Wednesday, December 30, 2009
No rate hike for six months: SBI
No rate hike for six months: SBI
The Times of India, December 30, 2009, Page 21
Surplus Liquidity, Low Credit Offtake Will Force Banks Not To Up Interest
TIMES NEWS NETWORK
New Delhi: India Inc can rejoice. State Bank of India chairman OP Bhatt on Tuesday indicated that there will be no increase in interest rates for next six months despite inflationary pressure.
As inflation is rising, the speculation is rife that RBI might take measures to tighten the money supply, leading to hardening of interest rates, in its review of monetary policy in January. As the global economy is still in the grip of recession, industry captains feel that any hike in interest rates will affect the economic recovery in India.
Bhatt said there was surplus liquidity in the system and credit offtake was slowly picking up. This situation of liquidity surplus will force banks not to increase interest rates. Because of this surplus liquidity, banks have cut deposits rates. But they are not cutting the lending rates due to slow credit offtake, despite the speculation that RBI can increase key rates (repo or reverse repo) to contain inflation.
In the eight months of the current financial year till December 4, while the deposits with the commercial banks rose by 3,69,535 crore, credit offtake was only Rs 1,44,151 crore. This forced the banks to park around Rs 100,000 crore with the RBI at reverse repo rate of 3.25%.
When the interest rate condition was benign, SBI had cut its lending rates, particularly home loan rate. Bhatt claimed that the 8% interest rate on home loan announced by SBI had helped reviving real estate market. The buyers have started coming back and cement and steel sectors have also started improving, he said. In fact, SBI’s decision to cut the rates forced other banks to follow suit, he added.
Bhatt does not think Indian economy had been affected by global recession. ‘‘The recession did not hit India the way it had affected European countries last year. There was only a slowdown in the growth rate which came down to 7% from 9%,” he said.
Replying to a question on withdrawal of stimulus package by the government in the prevailing situation, Bhatt said it should not be taken back but ‘phased out’ in staggered manner.
Referring to the ongoing merger process of SBI associate banks, Bhatt said SBI is a major stakeholder in SBI associate banks like State Bank of Saurashtra and State Bank of Indore. “In fact, we did not have less than 75% stake in any of these banks and owned 100% in State Bank of Hyderabad and State Bank of Patiala which were with us for the last 50 to 60 years,” he said.
State Bank of Saurashtra has merged while process was on in regard to State Bank of Indore, Bhatt said. The merger would improve SBI in terms of efficiency in operation, release of capital.
RBI hints at tighter money supply
Bangalore: Concerned over the spiralling food prices, the Reserve Bank has indicated at tightening money supply to contain the rising inflation pressures.
“Effective assessment of the inflation process, and using monetary policy actions at the right time would be critical to enhance the effectiveness of the inflation management policy,” RBI deputy governor Shyamala Gopinath said. She further said there is a risk of high inflation in essential commodities affecting inflation expectations over time and give rise to generalised inflation. “Given the dominance of food price inflation in shaping the overall course of the inflation path, the policy challenge is to address the supply constraints,” Gopinath added.
The food inflation was nearly 19% last week while the overall wholesale price inflation rose to 4.78% in November compared to 1.34% in October. PTI
Economy to grow 7.5%: Rangarajan
Economy to grow 7.5%: Rangarajan
The Times of India, December 30, 2009, Page 21
Hyderabad: Indian economy will grow between 7% and 7.5% during the current financial year despite poor performance of the agriculture sector on account of drought and floods, said PMEAC chairman C Rangarajan.
“The economy will grow between 7% and 7.5% overall but agricultural growth may fall by 1% to 2%,” Prime Minister’s Economic Advisory Council (PMEAC) chief said. Flagging food inflation as a major concern, he said, “agricultural growth rate should not fall below 4% for food security as 60% of the population are in rural areas.” Although the economy did well during second quarter recording a growth of 7.9%, the output of agriculture and allied sector slipped to below 1%.
Referring to the impact of the widespread drought and devastating floods on the farm sector, Rangarajan said., rice output might decline by 13 million tonnes. However, he hoped, the rabi crop) would to some extent make up for shortfall in kharif crop). PTI
GDP growth may be 7-7.5% this fiscal, says Rangarajan
GDP growth may be 7-7.5% this fiscal, says Rangarajan
The Hindu Business Line, December 20, 2009, Page 4
Agriculture may show negative growth.
Our Bureau, Hyderabad
Dr C. Rangarajan, Chairman of the Economic Advisory Council to the Prime Minister, on Tuesday forecast the GDP to grow at 7 to 7.5 per cent this fiscal, signalling an improvement in the domestic economic climate.
Speaking at a meet on ‘Challenges before the Indian Economy' here today, he cautioned that agriculture could show a negative growth of 1-2 per cent, while the industrial and services sectors are projected to grow at 8.6 per cent and 8.7 per cent respectively.
Dr. Rangarajan also noted with concern the rising food inflation, which is at an 11-month high now, stating that the task ahead was to check food inflation.
He advocated a two-pronged strategy that included improving supplies by issuing out part of the foodgrain reserves through the PDS and importing certain additional foodgrain.
He indicated that the Reserve Bank of India could look at raising the CRR to suck out excess liquidity from the system, even though the central bank may watch the price movements for some more time before taking any decision on rate hike.
“I am not saying that a rise in the CRR is imminent,'' he said adding that the supply position of the food products and the seasonal decline in prices would also be factors in deciding the tools to deal with inflation.
Dr Rangarajan said the challenge next year would be to bring down fiscal deficit by 1-1.5 percentage points of the GDP. Agricultural growth should not be allowed to fall below four per cent, as a decline in growth by even one to two percentage points would translate into a significant shortfall in food production. Low yields and power shortage were the major challenges before increasing farm productivity.
In the long run, he felt that if there were to be a consistent growth of four per cent in agriculture and nine per cent in industrial and services sectors over the next two decades, India could be propelled into the club of developed nations.
He also called for prudence to improve the fiscal situation, identifying the root cause for the recent global economic crisis as proliferation of derivative products.
“The lesson to be learnt from the crisis is that all segments of the market need to be regulated,” he pointed out.
Deposit-based banking was more prudent than the practice of short-term borrowing from capital markets by banks, he felt.
Demand for mall space yet to pick up as retailers go cautious
Demand for mall space yet to pick up as retailers go cautious
The Economic Times, December 30, 2009, Page 21
Markets In NCR, Bangalore & Mumbai Record 53% To 40% Fall In Rentals In Q4
Ravi Teja Sharma NEW DELHI
THE year 2009 has been bad for the real estate sector, particularly the retail sector. While residential real estate picked up in the last two quarters, retail is still seeing very low demand. According to a report by Cushman & Wakefield, of the 44 malls proposed at the beginning of Q1 2009, just about 18 were delivered by the year end. A number of developers postponed mall projects in 2009 but with a revival of demand in the end of the year, 2010 is expected to see a number of mall projects getting back on track.
“The outlook for the retail sector in 2010 is looking brighter. The festive season has been good and has seen a lot more footfalls. As the market picks up, there will be a revival of demand for retail spaces again,” says Rajeev Talwar, executive director at DLF. Year 2009 saw fresh supply of 5.7 million sq ft of mall space. Approximately 9 million sq ft of mall space was deferred to the future, which is a reduction of 60%. Almost 80% of new mall space in Bangalore was postponed which meant the city saw a vacancy of only 3%.
“I see retailers being cautiously optimistic in 2010. They will expand but with caution unlike earlier,” says Jaideep Wahi, director, retail agency, Cushman & Wakefield. Most large developers had postponed their projects as it was hard for them to lease retail space, he says. In the early part of 2009, developers also faced a credit crunch which slowed down mall plans.
This slowdown in mall construction need not be viewed as a negative. The slowdown has helped in maintaining a good supply demand equation, especially for markets which were staring at an oversupply situation.
Delhi-based developer Omaxe launched its mall in Patiala a month back and the response has been good, says Omaxe CMD Rohtas Goel. The company though had decided to postpone its 1.5 million sq ft mall Connaught Place in Greater Noida because of lack of demand in 2009. “The retail segment is seeing renewed demand over the last 4-5 months. We are seeing new leasing activity start at our mall in Greater Noida where construction will start in early 2010,” Mr Goel adds.
Across the major cities, rentals hardly saw any upward movement since the markets crashed late 2008. Mall as well as main street rentals (except a few locations) continued to remain below the average rental rates of Q4 2008, says the report.
Some micro markets in the NCR, Bangalore and Mumbai saw a 53% to 40% decline in rentals in Q4 2009 over the same period last year. Bangalore’s prominent high streets (Brigade Road and Commercial Street) were the only micro markets to post an approximate 10% rise in rentals over last year, indicating the existing demand for premium retail precincts over emerging locations in the city.
Of the 5.7 million sq ft of fresh mall supply in 2009, the largest share of the supply — 1.8 million sq ft came up in Mumbai, followed by Hyderabad (1.1 million sq ft) and the NCR (0.9 million sq ft). Kolkata saw fresh supply of 0.7 million sq ft.
Retailers are now very cautious about signing up new space. “It has been a learning for both developers and retailers. The retailer is now asking a lot more questions and is very cautious,” says V Muhammad Ali, head, mall operations, Forum, Prestige Group’s mall division. They area asking questions about the location, about anchor tenants. Ali recalls that during the boom time, no one was asking these questions. “LoI’s were being signed at conferences at that time.”
The Economic Times, December 30, 2009, Page 21
Markets In NCR, Bangalore & Mumbai Record 53% To 40% Fall In Rentals In Q4
Ravi Teja Sharma NEW DELHI
THE year 2009 has been bad for the real estate sector, particularly the retail sector. While residential real estate picked up in the last two quarters, retail is still seeing very low demand. According to a report by Cushman & Wakefield, of the 44 malls proposed at the beginning of Q1 2009, just about 18 were delivered by the year end. A number of developers postponed mall projects in 2009 but with a revival of demand in the end of the year, 2010 is expected to see a number of mall projects getting back on track.
“The outlook for the retail sector in 2010 is looking brighter. The festive season has been good and has seen a lot more footfalls. As the market picks up, there will be a revival of demand for retail spaces again,” says Rajeev Talwar, executive director at DLF. Year 2009 saw fresh supply of 5.7 million sq ft of mall space. Approximately 9 million sq ft of mall space was deferred to the future, which is a reduction of 60%. Almost 80% of new mall space in Bangalore was postponed which meant the city saw a vacancy of only 3%.
“I see retailers being cautiously optimistic in 2010. They will expand but with caution unlike earlier,” says Jaideep Wahi, director, retail agency, Cushman & Wakefield. Most large developers had postponed their projects as it was hard for them to lease retail space, he says. In the early part of 2009, developers also faced a credit crunch which slowed down mall plans.
This slowdown in mall construction need not be viewed as a negative. The slowdown has helped in maintaining a good supply demand equation, especially for markets which were staring at an oversupply situation.
Delhi-based developer Omaxe launched its mall in Patiala a month back and the response has been good, says Omaxe CMD Rohtas Goel. The company though had decided to postpone its 1.5 million sq ft mall Connaught Place in Greater Noida because of lack of demand in 2009. “The retail segment is seeing renewed demand over the last 4-5 months. We are seeing new leasing activity start at our mall in Greater Noida where construction will start in early 2010,” Mr Goel adds.
Across the major cities, rentals hardly saw any upward movement since the markets crashed late 2008. Mall as well as main street rentals (except a few locations) continued to remain below the average rental rates of Q4 2008, says the report.
Some micro markets in the NCR, Bangalore and Mumbai saw a 53% to 40% decline in rentals in Q4 2009 over the same period last year. Bangalore’s prominent high streets (Brigade Road and Commercial Street) were the only micro markets to post an approximate 10% rise in rentals over last year, indicating the existing demand for premium retail precincts over emerging locations in the city.
Of the 5.7 million sq ft of fresh mall supply in 2009, the largest share of the supply — 1.8 million sq ft came up in Mumbai, followed by Hyderabad (1.1 million sq ft) and the NCR (0.9 million sq ft). Kolkata saw fresh supply of 0.7 million sq ft.
Retailers are now very cautious about signing up new space. “It has been a learning for both developers and retailers. The retailer is now asking a lot more questions and is very cautious,” says V Muhammad Ali, head, mall operations, Forum, Prestige Group’s mall division. They area asking questions about the location, about anchor tenants. Ali recalls that during the boom time, no one was asking these questions. “LoI’s were being signed at conferences at that time.”
Growth-inflation to determine RBI's future action, says Gopinath
Growth-inflation to determine RBI's future action, says Gopinath
Business Standard, December 30, 2009, Section II, Page 3
BS Reporter / Mumbai
Concerned over food inflation spreading to other sectors through adverse expectations, Reserve Bank of India (RBI) Deputy Governor Shyamala Gopinath has said the near-term policy challenges will depend on the evolving growth-inflation outcome that supports shifting the focus of the policy to managing recovery and containing inflation.
“RBI has already started the first phase of ‘exit’ in its October 2009 policy statement, though primarily in terms of signaling the stance rather than affecting liquidity conditions or interest rates. The evolving growth-inflation conditions will dictate the future course of action by RBI,” Gopinath said in Bangalore on Monday.
Headline inflation for November shot up to 4.8 per cent, mainly driven by food prices, as compared to 1.3 per cent in the previous month. Food inflation was 19.8 per cent in November.
During the second quarter review of the annual policy, the central bank revised its inflation forecast to 6.5 per cent with an upward bias, above its comfort level of 5 per cent.
“Given the dominance of the food price inflation in shaping the overall course of the inflation path, the policy challenge is to address supply constraints. Since supply shocks take time to taper off, there is risk that high inflation in essential commodities could affect inflation expectations over time and give rise to generalised inflation,” RBI said.
On the growth front, though there are positive indicators like strong performance of the infrastructure sector and industrial recovery, the central bank has expressed concern over the deceleration of private consumption and investment demand, besides a deficient south-west monsoon. Continuous fall in non-food credit growth and negative growth in consumer durables and credit cards, suggesting possible continuation of deceleration in private consumption, were the downside risk for economic growth, RBI said.
Though bank credit growth fell to 11 per cent as on December 4, from 26.3 per cent an year ago, RBI says credit may pick up in the remaining period of the financial year.
“With the economy posting strong growth in the second quarter of the year, credit demand could be expected to pick up, which has already started in the recent fortnights,” Gopinath said.
RBI also said there was a growing perception that India might experience surges in capital inflows again because of easy global liquidity conditions and superior growth prospects.
“Once the recovery gains further strength and sustainability in India, return to the fiscal consolidation path will be critical to contain the constraints to the high growth path. With revival in demand for credit from the private sector, the significance of fiscal consolidation will become more apparent,” she said.
Business Standard, December 30, 2009, Section II, Page 3
BS Reporter / Mumbai
Concerned over food inflation spreading to other sectors through adverse expectations, Reserve Bank of India (RBI) Deputy Governor Shyamala Gopinath has said the near-term policy challenges will depend on the evolving growth-inflation outcome that supports shifting the focus of the policy to managing recovery and containing inflation.
“RBI has already started the first phase of ‘exit’ in its October 2009 policy statement, though primarily in terms of signaling the stance rather than affecting liquidity conditions or interest rates. The evolving growth-inflation conditions will dictate the future course of action by RBI,” Gopinath said in Bangalore on Monday.
Headline inflation for November shot up to 4.8 per cent, mainly driven by food prices, as compared to 1.3 per cent in the previous month. Food inflation was 19.8 per cent in November.
During the second quarter review of the annual policy, the central bank revised its inflation forecast to 6.5 per cent with an upward bias, above its comfort level of 5 per cent.
“Given the dominance of the food price inflation in shaping the overall course of the inflation path, the policy challenge is to address supply constraints. Since supply shocks take time to taper off, there is risk that high inflation in essential commodities could affect inflation expectations over time and give rise to generalised inflation,” RBI said.
On the growth front, though there are positive indicators like strong performance of the infrastructure sector and industrial recovery, the central bank has expressed concern over the deceleration of private consumption and investment demand, besides a deficient south-west monsoon. Continuous fall in non-food credit growth and negative growth in consumer durables and credit cards, suggesting possible continuation of deceleration in private consumption, were the downside risk for economic growth, RBI said.
Though bank credit growth fell to 11 per cent as on December 4, from 26.3 per cent an year ago, RBI says credit may pick up in the remaining period of the financial year.
“With the economy posting strong growth in the second quarter of the year, credit demand could be expected to pick up, which has already started in the recent fortnights,” Gopinath said.
RBI also said there was a growing perception that India might experience surges in capital inflows again because of easy global liquidity conditions and superior growth prospects.
“Once the recovery gains further strength and sustainability in India, return to the fiscal consolidation path will be critical to contain the constraints to the high growth path. With revival in demand for credit from the private sector, the significance of fiscal consolidation will become more apparent,” she said.
Infrastructure will remain the top sector in 2010
Infrastructure will remain the top sector in 2010
Business Standard, December 30, 2009, Section II, Page 2
Q&A: Anil Ahuja
3i is a global private equity fund based out of UK and invests across buyouts, growth capital and infrastructure deals. It has a $1.2 billion India dedicated infrastructure fund which has made investments in Soma Enterprises and Adani Power. Anil Ahuja leads 3i’s investment teams across Asia, working with 3i’s local business heads in China, Singapore and India.
How do you see the fund raising scenario in 2010?
Fund raising activity will be more selective. It will be better in 2010 compared to what we saw in 2008-09. LPs will be lot more careful in allocating capital to first time funds. Established funds will have their task easier as LPs will feel more comfortable with funds having a track record. Number of funds that get allocations from LPs is going to come down significantly as it is very difficult for them to keep a tab on 100 fund managers. So, they will choose 10 or 15 fund managers whom they want to get involved with. This might make things easier for established funds but extremely difficult for new funds.
What will be the focus sectors?
Infrastructure will remain the top sector in 2010 as well. Financial Services, consumer and healthcare will see increased focus from private equity players. Financial Services is an interesting sector but difficult to find deals. With a savings rate of 35 per cent, we have already witnessed the remarkable growth of mutual fund and insurance industry. Much of the financial services space in India is listed where valuation becomes an issue. Within Infrastructure, power, roads, ports and airports are attractive. However, there is lot of frenzy in the power sector and people will wait to see returns on existing investments before making new one.
Will exits be easier next year?
Exits were an issue in 2008-09 but I do not see it being a problem in 2010. There is a market now for practically everything that can be sold and hence I see more exits in 2010. Most of the exits next year will be done through IPOs rather than strategic sales as markets remain bullish.
What are the challenges that private equity funds are likely to face next year?
Valuation is a major challenge that private equity funds are facing and will continue to do so. Markets have bounced back to pretty much 2007 levels. At the same time sustainability of global growth story is not intact right now. So, there will be some sort of cautious approach from private equity funds. The other challenge that I see is retaining good people. An important part for retention is carried interest and as carried interest gets wiped out, incentive to stay with the fund is much lower. So we will see lot of job hopping. For new players, holding on to their team will be difficult.
RBI focus shifts from growth to inflation worries
RBI focus shifts from growth to inflation worries
Hindustan Times, December 30, 2009, Page 23
A month before the scheduled policy review by the Reserve Bank of India (RBI), Deputy Governor Shyamala Gopinath said that the focus of the central bank is on managing the recovery and on containment of inflation rather than fostering growth.
Speaking at Bangalore Chamber of Industry & Commerce on Monday, Shyamala Gopinath said, “The near-term policy challenges are clearly conditioned by the evolving growth-inflation outcome that supports shifting the balance of policy focus on managing the recovery and on containment of inflation.”
Given the dominance of food price inflation in shaping overall course of inflation, the RBI policy would be towards addressing supply constraints. “Since supply shocks take time to taper off, there is a risk that high inflation in essential commodities could affect inflation expectations over time and give rise to generalised inflation.”
When prices go beyond a level and the government cannot control it, the RBI is expected to contain it by increasing interest rates. “Containing inflation is more important than ensuring higher rate of growth. It is a good thing that the RBI has hinted at containing food inflation,” said Shirin Bagga, Economist, Boston Analytics. “Food prices need to come down, which would translate into money flowing into the economy through investments and other channels.”
The comments follow those from fellow Deputy Governor Subir Gokarn on Thursday, who said the January policy review would focus both on growth and inflation, instead of only growth.
Hindustan Times, December 30, 2009, Page 23
A month before the scheduled policy review by the Reserve Bank of India (RBI), Deputy Governor Shyamala Gopinath said that the focus of the central bank is on managing the recovery and on containment of inflation rather than fostering growth.
Speaking at Bangalore Chamber of Industry & Commerce on Monday, Shyamala Gopinath said, “The near-term policy challenges are clearly conditioned by the evolving growth-inflation outcome that supports shifting the balance of policy focus on managing the recovery and on containment of inflation.”
Given the dominance of food price inflation in shaping overall course of inflation, the RBI policy would be towards addressing supply constraints. “Since supply shocks take time to taper off, there is a risk that high inflation in essential commodities could affect inflation expectations over time and give rise to generalised inflation.”
When prices go beyond a level and the government cannot control it, the RBI is expected to contain it by increasing interest rates. “Containing inflation is more important than ensuring higher rate of growth. It is a good thing that the RBI has hinted at containing food inflation,” said Shirin Bagga, Economist, Boston Analytics. “Food prices need to come down, which would translate into money flowing into the economy through investments and other channels.”
The comments follow those from fellow Deputy Governor Subir Gokarn on Thursday, who said the January policy review would focus both on growth and inflation, instead of only growth.
Villa projects back in lexicon of developers
Villa projects back in lexicon of developers
Business Standard, December 30, 2009, Page 3
Raghavendra Kamath / Mumbai
Unitech, Jaypee Greens to launch new projects in the segment.
Villa and bungalow projects are back on the agenda of property developers as demand for premium homes picks up. Though villas were popular with the affluent during the boom years of 2004-07, the economic slowdown saw many premium projects put on hold due to diminishing demand.
Large developers such as Unitech, Parsvnath and Jaypee Greens, which had shifted focus to mid-income housing in the range of Rs 20 lakh to Rs 60 lakh to beat the slowdown, have all launched villa projects in the last two months to tap demand for such properties.
Unitech, the country’s second-largest property developer, which launched its luxury villas ‘Alder Grove’ in Gurgaon last month, has already sold out all its 50 villas. Prices started from Rs 1.25 crore per villa.
After selling the first phase, the company has put the second phase of Alder Grove on sale, where villas are priced upwards of Rs 1.7 crore. Now, the company is exploring villa projects in other parts of the country, sensing renewed demand for such projects.
Jaypee Greens, a unit of Jaiprakash Associates, launched Jaypee Greens Sports City, including villas and town homes, on the Yamuna Expressway in Gautam Budh Nagar, this month.
Says R Nagaraju, head of corporate planning, Unitech: “In the last couple of years, there were no new launches in this segment. We felt there was a big gap and thought of launching the project to tap the demand. Within a month of launching it, we were proved right. Now we have launched the second phase.”
Adds Neetal Narang, assistant general manager, corporate communication, Delhi-based Parsvnath Developers: “All our residential projects have villas and penthouses. Though the sale of such properties went down during the slowdown, now they are in recovery mode. People are coming back to us with enquiries.”
According to property consultants in Delhi, prices of villas in the secondary market have also increased 20-30 per cent in South Delhi in the last couple of months due to renewed demand.
“Buyers thought it was the right time to buy such properties as prices corrected significantly. In South Delhi itself, there is enormous demand for villas in second sale,” says Raminder Grover, CEO, Homebay Residential, a unit of property consultancy Jones Lang LaSalle Meghraj.
In Mumbai, several small developers are marketing villas on the peripheries of Mumbai, pitching them as ‘second homes’. Villas, priced at Rs 25-35 lakh, are coming up at Kasara, Karjat and Shahpur — about 70-100 km from Mumbai.
“When markets go down, such projects are first to go down. But when markets go up, they are the ones that move faster than others. Villas are an important portfolio for us and we want to take it across different geographies,” says R Karthik, senior vice- president (marketing), Lodha Group, which is developing Lodha Goldcrest — a ‘by invitation only’ villa project in Lonavala, a two-hour drive from Mumbai. The cost for each villa is Rs 3.5 crore.
“We have many such projects under planning,” Karthik says.
Consultants say lower land prices and availability of large tracts of land in these localities are inducing developers to launch villa projects. While land price ranges from Rs 100 to Rs 500 a square ft in places such as Kasara and Karjat, a square ft of land costs Rs 3,000 to Rs 20,000 in Mumbai.
This leads to better margins for developers. While realty projects in Mumbai carry a margin of 25-35 per cent, those on peripheries carry 35-40 per cent margin due to lower land prices.
But not everybody is enthused. Rajeev Talwar, executive director at DLF, the country’s largest developer, says the company will continue to focus on apartments rather than villas and bungalows.
“The days of selling per square yard are gone. We can derive more value in apartments by selling per square ft,” Talwar says.
Adds Sunil Bajaj, a property consultant: “The reliability of many of the villa projects on Mumbai’s peripheries is doubtful. In many cases, they were only photographs and not real projects when buyers seriously looked at the projects.”
IRDA may widen infra definition
IRDA may widen infra definition
Business Standard, December 30, 2009, Page 1
Manojit Saha / Mumbai
Insurance companies intend to invest in more sectors
The Insurance Regulatory Development Authority (Irda) is likely to broaden the definition of infrastructure to include more sectors. The move, being discussed with insurance companies, is aimed at enabling insurers to get access to more papers to invest in and diversify their portfolio.
Under the existing guidelines, life insurance companies can invest up to 15 per cent of their investible corpus in papers issued by power, roads, ports, dams, housing and construction companies or projects. In addition, life insurers had to invest at least half of their investible surplus in government securities, while 35 per cent could be allocated for investment in other instruments, including equities. The norms for unit-linked plans that account for 90 per cent of the sales, however, permit investors to allocate the entire money in equities.
While the definition covered sectors other than core infrastructure, companies said that there was inadequate availability of papers. For instance, against a target of Rs 4,000 crore, National Highways Authority of India has raised only Rs 520 crore so far. During the last financial year, the highways construction agency raised Rs 1,630 crore, as against the annual target of Rs 3,000 crore.
Rural Electrification Corporation, the other large company which depends on debt, has raised Rs 18,000 crore so far this year, as against Rs 14,800 crore during 2008-09, a senior company executive said.
Last year, the market expanded as India Infrastructure Finance Company raised Rs 10,000 crore by issuing tax-free bonds. But given its inability to deploy the funds so far, the company is unlikely to tap the market for a similar issue this year.
During the current financial year, life insurance companies are expected to earn a premium income of Rs 2,55,000 crore, as against Rs 2,10,000 crore during the last financial year. This includes the renewal premium income as well as income emanating from sale of new policies.
In an interview last week, ICICI Prudential Life Insurance Managing Director and CEO V Vaidyanathan told Business Standard that the industry could generate an annual premium income of Rs 8,00,000 by the end of the next decade. With higher funds flow, company executives said, the availability of infrastructure sector papers also needed to expand at the same pace.
A senior executive at a large private sector insurance company said that the demand to widen the definition was made by companies that did not fall within the purview of the existing classification. The government has forwarded the proposal to Irda, which in turn has approached insurers to seek their comments.
“Since there are not many bonds available, it will be a good idea to broaden the scope. Investment in sectors such as cement, steel and engineering, which also contribute to the development of infrastructure can be included in the definition,” said the chief executive officer of a life insurance company.
The present norms allow investment to be treated as infrastructure sector exposure if the company involved owns a project, but is not responsible for building it. Insurers are now suggesting that engineering, procurement and construction companies and others such as Larsen & Toubro and Bharat Heavy Electricals Ltd (Bhel), which are involved in development of a project, should be included in the new definition.
Also, the insurance regulator mandated that 75 per cent of the infrastructure investment should be made in AAA-rated bonds. Insurance company executives said that this restricted their flexibility in selecting the bonds and companies in which they could invest.
Recently, banks approached the government for allowing them to float tax-free infrastructure bonds to access low-cost resources for the long term. At present, only infrastructure companies are allowed to float tax-free bonds.
Business Standard, December 30, 2009, Page 1
Manojit Saha / Mumbai
Insurance companies intend to invest in more sectors
The Insurance Regulatory Development Authority (Irda) is likely to broaden the definition of infrastructure to include more sectors. The move, being discussed with insurance companies, is aimed at enabling insurers to get access to more papers to invest in and diversify their portfolio.
Under the existing guidelines, life insurance companies can invest up to 15 per cent of their investible corpus in papers issued by power, roads, ports, dams, housing and construction companies or projects. In addition, life insurers had to invest at least half of their investible surplus in government securities, while 35 per cent could be allocated for investment in other instruments, including equities. The norms for unit-linked plans that account for 90 per cent of the sales, however, permit investors to allocate the entire money in equities.
While the definition covered sectors other than core infrastructure, companies said that there was inadequate availability of papers. For instance, against a target of Rs 4,000 crore, National Highways Authority of India has raised only Rs 520 crore so far. During the last financial year, the highways construction agency raised Rs 1,630 crore, as against the annual target of Rs 3,000 crore.
Rural Electrification Corporation, the other large company which depends on debt, has raised Rs 18,000 crore so far this year, as against Rs 14,800 crore during 2008-09, a senior company executive said.
Last year, the market expanded as India Infrastructure Finance Company raised Rs 10,000 crore by issuing tax-free bonds. But given its inability to deploy the funds so far, the company is unlikely to tap the market for a similar issue this year.
During the current financial year, life insurance companies are expected to earn a premium income of Rs 2,55,000 crore, as against Rs 2,10,000 crore during the last financial year. This includes the renewal premium income as well as income emanating from sale of new policies.
In an interview last week, ICICI Prudential Life Insurance Managing Director and CEO V Vaidyanathan told Business Standard that the industry could generate an annual premium income of Rs 8,00,000 by the end of the next decade. With higher funds flow, company executives said, the availability of infrastructure sector papers also needed to expand at the same pace.
A senior executive at a large private sector insurance company said that the demand to widen the definition was made by companies that did not fall within the purview of the existing classification. The government has forwarded the proposal to Irda, which in turn has approached insurers to seek their comments.
“Since there are not many bonds available, it will be a good idea to broaden the scope. Investment in sectors such as cement, steel and engineering, which also contribute to the development of infrastructure can be included in the definition,” said the chief executive officer of a life insurance company.
The present norms allow investment to be treated as infrastructure sector exposure if the company involved owns a project, but is not responsible for building it. Insurers are now suggesting that engineering, procurement and construction companies and others such as Larsen & Toubro and Bharat Heavy Electricals Ltd (Bhel), which are involved in development of a project, should be included in the new definition.
Also, the insurance regulator mandated that 75 per cent of the infrastructure investment should be made in AAA-rated bonds. Insurance company executives said that this restricted their flexibility in selecting the bonds and companies in which they could invest.
Recently, banks approached the government for allowing them to float tax-free infrastructure bonds to access low-cost resources for the long term. At present, only infrastructure companies are allowed to float tax-free bonds.
Japan to make Sahara’s Aamby a green city
Japan to make Sahara’s Aamby a green city
The Times of India, December 30, 2009, Page 21
TIMES NEWS NETWORK
New Delhi: Sahara group’s Aamby Valley township project near Mumbai will turn into an eco-friendly one with the help of Japanese government. Japanese prime minister Yikio Hatoyama met Sahara group chairman Subrata Roy on Tuesday to discuss ways to make the Aamby Valley project, spread over 10,000 acre, an environment and energy-efficient city. Aamby valley is one of the two cities selected by the Japanese government (another in China) to develop as model eco-friendly cities for the world.
Talking to TOI, Roy said that in the meeting with Hatoyama, they discussed details of Japan’s initiatives on environment and converting Aamby Valley City into an energy-efficient project with cooperation. Roy said the group has been in discussion with the Japanese government for quite some time. Recently a delegation of Sahara Group had gone to Japan to finalise details of the cooperation.
Roy hoped that the company will soon be able to sign a detailed agreement with the Japanese government. A delegation of Japanese ministers and senior officials is likely to visit India early next month. It is understood that the agreement would be signed during the visit of the delegation.
The cooperation will lead to not only efficient use of energy but also its generation through renewable sources like wind and solar. It will also provide technology to recycle water and other wastes to reduce the carbon dioxide emission from the city.
Aamby Valley City is a premium housing project located on the Mumbai-Lonavala expressway. The township has been developed away from the hustle and bustle of cities in green surroundings. A senior official said because of its location and quality of environment, Japanese government has selected it to develop as a eco-friendly city.
The Times of India, December 30, 2009, Page 21
TIMES NEWS NETWORK
New Delhi: Sahara group’s Aamby Valley township project near Mumbai will turn into an eco-friendly one with the help of Japanese government. Japanese prime minister Yikio Hatoyama met Sahara group chairman Subrata Roy on Tuesday to discuss ways to make the Aamby Valley project, spread over 10,000 acre, an environment and energy-efficient city. Aamby valley is one of the two cities selected by the Japanese government (another in China) to develop as model eco-friendly cities for the world.
Talking to TOI, Roy said that in the meeting with Hatoyama, they discussed details of Japan’s initiatives on environment and converting Aamby Valley City into an energy-efficient project with cooperation. Roy said the group has been in discussion with the Japanese government for quite some time. Recently a delegation of Sahara Group had gone to Japan to finalise details of the cooperation.
Roy hoped that the company will soon be able to sign a detailed agreement with the Japanese government. A delegation of Japanese ministers and senior officials is likely to visit India early next month. It is understood that the agreement would be signed during the visit of the delegation.
The cooperation will lead to not only efficient use of energy but also its generation through renewable sources like wind and solar. It will also provide technology to recycle water and other wastes to reduce the carbon dioxide emission from the city.
Aamby Valley City is a premium housing project located on the Mumbai-Lonavala expressway. The township has been developed away from the hustle and bustle of cities in green surroundings. A senior official said because of its location and quality of environment, Japanese government has selected it to develop as a eco-friendly city.
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