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Modi’s ambitious ‘smart’ city project in Gujarat is slow to take off
ENLARGE
Two buildings with 1.6-million-square feet of office space have been completed in the Gujarat International Finance Tec-City, or GIFT. Only part of one building is occupied. PHOTO: REUTERS
By
SHEFALI ANAND
Updated July 28, 2015 9:09 a.m. ET
1 COMMENTS
AHMEDABAD, India—Two 29-story steel-and-glass office buildings rise above a dusty wasteland in the Indian state of Gujarat, the most conspicuous sign of progress on an ambitious project conceived by the man who is now India’s prime minister, Narendra Modi.
More than seven years ago, Mr. Modi, at the time the state’s top elected official, decided to push the construction of an entirely new city—dubbed the Gujarat International Finance Tec-City, or GIFT—about a 40-minute drive from Ahmedabad, the historic commercial hub here.
The if-you-build-it-they-will-come idea was to create a magnet for banks, securities firms and information-technology companies akin to Canary Wharf in London or La Defense outside Paris. But construction work has moved slowly and few private enterprises have signed up. Of the two office towers, the first is about 50% occupied and the second one is empty.
Critics say the undertaking’s halting progress is a cautionary tale as Mr. Modi’s federal administration moves ahead with plans for 100 “smart cities,” which, among other things, would use technology to improve public services such as waste disposal and save energy.
PROPERTY REPORT
These people say the government should focus more on delivering basics—like 24-hour electricity and water—to India’s rapidly growing and often poorly run existing cities. About 340 million people lived in Indian cities in 2008, a number expected to rise to 590 million by 2030, according to a study by McKinsey & Co.
Developments like GIFT are “not really serving the benefit of Indian citizens that need better cities,” saysGreg Clark, an urban-policy expert and chairman of Business of Cities Ltd., a London-based consulting company.
Mr. Modi’s government has said its smart-cities initiative would involve building new cities, including satellites to existing metropolises and modernize existing midsize cities. It still hasn’t settled on a final list of locations.
Jaijit Bhattacharya, a partner at KPMG India’s infrastructure division, estimates that it will cost $20 billion to create a smart city, so 100 cities would cost around $2 trillion—about the size of the Indian economy. India has so far budgeted $7.5 billion.
“If by some magic you get that money, India still doesn’t have the capacity to execute” this plan, said Mr. Bhattacharya.
GIFT’s backers say the city provides an answer to India’s infrastructure problem, at a time when the country’s economic growth is picking up.
“Do you have space to expand your business in the existing infrastructure? No,” says Ramakant Jha,managing director of the company building the city—a joint venture of the state’s urban development body and Infrastructure Leasing & Financial Services Ltd.
Mr. Jha sees GIFT becoming a new central business district for the now quiet state capital, Gandhinagar, a 20-minute drive away. He said that eventually, there will be bus and metro service connecting GIFT to Ahmedabad and Gandhinagar.
Mr. Jha says that offices and retail stores and other businesses at GIFT will help create one million direct and indirect jobs. The city will also have homes, allowing employees to walk to work, and social infrastructure like a school, hospital and malls.
With central air-conditioning in all buildings, filtered tap water and municipal waste collection (a rarity in urban India), GIFT, as planners envision it, would be far more advanced than existing Indian cities.
But all this comes at a cost. If 100,000 people live in a city, the cost of building the city’s infrastructure comes to around $23,500 per person. In comparison, India’s gross national income per capita is around $1,600, according to the World Bank.
Goal posts for the city’s development have changed over the years. Its creation was announced when India was booming back in 2007, and the first phase—covering around 25 million square feet—was supposed to have been completed by 2010.
On a recent visit, two buildings with 1.6-million-square feet of office space had been completed. Part of one building was occupied. A data center for telecommunications was also ready, as was a fire station and a school. The rest of the area was mainly empty. Construction was under way for a hospital and other facilities.
Mr. Jha says the city will ultimately have 62 million square feet of office and residential space, to be built over three phases. He says GIFT has already sold nearly 14 million square feet to developers or companies in buildings not yet built.
He says it will be another four to five years before the first phase of the city—now covering only a fifth of the originally planned area—will get going.
For now, the city’s infrastructure layout is being funded mainly by loans taken from a clutch of state-run banks, and to some extent by government grants and fees charged to developers who plan to set up buildings in the city, says Mr. Jha.
State-run banks such as Bank of Baroda and State Bank of India Ltd., India’s largest bank, have committed to setting up shop, says Mr. Jha. A stockbrokers’ association has also said it would build a tower in the city to accommodate back offices.
Mr. Jha, who is due to leave his position at GIFT at the end of July, sees GIFT city emerging as a hub for back offices of financial and information-technology firms. The city has been declared a special economic zone, so companies setting up shop there will get some tax breaks.
Indian regulators in April issued guidelines that would help declare a section of the city as “deemed foreign territory.”
Firms that set up shop in this part of the city would have to conduct transactions in foreign currencies but would be exempt from some rules of India’s central bank and capital-markets regulator.
Mr. Jha said that if the government were to also give tax breaks for doing business here, it would attract multinational firms. “They are waiting for this,” he says.
Write to Shefali Anand at shefali.anand@wsj.com
In India, a GIFT Waiting to Be Opened - WSJ
Two buildings with 1.6-million-square feet of office space have been completed in the Gujarat International Finance Tec-City, or GIFT. Only part of one building is occupied. PHOTO: REUTERS
By
SHEFALI ANAND
Updated July 28, 2015 9:09 a.m. ET
1 COMMENTS
AHMEDABAD, India—Two 29-story steel-and-glass office buildings rise above a dusty wasteland in the Indian state of Gujarat, the most conspicuous sign of progress on an ambitious project conceived by the man who is now India’s prime minister, Narendra Modi.
More than seven years ago, Mr. Modi, at the time the state’s top elected official, decided to push the construction of an entirely new city—dubbed the Gujarat International Finance Tec-City, or GIFT—about a 40-minute drive from Ahmedabad, the historic commercial hub here.
The if-you-build-it-they-will-come idea was to create a magnet for banks, securities firms and information-technology companies akin to Canary Wharf in London or La Defense outside Paris. But construction work has moved slowly and few private enterprises have signed up. Of the two office towers, the first is about 50% occupied and the second one is empty.
Critics say the undertaking’s halting progress is a cautionary tale as Mr. Modi’s federal administration moves ahead with plans for 100 “smart cities,” which, among other things, would use technology to improve public services such as waste disposal and save energy.
PROPERTY REPORT
These people say the government should focus more on delivering basics—like 24-hour electricity and water—to India’s rapidly growing and often poorly run existing cities. About 340 million people lived in Indian cities in 2008, a number expected to rise to 590 million by 2030, according to a study by McKinsey & Co.
Developments like GIFT are “not really serving the benefit of Indian citizens that need better cities,” saysGreg Clark, an urban-policy expert and chairman of Business of Cities Ltd., a London-based consulting company.
Mr. Modi’s government has said its smart-cities initiative would involve building new cities, including satellites to existing metropolises and modernize existing midsize cities. It still hasn’t settled on a final list of locations.
Jaijit Bhattacharya, a partner at KPMG India’s infrastructure division, estimates that it will cost $20 billion to create a smart city, so 100 cities would cost around $2 trillion—about the size of the Indian economy. India has so far budgeted $7.5 billion.
“If by some magic you get that money, India still doesn’t have the capacity to execute” this plan, said Mr. Bhattacharya.
GIFT’s backers say the city provides an answer to India’s infrastructure problem, at a time when the country’s economic growth is picking up.
“Do you have space to expand your business in the existing infrastructure? No,” says Ramakant Jha,managing director of the company building the city—a joint venture of the state’s urban development body and Infrastructure Leasing & Financial Services Ltd.
Mr. Jha sees GIFT becoming a new central business district for the now quiet state capital, Gandhinagar, a 20-minute drive away. He said that eventually, there will be bus and metro service connecting GIFT to Ahmedabad and Gandhinagar.
Mr. Jha says that offices and retail stores and other businesses at GIFT will help create one million direct and indirect jobs. The city will also have homes, allowing employees to walk to work, and social infrastructure like a school, hospital and malls.
With central air-conditioning in all buildings, filtered tap water and municipal waste collection (a rarity in urban India), GIFT, as planners envision it, would be far more advanced than existing Indian cities.
But all this comes at a cost. If 100,000 people live in a city, the cost of building the city’s infrastructure comes to around $23,500 per person. In comparison, India’s gross national income per capita is around $1,600, according to the World Bank.
Goal posts for the city’s development have changed over the years. Its creation was announced when India was booming back in 2007, and the first phase—covering around 25 million square feet—was supposed to have been completed by 2010.
On a recent visit, two buildings with 1.6-million-square feet of office space had been completed. Part of one building was occupied. A data center for telecommunications was also ready, as was a fire station and a school. The rest of the area was mainly empty. Construction was under way for a hospital and other facilities.
Mr. Jha says the city will ultimately have 62 million square feet of office and residential space, to be built over three phases. He says GIFT has already sold nearly 14 million square feet to developers or companies in buildings not yet built.
He says it will be another four to five years before the first phase of the city—now covering only a fifth of the originally planned area—will get going.
For now, the city’s infrastructure layout is being funded mainly by loans taken from a clutch of state-run banks, and to some extent by government grants and fees charged to developers who plan to set up buildings in the city, says Mr. Jha.
State-run banks such as Bank of Baroda and State Bank of India Ltd., India’s largest bank, have committed to setting up shop, says Mr. Jha. A stockbrokers’ association has also said it would build a tower in the city to accommodate back offices.
Mr. Jha, who is due to leave his position at GIFT at the end of July, sees GIFT city emerging as a hub for back offices of financial and information-technology firms. The city has been declared a special economic zone, so companies setting up shop there will get some tax breaks.
Indian regulators in April issued guidelines that would help declare a section of the city as “deemed foreign territory.”
Firms that set up shop in this part of the city would have to conduct transactions in foreign currencies but would be exempt from some rules of India’s central bank and capital-markets regulator.
Mr. Jha said that if the government were to also give tax breaks for doing business here, it would attract multinational firms. “They are waiting for this,” he says.
Write to Shefali Anand at shefali.anand@wsj.com
In India, a GIFT Waiting to Be Opened - WSJ
