Industry Infrastructure

Employees working in this sector are given opportunities to learn new aspects of the business beyond the limits of their job profile.

After the infrastructure industry opened up to private investments there has been a tremendous growth in this sector. With regards to the real estate sector, in spite the recession the demand supply variation shows the prospects of sustained high growth. According tot eh report by the Technical group, on estimation of housing shortage a shortage of 26.53 million houses is estimated during the Eleventh Five Year plan (2007-12) also, another study conducted by PWC and urban Land Institute points out that India leads the pack of real estate investment market in Asia for the year 2010.

In order to meet financial requirements of infrastructure projects, banks may extend credit facility in the form of working capital finance, term loan, project loan, subscription to bonds and debentures/preference shares /equity shares acquired as a part of the project finance package which is treated as deemed advance and any other form of funded or non-funded facility.

Take out financing: A mechanism designed to enable banks to avoid asset liability maturity mismatches that may arise out of extending long tenor loans to infrastructure projects is known as ‘take-out financing’ Banks may enter into a take out financing arrangements with IDFC/other financial institutions, or avail of liquidity support from IDFC/other FIs. Under this type of financing structure, banks that finance the infrastructure projects will have an arrangement with IDFC or any other financial institution for transferring the outstanding in their books to the latter on a pre determined basis.

In this connection, it is to be noted that IDFC and SBI have devised different take out financing structure to suit the requirements of various banks, addressing issues such as liquidity, asset liability mismatches, limited availability of project appraisals skills, etc. They have also developed a Model Agreement that can be considered for user as a document for specific projects in conjunction with other project loan documents. The agreement between SBI and IDFC could provide a reference point for other banks to enter into somewhat similar arrangements with IDFC or other financial institutions.

Inter-institutional guarantees:

Separation of credit risk and funding is not allowed. Accordingly, banks are prohibited from issuing guarantees favoring other banks/lending institutions for the loans extended by the latter. This is because the primary lender is expected to assume the credit risk and is not supposed to pass on the same by securing itself with a guarantee. However, RBI permits banks to issue guarantees favoring other lending institutions for infrastructure projects, provided the bank issuing the guarantee takes a funded share in the project to the extent of at least 5 percent of the project cost, and undertakes normal credit appraisal, monitoring and follow up of the project. This has been done by RBI in view of the special features of lending to infrastructure projects, viz., high degree of appraisal skills required on the part of lenders and availability of resources of a maturity matching the project period.

Right from technical professionals like engineers and architects to functional managers in the field of HR, marketing, finance etc are in demand. Not just that, there is also a good scope for creative people with an ability to portray thoughts on papers using latest software technology in designing.

The opportunities available for an individual associated with this industry are many. Employees working in this sector are given opportunities to learn new aspects of the business beyond the limits of their job profile.

The core construction roles like that of engineers and architects are definitely in demand. However, currently in view of stiff competition in the real estate market the key to success is innovation. So any role that brings to the table an innovative way to make the end product most useful, durable and appealing is in demand.

India’s investment on the infrastructure sector in 2002 was just six per cent of the GDP or US$ 31 bn. Growth opportunities seem to be tremendous considering the target to increase investment in infrastructure sector at 10 per cent of the GDP at the end of the five year plan 2007-2012.

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