August 20,
2014: ASSOCHAM and NAREDCO
today signed a Memorandum of Understanding to align strategic efforts
under the aegis of the Ministry of Housing &Urban Poverty Alleviation,
Government of India, to ensure a home for every Indian by 2022.
Sunil Mantri, President NAREDCO and Chairman, Mantri Realty with Rana Kapoor, President, ASSOCHAM and MD&CEO, YES BANK
The MoU and Charter
were jointly unveiled by Mr. Rana Kapoor, President, ASSOCHAM and MD & CEO,
YES BANK, along with Sunil Mantri, President, NAREDCO, at the NAREDCO Real
Estate Banking Conclave in the presence of
Shri G.S. Sandhu, Secretary, Ministry of Finance, Govt. of India
and Mr. S.S. Mundra, Deputy Governor, Reserve Bank of India.
Speaking on the occasion Rana Kapoor, President, ASSOCHAM and MD & CEO, YES BANK said: “This MoU between NAREDCO and ASSOCHAM will empower both organisations to strategically align efforts by championing knowledge initiatives and strategic interventions in the real estate, housing, urban infrastructure and construction sectors.
I strongly believe that positioning Mumbai as an International Finance Centre at par with global cities will help realise the city’s tremendous growth potential and achieve the vision of actualising the vision of Mumbai as an ‘Economic Capital Region’ and hub of the Indian economy.”
Mr. Rana Kapoor delivered a keynote address on the steps to be taken to establish Mumbai as an Economic Capital Region and emphasised that development of Real Estate, Healthcare, Urban Infrastructure, Education and other allied sectors is essential to take this vision forward.
Keynote address by Mr. Rana Kapoor at the NAREDCO Real Estate Banking Conclave
Gregory David Roberts, the famous author of Shantaram, once said “More dreams are realised and extinguished in Mumbai than any other place in India”. Since the time when East India Company bought the “island city” from the Crown and shifted its Western India
headquarters here, the city has indeed, undergone a great transformation. Mumbai, now the heart of India’s growing economic power; is a city where financial markets, fashion, and entertainment are taken seriously. It is home to two of the largest stock exchanges in India, accounts for about 5% share in India’s GDP, 25% of industrial output, 70% share of India’s total maritime trade and contributes over 33% of India’s total income tax collections.
It is therefore appropriate that we talk about developing Mumbai as an Economic Capital Region and the multiplier effect it can have on our nation’s growth and prosperity.
Mumbai, with its population of over 13 mn, is a land of economic and social contradictions. While the city has relatively well developed capital markets, the supportive urban infrastructure is inadequate. In recent years, the relative attractiveness of Mumbai has declined, with the city slipping down to lowest ranking in the Asia-Pacific Index for Global Financial Centres.
In a globalizing age, foreign investors’ interest is directly linked to modernization, skilled workforce, cost competitiveness, connectivity, healthcare, and sophistication of financial system. Given that Mumbai already epitomizes some of these, the imminent need and endeavour to adopt a systematic change of city’s urban and financial fabric, would not only help to position the “financial capital” as an International Financial Centre, but also help overcome current economic challenges that our nation faces today.
An integrated plan, implemented with a coordinated effort of the government (both Centre and state) and the private sector, will establish Mumbai as an enabler and driver of India’s next phase of robust economic growth, to what I call “Take-Off Version 2.0”.
Contours of making Mumbai an Economic Capital and an IFC
On the basis of provision of financial services, a financial centre can be categorized as:
• Global Financial Centre if it serves clients from all over the world, for example Singapore, London, and New York
• Regional Financial Centre like Dubai
Mumbai’s time zone forms an ideal link between major offshore centres in the east and west. It can facilitate transactions on the same day with Tokyo, Singapore, London, and New York. More importantly, majority of freely and mobile high quality labour force in India, generally finds its way to Mumbai. As per NSSO Report (2007-08), Maharashtra has a net migration rate 41/1000 person. In addition:
• Over 90% of merchant banking transactions take place in Mumbai
• Mumbai accounts for a significant share in deposits mobilization (13.6%) and deployment of credit (17.3%)
• Mumbai’s share in banking sector transactions is 3/4th of the total clearances
• Treasuries of banks & corporates generally operate from Mumbai
The Master Plan:
1. Strengthen financial regime and governance: Improving the legal system to ensure enforcement of contracts in a fair and timely manner is the prerequisite of developing any internationally acclaimed financial hubs. Faster resolution of financial disputes, with a comprehensive assessment of the country’s commercial law, as well as the judiciary’s ability to deal with cases that involve foreign parties, plays an important role. Way forward can be Tailor-made Enclaves in and around Mumbai, on the lines of Dubai IFC, which could be granted the power to self legislate on civil and commercial areas through an amendment in the Constitution.
Simplifying the taxation structure too holds importance to develop an efficient financial regime. An early roll-out of the GST and comparable tax sops, as in other countries are key to attracting the best hedge funds and brokerages to Mumbai.
While there are single unified financial regulators like FSA in UK and Financial Stability Oversight Council in the US, in case of India, financial regulation is oriented towards product regulation. For example, banks are regulated by the RBI, mutual funds and equity markets by SEBI, etc. As the financial sector grows in size, it would become crucial to internalize systemic risk posed by various financial entities by taking on board some of the recommendations of the FSLRC (Financial Sector Legislative Reforms Commission).
2. Create competitive financial market structure: There is a simultaneous need to deepen the existing financial markets.
• Setting up a forex clearing house based out of Mumbai and designing it on par with other leading clearing systems in the world.
• Reviewing ceilings on interest rates and maturities of non-resident foreign currency deposits with a view to liberalize them prudently.
To deepen and expand the scope of our financial system, a domestic financial hub would be a first step in a much larger scheme of things. In this regard, encouraging financial savings would act as the foundation stone.
• I propose the setting up of Gold Bank, an apex body headquartered in Mumbai, which with the support of the banking system can effectively postpone the immediate need for imported gold and also help in partial conversion of existing stock of physical gold into standardized form of e-gold. This would help in diverting non-productive physical savings (14.8% of GDP in FY13) towards productive financial savings (7.1% of GDP in FY13).
In India, Centre and States run a combined deficit of ~7% of GDP and finance it largely through bonds, leaving only a small share of effective domestic savings for private borrowers. Therefore, there is a need to bring-in other sources of financing infrastructure investments. In this context, development of the corporate bond market, reduction in entry barriers for financial technology, gradually reduction in SLR, and liberalisation of investment regulations for insurance & pension companies would be steps in the right direction. This would further enhance the appeal of Mumbai as the Economic Capital Region of India.
3. Developing global economic clout: Greater use of Rupee for trade invoicing would help contain the CAD and hence promote India as an exporter of capital - another key requisite for becoming an IFC. For internationalisation of currency, India would have to debate about making the Rupee fully convertible, in a progressive manner. China for example has entered into a series of bilateral currency swap agreements and has created SEZs where Renminbi is convertible.
4. Urban Infrastructure:
While Mumbai has most extensive transport networks, its infrastructure development hasn’t kept pace with the demands of the city. It has some excellent blueprints for development, but execution is often delayed due to limited land space and high density of population. The challenges have multiplied as Mumbai's vehicle population has shot up from under 7 lakh in 1991 to 21 lakh in 2013. BMC reportedly has just 12,000 official parking lots for this ocean of vehicles.
What is needed?
• Encourage people to move from using personal vehicles to public transport system.
• Create a single window body to approve infrastructure projects in the city. According to Bombay First, 17 agencies are involved in city’s governance.
• Expedite implementation of key projects such as Coastal Roads, Nhava-Sewri Trans Harbor Link, Navi Mumbai International Airport. The 22km Trans Harbor Link will create increase entry and exit points for the city. Presently, there are only 4 entry-exit points in the city.
• Explore intra-sea transport (like ferries)
Affordable housing:
As elucidated above, Mumbai’s gravitational pull is its position as financial capital of India and a flamboyant metropolis. This commercial relevance of the city has been a prime driver for its real estate industry.
With a slum population of around 50%, more people live in Mumbai's slums than in all of Switzerland. As per McKinsey, by 2030, Mumbai will be the most populous city in the world, with a population of 33 mn. Hence, affordable housing space has tremendous potential.
For Mumbai to become a world-class city, it must ensure that housing becomes more affordable, the rental housing market is revitalized, land is developed in an integrated manner and housing stock is upgraded. Specifically, I have following suggestions:
• Rehabilitate slums and encourage rental housing as an option for the poorest of the poor. Government could develop low-income homes with nominal rent of Rs 3000-5000/month.
• Permit Vertical Growth by increasing FSI to an average of 3-4. This will also aid the commercial real estate market. Developed parts of international cities generally have an FSI of over 10.
• Create special housing zones (on the lines of those in China) where the government auctions public land on the condition that a certain fraction of it is developed into low-income housing. In Gujarat which has the largest stock of affordable housing in India, developers are encouraged to build affordable homes on public land with government subsidizing part of the building cost.
5. Social Infra
Education & Skill
In a world class city the quality of education imparted and easy access to it by a majority of the population becomes critical for developing a world class work force.
• PPP in higher education needs to be encouraged.
• The Government of Maharashtra endeavors to develop the Navi Mumbai “Knowledge Corridor” as the hub of high tech IT industry. While this is a welcome step, it is critical to go one step forward and give thrust to innovation, research and skill development with an aim of fostering entrepreneurship in emerging knowledge and sunrise sectors.
• Leading urban centres across the world are prominent in their patronage of arts and culture. Mumbai would need to nurture these facilities, including protection and conservation of its valuable heritage zones that are distinctive of the island city. Theme Parks showcasing Mumbai’s social strengths like media & entertainment can be developed on the lines of Universal Studio & Sentosa Island in Singapore. This will create positive externalities for the Tourism & Hospitality sector.
Healthcare
• A world class city must encompass the tools and instruments for broad based healthcare facilities of quality standards. The healthcare infrastructural facilities in the city currently have failed to cope with the exponential population growth. The Mumbai Human Development Report 2009, points out that, on an average, only about 21% of city households use public health services.
• Development of a world class health infrastructural base requires focus on 1) up gradation of health infrastructure qualitatively and quantitatively prioritizing on the improvement of service, 2) trained staff, and 3) public private partnerships to ensure quality and responsibility of service.