New SEZs norms elicit terse reaction

NEW DELHI, SEPT 21: The Reserve Bank of India's (RBI) direction to banks
to treat lending to special economic zones or acquisition of units in
SEZs as exposure to commercial real estate, has invited terse reactions
from the industry.
"The RBI move shows a lack of clear vision on its part. On one hand, the
government is trying to promote infrastructure development, on the
other; RBI is coming with new regulations like this. The Indian
financial market is not strong enough to absorb so much lending," says
Parsvnath CMD Pradeep Jain.
However, DLF VP finance Saurabh Chawala says, "The RBI move will have a
negligible impact on us as most of our SEZ projects are based on equity
accruals. But it may surely have an impact on smaller players who are
mostly dependent on debt for financing."

According to ministry of commerce and industry, SEZ-based industries are
expected to employ half a million people by December 2007 and to invest
Rs 100,000 crore, including Rs 25,000 crore of FDI.

“As it is, the imposition of 150% risk weightage on commercial lending
was wrong. A 100 basis points hike raises the bank-lending rate by 1%.
This will decrease the viability of the projects and increase costs.
When land titles are clear, approvals are in place, projects get good
ratings, and the RBI should not be worried. In products-specific SEZs
like gold and jewellery or IT SEZs, this move may make SEZs less
competitive,” says ex-Hudco CMD and CEO Gold Souk V Suresh.

Others like realty advisor DTZ's MD Ankur Srivastava believe that the
RBI move will make debt costlier, forcing SEZ developers to increase the
equity participation in SEZs.

However, Suresh feels that higher equity component will not be viable.
"SEZ developers want short term finances, not long term finances, so
equity will not be a very viable option," feels Suresh.

Some experts feel the RBI move may have a marginal impact as incentives
and the acquisition of land at low costs will negate the RBI move

http://www.financialexpress.com/fe_full_story.php?content_id=141166