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Kochi’s Investment Scenario

Kochi – In -Focus

Outlook – Bullish, medium term exposure to Kochi (Kerala)

Drivers - Information Technology to fuel the short to medium term growth
Risk Exposure – Low
Upside – 20 % Annual Growth Rate to the current property price.

Concept Tree’s Analysis

Why are we bullish about Kochi – Kochi’s Real estate has grown at a rate of 30% on a yearly basis
for the last couple of years. Further to this, significant amount of investments committed to the
Information Technology, Real Estate and Retails sectors will continue to deliver similar growth in the
coming years. Government has shown its utmost commitment to achieve the year on year growth rate
of 100% in the field of Information Technology exports. Kochi has delivering second highest growth
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rate in terms of IT exports for the year 2007. Growing demand for quality housing driven by the ever-
increasing employment opportunities presented by a number of IT Parks provide impetus to the
Kochi’s Real Estate.

Portfolio of latest Investments in Kochi

 Rs 4000 Cr HDIL Cybercity at Kalamassery in Kochi will not only create a world class
IT hub in Kerala, but also provide 60,000 direct and 1,50,000 indirect jobs. Stone Laying
for this project was done early Jan2008
 Rs 5,000 Cr will be invested by Sobha Developers for setting up the largest township in
Maradu, Kochi, called the Sobha Hitech City. Work started Oct 2007
 Rs 2000 Cr Smart City project was initiate by the Dubai Based Dubai Internet City group
in Nov 2007
 Rs 3000 cr Kochi Metro rail project approved in Jan 2008 reconfirms government’s
intention for developing high standard infrastructure in the state.

Investments in IT Industry - Kochi has emerged as one of the top three IT/ITES commercial real
estate destinations among Tier III cities in India, says a recently released report. In the recent past
initiatives such as Smart City, Sobha Hi -Tec City and development of an IT Park within the
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International Airport have reinforced the Kerala government’s intention of promoting Kochi as a
favourable destination for IT investment. These developments should create around 150,000 jobs.

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Sustainability of IT Industry - The availability of 15 Gbit/s bandwidth, through undersea cables such
as FLAG, SAFE and SEA ME WE 3 ensures seamless data flow, and lower operational costs
compared to other major cities in India, has been to its advantage. The Info Park promoted by the
Government of Kerala is home to companies like Wipro and TCS and L&T. There are 84 engineering
colleges with a sanctioned intake of 23196 seats. Out of 84 engineering colleges, 9 are government
colleges, 3 are private aided and 72 are self-financing engineering colleges. This is the reason that
Kochi has highest density of science and technology personnel in India

Key Infrastructure Advantage.

th
15 Jan 2008
 A fully burdened cost of just $8 per hour when compared to the global average of $15
 Salaries - 1/5th of the international average
 Operational costs less than 50% when compared to the other major IT Parks
 Rentals lower by more than 60%
 Power and water tariff among the lowest in the country
 State with 99% of its high schools have modern Computer Labs

Communication Advantage

 100 per cent of 988 telephone exchanges are digital

 98 per cent of telephone exchanges connected by OFC to the National Internet Backbone
(NIB).
 Malappuram - First wifi district in the country
 VSNL's primary international gateway in India is in Kochi and this gateway handles
around two third of the country's data traffic

Government objectives for IT policy for year 2007 – Kerala government has stipulated some measurable
objectives for 2007 IT policy to track the progress of various initiatives toward the goal of achieving the
growth in IT sector.

 To establish Kerala as a leading IT destination in the country within the next five years.
 To provide a nurturing and enabling environment conducive to the vigorous growth of the
local IT industry in the State.
 To significantly enhance direct and indirect employment creation in the IT sector.
…minimum growth
 To attain a minimum growth level of 100% every year in IT.
level of 100% in IT
 To significantly accelerate the levels of investment inflows including foreign capital into the
hardware, software and ITES sectors.
 To aggressively promote the State as the destination of choice for emerging IT business
opportunities including IT Enabled Services, new media products and E-services. To
establish ITES as the definitive core competence of the State.
 To develop Kochi as an international media and ICT hub.
 To consolidate and expand the Techno park, Trivandrum as a leading software and HR Centre

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in the region.
 To provide the physical and institutional environment for the growth of SOHO and
decentralized IT businesses.

Economic Indicators – Kochi is very well connected to the world through see and air routes. It is
strategically located on the trans-national trade corridor. Kochi Airport is one of the top 8 airports of India in
terms of traffic. It is the first international airport in India to be built without Central Government funds. Rich
in natural resources, Kochi has it own browse and BSE has opened an exclusive centre for investor services in
Cochin. In recent years the city has rejuvenated from its economic stagnation and has witnessed heavy
investment, posting a GDP growth rate of 8.3%; thus making it one of the fastest-growing second-tier metro
cities in India

Fundamental Analysis – Kochi has some strong driver to foster growth in business and investments in the
region.
 Most advance state in terms of literacy, education and health
 One of the highest consumer spending profile
 One of the top tourist destination
 High human development index in Indian States
 Commercial capital of Kerala
 International seaport with container cargo handling facility at Cochin. It is an ISO 9001-2000
Port.

Tourism Industry Report According to World Travel and Tourism Council (WTTC)

 Tourism demand of Kerala to grow by 11.6% per annum over the next decade (This is the
highest recorded growth in the world, surpassing Turkey's 10.2% as well as India's
This will promote the growth holiday home buyers usually investors from the adjoining states.

Ongoing initiatives to boost the economy – Kochi has three Special Economic Zones; Electronic Park at
KINFRA in Kalamassery, Cochin SEZ and Port Based SEZ. Proposed SEZ Film and Video Park Animation
SEZ (The first Animation SEZ in India). The Cochin Shipyard in Kochi is the largest shipbuilding facility in
India. Sobha Developers has inked a Memorandum of Understanding with Kerala government to set up a
Rs 5000 crore Hi-Tech city. This project will create 75000 direct jobs. The groundbreaking for the Rs
3,000 crore international container trans-shipment terminal (ICTT) at Vallarpadam, off Kochi in Kerala,
was completed on Monday 3rd Dec2007. HDIL has also announce new projects for building IT Infrastructure.

We are bullish about Kakkanad - Home to many important Government buildings. Such as Cochin
Special Economic Zone(CSEZ , Kochi Info Park, upcoming Smart City project, Civil Station, District
panchayat office, Cochin High Power Transmitter, Today Kakkanad is rated as one of the hottest places not
only in the city but also across the state and several major corporate houses including MNCs are eyeing
Kakkanad as their future destination. I

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We have noticed an influx of new capital into Kakkanad with a major percentage diverted to service industry
segment. IT players are consolidating their position by increasing their land banks. Wipro, TCS and IBS are
the leading examples. L&T has also increased their land holdings within the Info Park. In the coming three
years we should see a substantial increase in the demand for quality housing in the area primarily due to the
90,000 new jobs created in the area and people moving in from other states. There is a supply gap at the
moment with not much quality dwelling available within a radius of 2Km to the Info Park and the upcoming
Smart City. With new initiative launched by the Government such as Sobha Hi tec City and up gradation of
International Airport we envisage the IT industry within Kochi to achieve continuous growth.

The sharp rise in property price in Tier1 cities has also triggered the IT/TES sector companies to look at
alternative options. With favourable climate provided by the state in two ways; low set up cost and readily
available quality manpower the conditions are quite conducive for the sector to achieve the target of 100 %
growth on a yearly basis as stipulated in the government policy. This helps us reconfirm our calculated target
of 20% growth in selective locations in residential property sector.

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Concept Tree Research

Author Nitin Vermani

Research Analyst

Disclosure – I Nitin Vermani Research Analyst and the author of this report, hereby certify that all of the views expressed in this
research report accurately reflect my personal views about the subject. This content should not be relied upon as a substitute to a
professional advice.

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