GIFT update

Gujarat International Finance Tec-City (GIFT) Co. Ltd was formed in 2007 as an equal joint venture between Infrastructure Leasing and Financial Services Ltd (IL&FS) and state-owned Gujarat Urban Development Co. Ltd (GUDC).
The idea was to build a finance city near the state capital Gandhinagar. The project’s cost was in excess of Rs.70,000 crore and the announcement came soon after Maharashtra’s then chief minister, the late Vilasrao Deshmukh, announced a finance city in Mumbai. The Mumbai project never took off.
GIFT sounded impressive, at least in presentations: a township spread over 25,000 acres; office buildings in 880 acres; projected revenue of $1 billion (around Rs.5,500 crore today) by 2011; 500,000 jobs; favourable comparisons with other financial centres such as Pudong.
The response was overwhelming: GIFT signed around 100 agreements with finance and non-finance companies.
All were scrapped after their six-months validity expired and work on the city hadn’t started.
Indeed, it was only in 2011 that the government handed over 880 acres on the banks of the Sabarmati to GIFT for Rs.1.

An official who was earlier involved in the project blames the company for the delays.
One casualty of the delay was the project’s architect, Delhi-based Fairwood Consultants, which prepared the concept plan. Its services were terminated in 2010. Fairwood was paid at least Rs.170 crore for its work as reflected by GIFT’s balance sheet for 2007-08 and 2008-09. In all, the company spent over Rs.200 crore for various consultancy and design services in the first two years.
Some subsidiaries of IL&FS were roped in for environmental assessment and government proceedings. Developers could choose designs and models created by Fairwood. It wasn’t possible to simply start building on the basis of these and that GIFT has appointed Tata Consulting Engineers Ltd (TCE) to come up with a detailed engineering design.
A Fairwood executive said that the company had hired the best in the world to come up with its design.

GIFT is now on firmer ground. The company and the project have come out of a phase of uncertainty and there is work happening on the ground.
Of the Rs.70,000 crore cost, Rs.3,710 crore has been allocated to core infrastructure including water bodies, river tunnels, roads and bridges; Rs.25,000 crore to real estate; and Rs.30,000 crore for utilities such as power generation, cooling systems and data centres.
The Diamond tower will come up after the airport at Ahmedabad shifts to Dholera, 80 km away, in the next three to four years. That would preclude the need for any approvals from AAI.
A government official familiar with the Dholera project said, however, that only a cargo terminal is planned there. He had no information on the Ahmedabad international airport moving there. Dholera is a greenfield city being developed as part of the ambitious Delhi-Mumbai Industrial Corridor (DMIC) project.
Meanwhile, GIFT has to figure out how it will get funded. The state government rejected its demand for Rs.2,000 crore.
A few months ago, GIFT received a loan of Rs.400 crore from a consortium of banks and financial institutions led by a financial arm of IL&FS. The company will spend around Rs.1,000 crore on data centres and other infrastructure.
The two buildings on which work is taking place will open by December. IL&FS has spent Rs.300 crore per building, which includes developmental rights to be paid to GIFT.
GIFT city will also house a financial services-based multi-services special economic zone that will come up in 250 acres. The Board of Approval (BoA) for SEZs has approved an International Financial Services Centre (IFSC) at GIFT, the first of its kind in India. Being located in an SEZ, this will be deemed to be on foreign territory for the purposes of export and import transactions.
The move will, for the first time, enable Indian companies to raise funds for overseas acquisitions from banks and financial institutions set up in the GIFT city project. As of now, these firms have to raise costly funds from foreign banks from their offices abroad. The approval is, however, subject to a green signal from the government of India in consultation with the regulators of the capital market, insurance, banking and financial sectors and the commodity market.
Last month, GIFT announced that it allotted development rights to the India International Textile Machinery Exhibition Society (IITME) for the development of India’s largest inbuilt international exhibition complex. Work is also on for setting up an educational institute and hospital in the city. GIFT has also invited tenders for setting up information communication technology (ICT) infrastructure at the finance city and about 14 firms are in the race.
On financial sector companies setting up operations at GIFT, it was in talks with various banks and is yet to enter into a firm agreement.