construction law: an indian perspective
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Latest Developments in Construction Law: An Indian Perspective.TRANSCRIPT
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Latest Developments in Construction Law: An Indian
Perspective
Ramesh K. VaidyanathanPartner
ADVAYA LEGAL
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Overview
• India's middle class population, which is expected to exceed 600 million by 2030, will be a major driving force in global consumption.
• Asian consumers are likely to spend $ 32 trillion by 2030, accounting for 43 per cent of total global consumption, in which India and China will have major shares.
• Construction is the second largest economic activity after agriculture, accounting for nearly 65% of the total infrastructure investment.
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What is the opportunity?
XI Five Year Plan
Sectors USD billion Share (%)
Electricity (incl. NCE) 146.3 32.06
Roads and Bridges 61.9 13.57
Telecommunication 76.6 16.80
Railways (incl. MRTS) 44.7 9.78
Irrigation (incl. Watershed) 54.8 11.99
Water Supply & Sanitation 24.9 5.44
Ports 9.1 1.98
Airports 8.1 1.76
Storage 1.9 0.44
Oil & Gas Pipelines 28.2 6.20
Total 456.5 100
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Transaction Structure
• Commonly used PPP models:
Build Operate Transfer (BOT) Toll based or Annuity based and variants thereof – DBFOT, BOOT, BTL, BOO, BTO, etc.
Concession.
Joint Venture.
EPC/ Construction contracts.
• Consideration:
Revenue Share/ lump sum payments.
Collecting user fees or charging tariffs.
Availing government subsidies/ grants.
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Government Initiatives
• 100% Foreign Direct Investment (FDI) allowed in realty projects through the automatic route. • In the case of integrated townships, the minimum area to be developed has been brought down to 10 hectares from 40 hectares. • Minimum capitalisation of $10 million for wholly owned subsidiaries and $5 million for joint ventures with Indian partners.
•Full repatriation of original investment after three years.
•51% FDI permitted in single brand retail outlets and 100% in cash and carry trading through the automatic route.
• FDI is not allowed in the Real Estate business.
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Dispute Resolution: Biggest legal bottleneck
• Dispute Resolution continues to be the biggest impediment. • National Highways Authority of India (NHAI) has an ambitious target of building 20 km of roads per day.
• Currently, nearly Rupees 98600 million involving 1,240 cases is locked in various disputes between NHAI and road developers and contractors.
• Long process of ten years and legal expenses exceeding the claim amount in some cases major concerns.
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Dispute Resolution: Biggest legal bottleneck
• In 80 per cent of the disputed cases, DRB decision in favour of the road developer. However, NHAI chooses to challenge.
• In many cases, the interest awarded is twice the principal amount.
• One time settlement of pending cases with claim amounts of less than a certain threshold necessary.
• Stop of further litigation required if the decision given by the DRB and Arbitral Tribunal earlier is similar.
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Rebuilding the Mumbai International Airport: Why is it one of the most challenging infrastructure projects in the world?
India‘s busiest international airport with 21.5% of India’s air traffic
46 International airlines, 9 Domestic airlines 23.4 million passengers annually, 64000 passengers daily
650 aircraft movements every day 530,000 tons of cargo per year
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• Carved out: 42 ac
• Encroached: 276 ac
• Under litigation: 34 ac
• Govt. & Colonies: 193 ac
• Leased, etc: 293 ac
• Operational area: 1005 ac
• Vacant land: 51 ac
Land Constraints
In addition to the above , some land area is also occupied by NACIL, government and other external agencies.
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Most constrained Airport in the world
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Terminals 3m sqft
Cargo 1m sqft
Air India 2m sqft
Colonies 0.5m sqft
Slums 276 acres
Total: 6.5 m sqft
Demolish and rebuildwhile in operation
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• Approximately 276 acres of airport land encroached.• There are approximately 82000 hutments in which nearly 350,000
people live.• Security hazard to the airport operations.• 175-185 acres required outside airport.• Rehabilitation In–Situ not possible.• All slum dwellings set up before 1995 eligible
for rehabilitation. • Will be completed over the next 4 years.• 18,000 units currently under construction targeted for completion by
end of 2010.
Unique challenges
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• There is a river that flows under the runway, which will need diversion.
• There are two muslim burial grounds and hindu temples on airport land.
• The terminal construction will involve the shifting of a statue of a former local ruler, which is a politically sensitive issue.
• Many parts of airport land being used for agriculture, and there are ongoing litigations against the airport over title.
• There are over 125 reservations located on airport land under the city master plan.
Unique challenges
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Master plan for the Mumbai Airport
Sahar T2 – 40M
PAXCargo
Santacruz PAX/Cargo
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Integrated Terminal Development Sequence
T2A
T2B
T2C
All operations out of 2A will move to 2B-2C
2A to be demolished & site to be used for new T2 construction
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New Integrated Passenger Terminal
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New Integrated Passenger Terminal
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Integrated Passenger Terminal
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Integrated Passenger Terminal
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Integrated Passenger Terminal
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Integrated Passenger Terminal
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Integrated Terminal - Airside View
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Thank you