Ascendas, M&M set up 74:26 joint venture

The Singapore-based Ascendas had strengthened its existing alliance with Mahindra Industrial Park into a 74:26 joint venture, possibly the first between a foreign and domestic realty developer since the Centre opened up the sector to 100 per cent foreign direct investment.

Arun Nanda, executive director, Mahindra & Mahindra said while Ascendas has been operating in India for some time, the joint venture will strengthen the relationship. "Ascendas did the master planning of the Chennai IT park a few years back," he added.

The JV will develop the million square foot IT park in Mahindra World City in Chennai. It is reliably learnt that an IT complex of such magnitude would cost anywhere between Rs 1,800 and Rs 2,500 per square foot.

There has been huge interest by many Singapore-based real estate developers to enter into joint ventures with Indian developers.

Mahindra Industrial Park is a special purpose vehicle promoted by Mahindra & Mahindra and the Tamil Nadu Industrial Development Corporation. Ascendas promotes industrial properties, such as technology parks, across Asia.

Mahindra World City is Mahindra group's first project in this space. The complex will house software and BPO companies, which consider Chennai to be a hot destination for new economy businesses.

Apart from Ascendas, Keppel Land of the Temasek group has shown interest in the real estate market, said senior consultants in the know of developments. Players from Malaysia and the Middle East, among which US-based Hines and Dubai-based Emar group and Hanna Constructions have indicated plans to set up joint ventures in the country.

Ascendas has been operating in India for some time and has built complexes in Bangalore (The International Technology Park) and Hyderabad (Cyrber Pearl). It is also looking at expanding into other cities such as Pune and Calcutta.

Recently Ascendas bought out the Tata group's 47 per cent in Bangalore's International Technology Park. Ascendas is part of a consortium of Singapore companies, which holds 47 per cent in ITPL in a joint venture.

Foreign interest into the real estate sector has been given a boost following the reduction in capital requirement of about $5 million in the case of joint ventures and $10 million should the foreign entity decide to come on its own.

Further, the size of the project taken up for development stands reduced from the earlier 100 acres to 25 acres for commercial space and 11 acres for residential complexes.

Moreover, FDI in the real estate space need not be restricted to townships as the government has now allowed foreign players to get into any type of construction including hospitals, malls, and residential blocks.

"Many Singapore companies are looking at the joint venture route since a lot of approvals are required," said Jairaj Purandare, senior executive director, PricewaterhouseCoopers.

As many as 52 approvals are required and many other issues suh as the Urban Land Ceiling Act (ULCA), CRZ rules, stamp duty need to be addressed, and a local partner would be better placed to deal with the same, he added.