The Supreme Court has stayed all construction activities in the states and union territory, which do not have a Solid Waste Management (SWM) policy under the Solid Waste Management Rules, 2016. States such as Maharashtra, Uttarakhand and Madhya Pradesh, and the union territory of Chandigarh have come under the scanner. However, the court lifted the stay imposed on Maharashtra and Uttarakhand, after the two states submitted rules for SWM policies.
For a few in the builders' fraternity, the judgment still remains clouded with ambiguity. According to them, the judgment will have a colossal impact on the real estate industry, particularly on the ongoing projects.
"We need to look at the fine print in the recent Supreme Court order banning new construction in three states, including Maharashtra, since the Maharashtra Chamber of Housing Industry (MCHI) was not party to this case," said Mayur Shah, Managing Director, Marathon Group and Immediate Past President, MCHI. He added, "Greater clarity in this matter is required since the apex court in March, 2018 had lifted the ban on new constructions in Mumbai and Mumbai Metropolitan Region, following the intervention by MCHI." "We wish to consult legal experts to ascertain whether building construction in Mumbai is also a part of the new SC order or it affects the infrastructure projects alone," said Shah.
The industry view
In the view of Rohit Gera, Managing Director, Gera Developments, "There will be no impact of this judgment in Maharashtra as the state government has already clarified that there is a policy that exists on solid waste management."
The lawyer representing the Maharashtra Government has categorically made a statement that the state has a policy for solid waste management and it will ask the apex court for some time to present the policy. "I think the court taking such a strong stand, indicates the level of frustration for the states not responding to their directions," Gera conceded.
Getamber Anand, Chairman, CREDAI National said, "We understand the Supreme Court's predicament and concerns, however, we, at CREDAI, feel that the court should not stay the construction activities as this will have a direct implication on the daily wage-earners in the industry while the GDP of the nation could also suffer."
He believes that solid waste management is still a work in progress and while appropriate action could be taken by the concerned state authorities, the decision to stop the construction activities may not be a definitive solution to resolve the matter. According to industry experts, the Supreme Court's decision is good in the long-term, but it will certainly have an impact on the ongoing construction projects. It may lead to a number of job losses and cost overruns, along with delays in the execution of projects. Such blanket bans in the new framework of RERA can be harmful to both, the developers as well as the buyers.
Amar Haware, Executive Director and CFO, Haware Properties believes, "With the imposition of strict penalties for delays, the ongoing projects would suffer. It would have been better if the Supreme Court would have imposed this ban on new projects and allowed ongoing projects to continue."
However, stakeholders from the real estate community were anticipating that the apex court would lift the ban on all construction activities, as the policy and rules on SWM were already in place in Maharashtra and Uttarakhand. This comes as a sign of relief for builders in these two states and they are hopeful that the development work will resume shortly.
The Supreme Court order
As per the Supreme Court's judgment, Rs 0.5 million penalty has been imposed on Andhra Pradesh, whereas Chandigarh, Madhya Pradesh, Maharashtra and Uttarakhand have been slapped with a fine of Rs 0.3 million for the utilisation of juvenile justice issues.
"It is unfortunate that some states and Union Territories have not yet framed any policy under the Solid Waste Management Rules, 2016," the judgment read. It further stated, "In case the states have the interest of the people in mind and cleanliness and sanitation, they should frame a policy in terms of the Solid Waste Management Rules so that the states remain clean. The attitude of the states and the union territories in not yet framing a policy even after two years is pathetic, to say the least."
The apex court has instructed to list the matter on October 9.
India steps on the city gas, 4x rise in investments seen
The ongoing ninth round of auction of City Gas Distribution (CGD) licences is set to alter the industry landscape with the government expecting investments of Rs 700 billion from winning bidders, or four times the cumulative Rs 150-180 billion invested till fiscal 2018.
On offer are 86 geographical areas (GAs) in 174 districts covering 29 per cent of India's population, compared with a cumulative 56 GAs awarded in the previous eight rounds in the past 10 years. The new GAs on offer includes Chennai, Coimbatore, Visakhapatnam, Aurangabad and Bhopal, which have a good demand potential.
It is expected that the ninth round to receive a way better response than before because of revised bidding norms and the push from the government through favourable policies. These include marketing exclusivity period of eight years (extendable by two year, compared with five years earlier), tariff floors to discourage unviable bids, removal of additional bid bond requirement and evaluation of bids based on higher infrastructure creation.
Since CGD businesses in large cities are more profitable, licences for them are expected to draw greater bidding interest. Bidders are also expected to favour GAs adjacent to existing pipeline networks. Increased participation from public sector oil majors is likely given the government impetus and higher weightage given to a number of new domestic connections in the bidding criteria.
Only large companies could offer high PBG, which touched as much as four times the project cost. What's more, in case of a tie in scores between the bidding entities, the entity that submitted the higher additional bid bond was declared the successful bidder.
In terms of gas allocation too, the CGD players find favour. For example, in the past two years, while India imported 45 per cent of its natural gas requirement, the allocation to CGD (for both domestic and CNG segments) got the first priority.
IRCON International's Rs.4.7 billion Initial Public Offering
IRCON International will go public with its Rs 4.7 billion initial public offering (IPO) in September. In order to maintain an asset-light portfolio, with a focus on engineering cash contracts, IRCON International has planned to divest road projects beginning 2019.
"We have a consistent track record of making profits and paying dividends. We are selective about the projects that we bid for. We want them to be viable and have at least 8-10 per cent margins. In 2017-18, we bagged new orders worth Rs 65 billion, in 2018-19, we would like to win the same amount of orders, if not more," informed Sunil Kumar Chaudhary, Chairman and Managing Director, IRCON International. The company has an order book of Rs 224.06 billion as on March 2018. "We see a lot of opportunities in infrastructure projects including, railways, highways, bridges, flyovers and tunnels. Next year, we plan to divest our road projects, the Dhule-Pimpalgaon highway and subsequently liquidate other projects too. We want to be asset-light. Our strategy would be to build a project and run it for a year and then churn the portfolio," SK Chaudhary added.