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Rediff News  All News  » Business » Global pharma's India shift to shore up realty

Global pharma's India shift to shore up realty

March 25, 2009 10:22 IST

The pharmaceutical sector may emerge as a major buyer of real estate in the country, bucking the current economic slowdown.

Based on information from 10 pharmaceutical companies based in North America and Europe, a recent Jones Lang LaSalle Meghraj report said these were keen to set up their manufacturing units in India or expand their existing units.

Taken together, these would need about 15,000 acres over the next seven years to set up research and development centres, new units and to expand the existing units. 

"There will be demand for about 15,000 acres for manufacturing plants, laboratories, testing facilities and offices," said Nirav Kothary, vice-president, JLLM.

Kothary said the factors attracting these companies to India included low production cost, 50-55 per cent saving in cost of production of basic pharmaceutical products, 100 per cent foreign direct investment in the pharmaceutical industry, low import duty (7.5 per cent) on medical equipment, exemption of clinical trials for new drugs from service tax, intellectual property protection, and incentives to companies setting up facilities in pharma special economic zones.

India was fast emerging as the most favoured destination for contract research and manufacturing services due to its large pool of patients, low manpower cost, and availability of talent and infrastructure for research & development, claimed Kothary. To date, 13 pharmaceutical SEZs, covering 3,400 acres, have been notified.

Another 15,000 acres will be required to accommodate pharmaceutical units as their number could double from around 5,050 at present to 10,200 over the next seven to eight years.

Andhra Pradesh, Maharashtra and Gujarat were the most favoured destinations for companies planning to open new units due to their proximity to ports and presence of SEZs.  Andhra Pradesh and Maharashtra have four notified pharma SEZs each.

The Jawaharlal Nehru Pharma City, covering about 2,500 acres, has the largest notified Indian pharma SEZ in Andhra Pradesh.  It is being developed by Ramky Pharma City India Limited, a special purpose joint venture between the Ramky Group and the Andhra Pradesh Industrial Infrastructure Ltd.

Of the 2,143 acres, 661 acres have been earmarked for the pharma SEZ.  The Rs 630 crore (Rs 6.3 billion) pharma park had 75 domestic and international companies, which had taken up 1,000 acres, said Eswar Reddy, chief operating officer, RPCIL.

Around 25 more investors had evinced interest in setting up manufacturing units in the Pharma City and more deals were expected soon, said G Parameshwar, general manager for business development at RPCIL. The park was expected to attract investments of around Rs 10,000 crore from about 100 units, providing employment to more than 30,000 people.

Companies such as Vasudha Pharma, Glochem Industries, Auctus Pharma and Aptuit Laurus in the non-SEZ area have already started commercial production, while Eisai Pharma from Japan has started construction.  Shasun Chemicals and Orchid Chemicals have got unit approval to start construction.

Another developer, Inspira Infrastructure Limited, through its special purpose vehicle, Ajanta Projects Infrastructure Ltd, will be setting up a pharma SEZ over about 250 acres and a biotech SEZ over 25 acres at Aurangabad.

R Agrawal, director of IIL, said while planning and detailed engineering work was under progress, ground work was expected to commence from May. "The project is on schedule and we are hopeful that the ground work will start from May", said Agrawal.  Around 10 companies, both domestic and international, had evinced interest, he added.

The ground work for the biotech SEZ will start in three-four months.  He said he could not reveal any 'investment figure' as of now.

Nivedita Bhaduri & Margaret Williams in Kolkata