Thursday, February 19, 2009
Room for more rate cut: RBI
Room for more rate cut: RBI
Business Standard, 19th February 2009, Page 3, Section II
BS REPORTER & REUTERS Mumbai/ Tokyo
Reserve Bank of India Governor D Subbarao today said that there is room to cut interest rates further.
“There certainly is room for cutting rates. The question is whether we should cut rates or not, when should we cut rates and by how much,” he told reporters in Tokyo.
The statement comes at a time when the market is expecting further action from the central bank, which has repeatedly cut the repo and the reverse repo rates and lowered the cash reserve ratio by 400 basis points to boost economic activity. Through its steps over Rs 3,88,000 crore has flown into the system but banks, especially foreign and private players, have not pared rates significantly.
Subbarao said RBI expects that commercial banks will take policy cues to reduce deposit and lending rates to keep credit flowing to productive sectors.
He also said that India is committed to open its capital account further but it will draw lessons from the current crisis on how to proceed. At a conference Subbarao said that India may see a further downturn in the investment demand before it recovers but its current account deficit may be smaller than expected.
Further, the RBI governor said that the combined fiscal deficit of states and central government may touch 10 per cent of the gross domestic product during the current fiscal. “So, it is a concern,”Subbarao said.
He warned that the growth moderation may be steeper and more extended than the previous projection. The government has projected 7.1 per cent growth this year 2008-09 and 7 per cent in 2009-10.
In recent months, industrial output has contracted, the services sector is slowing down, exports have been hit by the global downturn and investment demand is decelerating.
The fall in inflation should support consumption demand and reduce input costs. Furthermore, the decline in global crude prices will help reduce the subsidy bill and create fiscal space for infrastructure spending, the governor said.
Going forward, the monetary policy stance will continue to maintain comfortable rupee and foreign exchange liquidity positions, he said.
Referring to the availability of resources for various segments, he said there are indications that the pressure on mutual funds have eased and nonbanking finance companies are also making adjustments to balance their assets and liabilities.
Complete transactions before strike
Mumbai: The one-day strike called by officers and other employees of Reserve Bank of India on Friday may disrupt normal functioning, including its payment and settlement system, the central bank said today.
As a result, RBI has advised the public to complete their transactions on Thursday. The United Forum of Reserve Bank Officers’ and Employees has called the strike in protest against the banking regulator’s decision to withdraw pension updation scheme. RBI said the one day strike amounts to cessation of work and concerted refusal to work. NW18.
Business Standard, 19th February 2009, Page 3, Section II
BS REPORTER & REUTERS Mumbai/ Tokyo
Reserve Bank of India Governor D Subbarao today said that there is room to cut interest rates further.
“There certainly is room for cutting rates. The question is whether we should cut rates or not, when should we cut rates and by how much,” he told reporters in Tokyo.
The statement comes at a time when the market is expecting further action from the central bank, which has repeatedly cut the repo and the reverse repo rates and lowered the cash reserve ratio by 400 basis points to boost economic activity. Through its steps over Rs 3,88,000 crore has flown into the system but banks, especially foreign and private players, have not pared rates significantly.
Subbarao said RBI expects that commercial banks will take policy cues to reduce deposit and lending rates to keep credit flowing to productive sectors.
He also said that India is committed to open its capital account further but it will draw lessons from the current crisis on how to proceed. At a conference Subbarao said that India may see a further downturn in the investment demand before it recovers but its current account deficit may be smaller than expected.
Further, the RBI governor said that the combined fiscal deficit of states and central government may touch 10 per cent of the gross domestic product during the current fiscal. “So, it is a concern,”Subbarao said.
He warned that the growth moderation may be steeper and more extended than the previous projection. The government has projected 7.1 per cent growth this year 2008-09 and 7 per cent in 2009-10.
In recent months, industrial output has contracted, the services sector is slowing down, exports have been hit by the global downturn and investment demand is decelerating.
The fall in inflation should support consumption demand and reduce input costs. Furthermore, the decline in global crude prices will help reduce the subsidy bill and create fiscal space for infrastructure spending, the governor said.
Going forward, the monetary policy stance will continue to maintain comfortable rupee and foreign exchange liquidity positions, he said.
Referring to the availability of resources for various segments, he said there are indications that the pressure on mutual funds have eased and nonbanking finance companies are also making adjustments to balance their assets and liabilities.
Complete transactions before strike
Mumbai: The one-day strike called by officers and other employees of Reserve Bank of India on Friday may disrupt normal functioning, including its payment and settlement system, the central bank said today.
As a result, RBI has advised the public to complete their transactions on Thursday. The United Forum of Reserve Bank Officers’ and Employees has called the strike in protest against the banking regulator’s decision to withdraw pension updation scheme. RBI said the one day strike amounts to cessation of work and concerted refusal to work. NW18.
DIPP recommends changes in FDI norms for real estate
DIPP recommends changes in FDI norms for real estate
Business Standard, 19th February 2009, Page 3
NEERAJ THAKUR &JOE MATHEW New Delhi
The Department of Industrial Policy and Promotion (DIPP) has recommended relaxation in foreign investment rules in the real estate sector in a bid to facilitate cash-strapped realtors get overseas funds.
The DIPP is backing changes in rules to facilitate foreign direct investment (FDI) in real estate projects that are not FDI-compliant, according to sources.
DIPP members who are part of the Foreign Investment Promotion Board (FIPB), in a meeting held on January 22, were of the view that in light of the current liquidity crunch, some leeway was required for the sector. The DIPP has directed that the matter be examined expeditiously.
At present, FDI in the sector is allowed only in partially completed and Greenfield projects. There are also area specifications that developers have to comply with.
The DIPP is also examining the approach to be adopted in case of requests for receiving FDI by real estate companies that are engaged in various projects, not all of which are FDI-compliant according to Press Note 2 (2005) and which cannot be hived off.
Unitech has approached the FIPB for raising up to Rs 5,000 crore through global depository receipts. Unitech’s 10 per cent projects are not FDI-compliant.
If the DIPP allows real estate companies to get FDI in non-compliant projects, it will help Unitech raise money without difficulty.
Business Standard, 19th February 2009, Page 3
NEERAJ THAKUR &JOE MATHEW New Delhi
The Department of Industrial Policy and Promotion (DIPP) has recommended relaxation in foreign investment rules in the real estate sector in a bid to facilitate cash-strapped realtors get overseas funds.
The DIPP is backing changes in rules to facilitate foreign direct investment (FDI) in real estate projects that are not FDI-compliant, according to sources.
DIPP members who are part of the Foreign Investment Promotion Board (FIPB), in a meeting held on January 22, were of the view that in light of the current liquidity crunch, some leeway was required for the sector. The DIPP has directed that the matter be examined expeditiously.
At present, FDI in the sector is allowed only in partially completed and Greenfield projects. There are also area specifications that developers have to comply with.
The DIPP is also examining the approach to be adopted in case of requests for receiving FDI by real estate companies that are engaged in various projects, not all of which are FDI-compliant according to Press Note 2 (2005) and which cannot be hived off.
Unitech has approached the FIPB for raising up to Rs 5,000 crore through global depository receipts. Unitech’s 10 per cent projects are not FDI-compliant.
If the DIPP allows real estate companies to get FDI in non-compliant projects, it will help Unitech raise money without difficulty.
Barack Obama to unveil plan for housing market
Barack Obama to unveil plan for housing market
The Financial Express, February 19, 2009, Page 13
Reuters, Washington
US President Barack Obama was set on Wednesday to unveil a plan to stabilize the troubled housing market, a main cause of the economy's deepening slump.
Fresh from signing into law a sweeping $787 billion fiscal stimulus package, Obama is turning his attention to the housing market, where foreclosures have continued to climb despite earlier initiatives aimed at halting that trend. The Obama plan will involve government subsidies to mortgage servicers and lenders to encourage them to lower payments for borrowers in distress.
The aim is to bring mortgage payments to a more affordable range of around 31% of borrowers' incomes. The administration has closely guarded the details of the roughly $50 billion plan but sources familiar with it have made clear it would be bolder than prior efforts to stem foreclosures.
Obama will outline the plan in a speech at a high school in Mesa, Arizona at 10:15 a.m. Mountain time (1715 GMT). It marks the second day of a two-day campaign-style swing Obama is taking to highlight his economic initiatives.
On Tuesday, he signed the stimulus bill into law at an event in Denver where he touted initiatives in the package aimed at encouraging the development of alternative energy sources, such as solar and wind power.
Obama said the stimulus package would "mark the beginning of the end" of the ills facing the economy, though he said it would not solve all the problems. On Wall Street, continued worries about the global economy sent US stock prices down toward their lows reached in November. The Dow Jones industrial average fell 297.81 points, or 3.8 % to 7,552.60. The Obama administration faces pressure to ensure the roll-out of the housing plan goes as smoothly as possible. A plan last week by Treasury Secretary Timothy Geithner to address the turmoil in the banking industry led to a drop in stock prices as investors panned it as lacking in detail.
An overhang of bad mortgage debt has contributed to the economy's difficulties because it has made it harder for consumers and businesses to get loans from banks. Stabilising the housing market could ease some of the problems with the banks.
At the end of last year, just over 9 % of all home loans in the United States were in arrears or already in foreclosure, the Mortgage Bankers Association has said.
The Financial Express, February 19, 2009, Page 13
Reuters, Washington
US President Barack Obama was set on Wednesday to unveil a plan to stabilize the troubled housing market, a main cause of the economy's deepening slump.
Fresh from signing into law a sweeping $787 billion fiscal stimulus package, Obama is turning his attention to the housing market, where foreclosures have continued to climb despite earlier initiatives aimed at halting that trend. The Obama plan will involve government subsidies to mortgage servicers and lenders to encourage them to lower payments for borrowers in distress.
The aim is to bring mortgage payments to a more affordable range of around 31% of borrowers' incomes. The administration has closely guarded the details of the roughly $50 billion plan but sources familiar with it have made clear it would be bolder than prior efforts to stem foreclosures.
Obama will outline the plan in a speech at a high school in Mesa, Arizona at 10:15 a.m. Mountain time (1715 GMT). It marks the second day of a two-day campaign-style swing Obama is taking to highlight his economic initiatives.
On Tuesday, he signed the stimulus bill into law at an event in Denver where he touted initiatives in the package aimed at encouraging the development of alternative energy sources, such as solar and wind power.
Obama said the stimulus package would "mark the beginning of the end" of the ills facing the economy, though he said it would not solve all the problems. On Wall Street, continued worries about the global economy sent US stock prices down toward their lows reached in November. The Dow Jones industrial average fell 297.81 points, or 3.8 % to 7,552.60. The Obama administration faces pressure to ensure the roll-out of the housing plan goes as smoothly as possible. A plan last week by Treasury Secretary Timothy Geithner to address the turmoil in the banking industry led to a drop in stock prices as investors panned it as lacking in detail.
An overhang of bad mortgage debt has contributed to the economy's difficulties because it has made it harder for consumers and businesses to get loans from banks. Stabilising the housing market could ease some of the problems with the banks.
At the end of last year, just over 9 % of all home loans in the United States were in arrears or already in foreclosure, the Mortgage Bankers Association has said.
Fall in prices by about 30 per cent should be enough to trigger demand’
Fall in prices by about 30 per cent should be enough to trigger demand’
Indian Express, February 07, 2009
Praveen K Singh
Indian Express, February 07, 2009
Praveen K Singh
Working towards establishing a benchmark for real estate professionals in land, construction and property related areas in India, Sachin Sandhir, MD and Country Head, Royal Institution of Chartered Surveyors (RICS) believes that there is a growing consciousness among all stakeholders to revive the sector. He expects that the market to turn around in next 12 months as the real estate prices are at their lowest ebb now and this is the perfect time to enter the market. Excerpts from a conversation with Praveen K Singh:
What’s your assessment on the current market scenario when the global meltdown erodes market capitalisation of Indian real estate companies?
The global financial crisis continues to unravel, the real estate sector around the world continues to take a hit with credit in short supply and consumer demand in housing witnessing record lows. India too has seen real estate values decline while the government undertakes a two-pronged approach of investing in infrastructure and facilitating consumer spending in real estate through interest rate cuts and easing of liquidity norms for banks.
The situation in India is however slightly different from that of the West. In India, the conduct of the monetary policy and regulation over banks and housing finance companies ensured that the housing bubble did not develop. Further, the actual equity component in housing is much higher than in the West. Thus, housing prices in India have fallen by about 20 per cent and may fall further, but unlikely to get into a free-fall situation
What we are all witnessing today is a period of complete transition for the real estate sector with some fundamental differences this time. Customers will purchase based on need rather than based on the euphoria and hype we saw in 2006-2007. Already, sizes of homes have reduced and customers will be more circumspect in their purchase decisions. At the developer end, the indiscriminate growth will also give way to more rational and safer growth plans as a result most new projects will be price corrected with realistic values.
Current environment notwithstanding, the domestic real estate sector still presents enormous opportunities. I am bullish on the sector from the long term perspective, and believe the current down cycle is unlikely to stretch beyond 12 months. The residential segment which is driven by rising population, urbanisation, nuclearisation, and low penetration of housing finance will be a key driver.
What sense you are getting from international investors about the current scenario in India?
The one common thing that seems to be going around in everyone's mind is that since the prices are low. One can plan investment now or wait for the market to bottom out. Quite obviously, the latter would seem logical given the sheer amount of changes happening. However no one knows... where's the bottom? The problem is that everyone is trying to catch the bottom, and that is what needs to change.
Lenders are slashing home loan rates, Prices of real estate have slipped in tandem with the stock indices, recession in the United States and Europe has forced many NRIs to rethink their property investment plans in India leaving thousands of plush homes in so-called NRI colonies without buyers. There has been a drop of 50-60 per cent bookings by the NRIs over the last three months owing to tight liquidity conditions in the international markets. A lot of developers expect the situation to continue till the liquidity situation improves in foreign markets.
Do you think developers need to bring in further correction to make the sector in force once again?
Developers may need to bring in further correction but this standalone measure may not be adequate. A lot of measures need to be taken and by all stakeholders which includes the government, developers and consultants and they need to get together to work towards viable solutions with the aim to trigger demand in the market. Over long term, actual sales of developed properties will be required - I would like to state that while the liquidity for the next 12 months may be generated by land bank sales and asset liquidation, over the long term, only actual sales of developed properties will help the developers avoid any such concerns. Sales will only take place if prices are cut to bring back affordability. The key going forward will be the completion of projects to lifting cash-flow rather than to spend on new land or new projects planned but yet to be initiated.
Is it the right time to scale up investment activities in India, as valuations are expected to be down to more realistic levels?
The downtrend is likely to continue for at least 12 months and the market could take a couple of years to turnaround.
It is the purpose of purchase that should determine an ideal time to buy a house. From a self-use perspective, the decision can be made as soon as a property that meets the budget, location and size requirements is found. Most developers are offering special deals and willing to negotiate and therefore this may well be a good period.
The decision can be stalled for next 3 to 6 months to get a better perspective on the effects of various reforms being announced by the Government and players directly related to it.
When do you think situation will improve?
There is a growing consciousness among all stakeholders to revive the sector. I expect the interest rates will continue to fall and that coupled with a fall in prices by about 30 per cent should be enough to trigger demand and I see the market turning around within the next 12 months as I do believe that real estate prices are at their lowest ebb now and this is the perfect time to enter the market.
What according to you are the critical factors in front of the real estate sector?
First of all, we need to institutionalise real estate in India with a mechanism to review professional standards. Secondly, there's a requirement for a uniform land laws and a single window clearance system. Thirdly, we need quality safeguards in projects. Fourthly, efficient land records and effective regulation of land valuations and international standards to be followed for valuations as prescribed by the RICS and effective regulation to ensure that we don't see the overheated situation we saw in land prices till June 2008. And finally, we need to address the resource crunch and lack of skilled manpower and reliable information.
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