SANAND(GUJARAT): The restaurant at hotel Krsna Lila in Sanand is packed at lunchtime these days. Patrons are neatly dressed corporate executives, several of them foreigners.Business wasn’t this robust until a while ago, said Ghanshyam Waghela, one of the four owners of the hotel. There were very few guests, to stay at the 40-room hotel and dine at its restaurant, Aahar.Waghela's business started flourishing as Sanand’s profile changed from a quiet neighbourhood of Gujarat's capital Gandhinagar, with a few factories that made products such as drugs and FMCG, to India’s next automobile hub.Tata Motors makes the Nano microcar here. Ford Motor’s facility is getting ready while Honda Motor is next in line. Maruti Suzuki, India's top carmaker by sales volume, has acquired land for at least two plants. Investments are flowing in thousands of crores.A 120-130 km belt comprising Sanand, Hansalpur and Vithalapur, with connected nodes of Kadi and Halol, is well on its way to be among the biggest automotive clusters in the Asia-Pacific region. Some 2.2 million passenger vehicles are expected to be produced in the region in the next six to eight years by Maruti, Tata Motors, Ford India and Honda Cars India. Hero MotoCorp and Honda Motorcycle & Scooters India are considering factories to manufacture two-wheelers.The region has become a magnet for the auto industry with the state's enabling polices including tax benefits that leveraged its natural advantages, such as proximity to ports. Availability of infrastructure, ease of doing business and close proximity of port are among the key triggers behind choosing Gujarat as a state for future investment, said Maruti Chairman RC Bhargava. Maruti’s current plants are at landlocked Gurgaon and Manesar near New Delhi.The Gujarat government put development of the region on fast-track after Narendra Modi, the current Prime Minister who was then the state's chief minister, famously sent an SMS to Ratan Tata in October 2008, inviting Tata Motors to relocate its strife-hit Nano plant to Gujarat from West Bengal. For Tata Motors, the Nano project has yet to produce the expected results. But for the development of Sanand, the company's decision to move in has acted as a catalyst as other auto makers too started taking note.An auto industry executive, who is investing in the region but doesn't want to be named, said the state is not only making land and infrastructure available to industrialists, but also demarcating space for townships and housing development with schools and colleges for thousands of people, who are likely to be hired in the region for work.According to KT Vyas, officer on special duty at the Industrial Extension Bureau, the state's one-stop business facilitation initiative, what gives Gujarat an edge over others is the assurance of water, electricity and road, rail and port connectivity. “Industrial development in the region will definitely improve the socio-economic level in this 100-120 km belt, thereby giving rise to a significant housing, school and college infrastructure," said Vyas.Some of the changes are already reflecting on the ground. Waghela of hotel Krsna Lila is one of the beneficiaries. A resident of Khoda village in the area, he held acres of land, the value of which has soared since Sanand was selected as Nano's home. Within six months of the announcement, land rates in the area shot up to Rs 2,000 a square yard from Rs 125.Prices went up again when the government decided to acquire land across four villages to set up an industrial park. Currently, a square yard costs Rs 5,000 in and around Sanand. Waghela used a piece of land close to the Sanand-Viramgam highway to build the hotel. "We saw that prior to opening of our hotel, people had to travel all the way to Ahmedabad (25 kms away) to meet their basic stay and food facilities,” he said. It took some time for the business to take off, the delay primarily because of Tata Motors’ Nano woes. But with new factories coming up in the area and more looking to move in, things have improved. “Today our 40-room hotel sees almost 60-70% occupancy most of the days. Our restaurant is packed in the afternoon.”For Sanand and its auto factories, 2015 is going to be a turnaround year. Led by the opening of Ford’s plant and new car launches from Tata Motors, production in the Sanand area is expected to be 1-1.2 lakh units this year. Tata Motors, which has been using just 10% of the Sanand plant’s capacity, will see utilisation improving to 30% with a Nano facelift and the Kite twins – a hatchback and a subfour-metre sedan.As much as Rs 15,000-20,000 crore of investment has already been committed to create capacity for about 1.25 million passenger vehicles and three million two-wheelers in three-four years. An additional investment of Rs 15,000 crore is almost certain post 2017-18 from the likes of Maruti and Honda Cars, taking capacity of the region to about 2.2 million units. Similar kind of investment is expected from parts vendors, some 90-100 of whom are likely to set shop in the area. Production capacity in the industrial belt is set to surpass that in the Gurgaon-Manesar-Greater Noida belt, Pimpri-Chakan-Talegaon in Maharashtra and Sriperumbudur-Orgadam in Tamil Nadu.One hitch that the auto industry is facing, and may weigh on their plans in Sanand, is the current state of the local market. The passenger vehicle industry is sitting on huge overcapacity – annual volumes have remained range-bound at 2.5-2.6 million units, whereas car makers have a capacity of more than 5.2 million. The companies are hopeful of better days ahead, as car ownership is very low in India and is expected to expand dramatically.According to a report from Roland Berger Consultancy, vehicle ownership in India would increase to 72 per 1,000 people by 2025 from 12 in 2010. The capacity in Sanand and adjoining areas could be utilised for exports because of port proximity – Kandla port is 300 kms away and is connected with a modern highway – even as the companies wait for the local market to improve. Maruti is already planning to shift production of some export-oriented models to Gujarat. Ford is also looking to ship vehicles from Gujarat to foreign markets.Anuraag Mehrotra, Ford India’s executive director for marketing, sales and service, said once the plant becomes functional, the company plans to triple exports. “The real potential of the Sanand belt will unravel now,” said Chaumukesh Vashisht, a senior executive at Sharda Industries, a supplier to Tata Motors who has seen tough times in the past. “We are looking at increasing our headcount by almost three-four times and, I suspect, others too may be planning on the same lines."