With the banking regulator Reserve Bank of India asking banks to treat loans to special economic zones as commercial real estate, promoters of SEZs are looking at all options including listing and raising cheap funds abroad. Corporates, setting up special economic zones, say very few SEZs have tied up funds as of now while some of them are in the process of approaching banks for funds. As they don’t rule out an escalation in project costs as funding is likely to be costlier now, they are looking at early listing on exchanges and raising funds abroad.

“Bank loans would now cost more but the policy makers must understand that setting up an SEZ is not only developing buildings. Funds for roads, ports, power stations and airports should cost less than real estate,” says Nikhil Gandhi, Chairman of Sea King Infrastruture.

“Listing and raising funds abroad are many options available to the upcoming SEZs,” he said. “We should have make our financing norms regarding SEZs clear from the beginning as investors do not like surprises,” he added. Sea King is setting up the Navi Mumbai SEZ in partnership with Mukesh Ambani.

In a notification issued this week, the Reserve Bank of India asked banks to treat all loans to SEZs as commercial real estate loans thus taking the SEZ developers by surprise. The RBI move will make banks to give higher weightage for such loans while making provisioning from their gross profits.

Companies like Bharat Forge, Videocon and Wockhardt which have signed SEZ agreements with the Maharashtra government are yet to tie up funds.

... contd.