SEZs require integration with social infrastructure: Marg Constructions

Vidya Bala

Company plans 2 special economic zones near Chennai

--------------------------------------------------------------------------------
The company has set up wholly owned subsidiaries for each of its
business verticals which includes integrated commercial development,
satellite city and serviced apartments.
--------------------------------------------------------------------------------

Chennai April 5 Special economic zone (SEZ) is all about creating a
sustainable city; being a real estate player does not automatically
qualify one to build SEZs, says Mr G.R.K. Reddy, Chairman and Managing
Director, Marg Constructions Ltd.

The Chennai-based company, listed on the BSE, has plans to develop two
special economic zones near Chennai, one a combination of light
engineering and auto ancillaries and the other multiservices.

Mr Reddy told Business Line that SEZs required an understanding of the
area's social profile including mindset of the locals and their skill
sets. This knowledge is essential to understand which industry/sector
would suit that economic zone. "It is not about merely activating a
large economic zone but about integrating it with the social
infrastructure," he said. He also added that economic zones must be
identified and built amidst a cluster of villages and not in the
peripherals of cities. Such a cluster would eventually develop into a
city thus bridging the rural-urban divide.

On the SEZ controversy, he said that there may have been a disconnect
somewhere in the process and hopes that it would disappear once left to
market realities. "The Government has taken an initiative to buy the
land and give it to developers. If that process does not work, I think
the entrepreneurs are capable of procuring land."

The company itself acquired over 600 acres of land for Marg's SEZs.

He was confident that no landlord would want to retain land that does
not fetch any income.

Land banks

On the issue of real estate players sitting on huge land banks, he said
that land banks derived true value only from the projects they carry. Mr
Reddy claims that all the land that the company owns was bought after
zeroing in on projects.

"Every land purchased should have a project earmarked. Buying land
without a planned project is like building a bridge and then looking for
water," he said.

Operating through SPVs

Marg Constructions also has malls and township development under its
portfolio. All the projects are located on the Old Mahabalipuram Road.

The company has set up wholly owned subsidiaries for each of its
business verticals which includes integrated commercial development,
satellite city and serviced apartments. Mr Reddy said that such SPVs
would provide flexibility and accountability in terms of financing and
also enable entry of strategic investors or divest stake when real
estate investment trust or funds are launched.

http://www.thehindubusinessline.com/2007/04/06/stories/2007040603460300.htm