Ahmedabad: It has been showcased in various national and international events as Gujarat’s response to other global finance centres. In one presentation, its tallest building, over 400m high, the so-called Diamond tower, overlooks a quiet flowing Sabarmati, and dwarfs the 125 other buildings planned around it. The Gujarat International Finance Tec-City (GIFT) looks like what it is supposed to—a city for the future; a new business hub in India; and a worthy rival to Mumbai.

Only, the project went into limbo till 2010, and while work on two towers is now on and will be completed in the next few months, some people familiar with the project and experts say GIFT could well become just another real-estate project.

And the Diamond tower will become a reality only after the plan to construct it is approved by the Airports Authority of India because of the high-rise’s proximity to Ahmedabad’s Sardar Vallabhbhai Patel International Airport.

“We are pitching GIFT as a financial centre with focus on knowledge-based industries. We are developing both SEZ (special economic zone) and non-SEZ areas," said R.K. Jha, director and CEO of GIFT Co. Ltd. “The target is to open the first of the two buildings (both in the non-SEZ area) by 10 January, followed by the second one in February," he said.

“Later, IL&FS will develop a commercial building in the SEZ area. We plan to have areas like banking enclave, insurance enclave, market enclave (for stock and commodity market) and corporate enclave," Jha said. “Generating revenues is not our main priority currently as we are in the phase of attracting activities. Once we have the companies in place, revenues will follow," he said.

It may be too premature to start visualising a financial centre outside Mumbai, said an expert.

“If you take the case of London or New York, a financial city project was planned in an area of about half a square mile. These places were already established business hubs before the finance centres shaped up," said Sebastian Morris, professor of economics at the Indian Institute of Management, Ahmedabad. “Achieving a similar feat is difficult for a country like India where land availability is a problem and substantial reform in the finance sector is yet to happen."

If a finance centre has to be set up in India at all, it should be in Mumbai, and not Ahmedabad, he added.

Gujarat International Finance Tec-City (GIFT) Co. Ltd was formed in 2007 as an equal joint venture between Infrastructure Leasing and Financial Services Ltd (IL&FS) and state-owned Gujarat Urban Development Co. Ltd (GUDC).

The idea was to build a finance city near the state capital Gandhinagar. The project’s cost was in excess of 70,000 crore and the announcement came soon after Maharashtra’s then chief minister, the late Vilasrao Deshmukh, announced a finance city in Mumbai. The Mumbai project never took off.

GIFT sounded impressive, at least in presentations: a township spread over 25,000 acres; office buildings in 880 acres; projected revenue of $1 billion (around 5,500 crore today) by 2011; 500,000 jobs; favourable comparisons with other financial centres such as Pudong.

The response was overwhelming: GIFT signed around 100 agreements with finance and non-finance companies.

All were scrapped after their six-months validity expired and work on the city hadn’t started.

Indeed, it was only in 2011 that the government handed over 880 acres on the banks of the Sabarmati to GIFT for 1.

An official who was earlier involved in the project blames the company for the delays.

“The owners of the project promised more than they could handle. It was not until 2011 that they carried out a seismic study and got all the necessary environmental clearances. As per the original plan, the Diamond tower was to be completed by 2010 along with core infrastructure. Today, the tower faces uncertainty," added this person, who did not wish to be identified. He also said there was no detailed break-up of the costs.

One casualty of the delay was the project’s architect, Delhi-based Fairwood Consultants, which prepared the concept plan. Its services were terminated in 2010, said Jha.

Fairwood was paid at least 170 crore for its work as reflected by GIFT’s balance sheet for 2007-08 and 2008-09. In all, the company spent over 200 crore for various consultancy and design services in the first two years.

“Fairwood had a tie-up with a Chinese firm for the GIFT project and the conceptualization and designing was costly. In all, we have paid them about 175 crore for their work. Also, the financial meltdown in 2008 hit our plans and we decided to not build buildings on our own," added Jha.

“We realized that we would have to find developers to build the buildings and they could come with their own designs. Also, the number of buildings, their size and their design will largely depend on the clients we get," Jha added.

Some subsidiaries of IL&FS were roped in for environmental assessment and government proceedings, according to Jha.

While Jha said developers could choose designs and models created by Fairwood, he added that it wasn’t possible to simply start building on the basis of these and that GIFT has appointed Tata Consulting Engineers Ltd (TCE) to come up with a detailed engineering design.

A Fairwood executive said that the company had hired the best in the world to come up with its design.

“Some may criticize the project at this stage but one needs to wait and watch for this project to emerge as a world-class city in the next 10 years or so. In our designs, we have kept in mind even residential units for cobblers," this person added, asking not to be identified.

GIFT is now on firmer ground, said Jha.

According to him, the company and the project have come out of a phase of uncertainty and there is work happening on the ground.

Of the 70,000 crore cost, 3,710 crore has been allocated to core infrastructure including water bodies, river tunnels, roads and bridges; 25,000 crore to real estate; and 30,000 crore for utilities such as power generation, cooling systems and data centres.

As for the Diamond tower, Jha said it will come up after the airport at Ahmedabad shifts to Dholera, 80 km away, in the next three to four years. That, he added, would preclude the need for any approvals from AAI.

A government official familiar with the Dholera project said, however, that only a cargo terminal is planned there. This person, who asked not to be identified, said he had no information on the Ahmedabad international airport moving there. Dholera is a greenfield city being developed as part of the ambitious Delhi-Mumbai Industrial Corridor (DMIC) project.

Meanwhile, GIFT has to figure out how it will get funded. The state government rejected its demand for 2,000 crore.

“We cannot make budgetary allocation for a real estate project," the second government official said. Jha’s defence is that companies will come only if there is office space, making real estate an integral part of the project.

A few months ago, GIFT received a loan of 400 crore from a consortium of banks and financial institutions led by a financial arm of IL&FS. The company will spend around 1,000 crore on data centres and other infrastructure, said a GIFT executive who didn’t wish to be identified.

According to a senior IL&FS official who spoke on condition of anonymity, the two buildings on which work is taking place will open by December. IL&FS has spent 300 crore per building, which includes developmental rights to be paid to GIFT.

GIFT city will also house a financial services-based multi-services special economic zone that will come up in 250 acres. The Board of Approval (BoA) for SEZs has approved an International Financial Services Centre (IFSC) at GIFT, the first of its kind in India. Being located in an SEZ, this will be deemed to be on foreign territory for the purposes of export and import transactions.

The move will, for the first time, enable Indian companies to raise funds for overseas acquisitions from banks and financial institutions set up in the GIFT city project. As of now, these firms have to raise costly funds from foreign banks from their offices abroad. The approval is, however, subject to a green signal from the government of India in consultation with the regulators of the capital market, insurance, banking and financial sectors and the commodity market.

Last month, GIFT announced that it allotted development rights to the India International Textile Machinery Exhibition Society (IITME) for the development of India’s largest inbuilt international exhibition complex. Work is also on for setting up an educational institute and hospital in the city. GIFT has also invited tenders for setting up information communication technology (ICT) infrastructure at the finance city and about 14 firms are in the race.

On financial sector companies setting up operations at GIFT, Jha said it was in talks with various banks and is yet to enter into a firm agreement.

“The purpose of giving away government land to GIFT was for a finance city. This will be defeated if they can’t make it a finance hub and focus only on IT or real estate," said a third government official who was with the state finance department at the time work on the land transfer to GIFT was going on.