UP Defence Corridor: A catalyst of new opportunities in the State’s realty market 

By: Ankit Kansal, Founder & MD, 360 Realtors: The state of UP has India’s second dedicated defence corridor, after Tamil Nadu. The six-node corridor comprising Lucknow, Kanpur, Jhansi, Chitrakoot, Agra, and Aligarh will play a pivotal role in India’s ambition of indigenization of defence production. The defence corridor with dedicated nodes for indigenous production is expected to attract numerous manufacturers, OEMs, start-ups, and SMBs in defence manufacturing and related ancillary industries.

Already, numerous manufacturers from India and abroad have embarked on their investment journey. Bangalore-based aircraft manufacturer Gensar will start producing aircraft in the Kanpur campus following an investment of INR 3000 crores. The manufactured aircraft will be supplied to Indian armed forces as well as exported to the international market. India’s leading conglomerate Adani is also setting up a manufacturing unit with a cost of INR 1500 crores to develop ammunition systems.

In Lucknow, Russian manufacturer Brahmos is setting up an INR 385-crore unit to develop missile systems. In Jhansi, Indian PSU Bharat Dynamics Ltd has set up an INR 400-crore manufacturing unit to produce propulsion systems.

Besides deals that have been inked, there is also an extensive pipeline with numerous enterprises looking to set up in the UP defence corridor. Talks are ongoing with numerous OEMs and manufacturers from France, Israel, the USA, and Germany, which have shown interest in setting up the corridor.

 What Makes the Corridor A Value Enhancer 

The UP defence corridor has been systematically developed to create the much-needed infrastructure and the institutional framework required to help defence enterprises grow and flourish. The six-node corridor has a dedicated space of around 7700 hectares of land for defence production, out of which most of the land acquisition has been done. The corridor is well connected with a host of expressways such as Yamuna Expressway, Agra-Lucknow Expressway, Purvanchal Expressway, and Bundelkhand Expressway. It is also linked with Western Dedicated Freight Corridor (WDFC) and Eastern Dedicated Freight Corridor (EDFC).

The state of UP is rich in plenty of universities, colleges, engineering institutes, and polytechnic colleges, which will ensure a ceaseless supply of human resources. Likewise, the state has a well-developed SME network, with around 14% of Indian MSMEs located in UP. This will offer the required impetus to the industry.

There are also plenty of policy-linked incentives and facilities available at the corridor, which the member companies can directly avail of. Land is available at a 25% discount and there is a 100% stamp duty waiver. Already 9 government-run ordnance factories and 3 HALs are present which has helped in creating a fully operational ecosystem. Companies can use the testing ranges by ordnance factory at 50% discounted rates. 75% reimbursement can be availed in case of technology transfer.

India’s Towering Defence Ambitions

India is not just the 3^rd largest defence market in the world but also has a visible appetite to become a powerhouse in defence production. In FY 23, the overall defence budget amounted to USD 81.3 billion rising sharply from FY 22 and FY 21, when it was USD 77 and 64 billion, respectively.

In the times to come, India wants to become a major node in global defence production and it will be marked by increased indigenous capabilities, a larger share in the global export market, and a lowering of imports. The Indian export has reached close to USD 1.8 billion and is set to rise steadily in the times to come. To further support local manufacturing, the FDI limit has been increased to 74% in the defence production category. Hundreds of items have been put on the negative list so that their local production can be bolstered.

In India’s ambition to become a major defence powerhouse, the UP defence corridor is set to play a major role. The UP corridor, alongside the one in TN, will be an important cog in India’s defence manufacturing industry.

Windfall for Real Estate

The six-node UP defence corridor which starts from Western UP and extends to the center, encompassing the Bundelkhand region, will also witness a rise  in real estate demand. As the ambitious project, which has the potential of raising INR 50,000 crores in the near horizon, is taking shape, the demand for housing, infrastructure, commercial offices, retail, etc. will steadily rise in the vicinity.

It is estimated that the corridor will generate a total of ~250,000 jobs. If we include other non-direct jobs, it will be much larger. Such a monumental shift in the job market will directly influence realty demand, unlocking requirements for housing complexes, townships, offices, hotels, industrial land, retail, warehouses, etc.

Another benefit of the UP defence corridor will be its proximity to the Jewar international airport and being located adjacent to the Golden Triangle of Jaipur- Delhi- Agra. This will further help in renewing realty demand.