Low-cost switch is paying off: Unitech

Low-cost switch is paying off: Unitech
Sunday Business Standard, April 26, 2009, Page 3

Neeraj Thakur / New Delhi

Unitech Ltd, the country’s second-biggest property developer, says its strategy to focus on affordable residential housing for mid-income consumers is getting an encouraging response.

It launched its second mid-income housing project in Gurgaon early this week after closing sales of an earlier one on the nearby Sohna Road. It said it sold over 500 apartments at its planned township, called North Town, in Chennai two weeks earlier.

“We have launched the project after getting a good response for the recently launched projects in Gurgaon and Chennai. The launch of new mid-income residential housing projects has improved the operating cash flow of the company,” said an official who did not wish to be identified.

Due to cash crunch and almost no demand for some of its luxury projects, Unitech had stopped the launch of new projects for about five months. It has now changed its strategy.

The company says it is also planing to launch projects in the range of Rs 5-10 lakh an apartment in Gurgaon, Chennai and Kolkata, among other places.

Earlier this month, Unitech raised $325 million (Rs 1,625 crore) from selling new shares to institutions. It plans to use a part of the money to develop its affordable housing segment. The developer plans to launch 40 such projects during the fiscal year ending 2010, aggregating 30 million sq ft.

The company is trying to keep prices in the range of Rs 30-50 lakh, which calls for a price of close to Rs 3,000 per sq. ft. The new project, ‘The Residencies’, is located in Sector 33 of Gurgaon and offers two and three-bedroom apartments at a basic price of Rs 3,295 a sq ft.

The cost of a two-bedroom apartment with a “super area” of 1,100 sq ft would be a little over Rs 36 lakh, while a three-bedroom apartment of 1,535 sq ft would cost a bit over Rs 50 lakh.

Without disclosing the number of apartments to be launched, the official said, “We are testing the market with a soft launch and will decide the apartments to be developed in a few days”.

DLF launches initiative to pacify retailers

DLF launches initiative to pacify retailers
Business Standard, April 27, 2009, Page 5

REAL REPORT - Investment in real estate picking up in metros

REAL REPORT - Investment in real estate picking up in metros
Hindustan Times, HT Estates, April 25, 2009, Page 5

HT Estates Correspondent

The metro rail projects have been the key drivers of infrastructure investment in Indian cities with projects worth Rs 34,000 crore, says a report

Despite the real estate sector having been the worst victim of a high cost economy, especially after the meltdown, it's share in the total private sector infrastructure investment in the metros in the last six months works out to be 12 per cent, followed by 10.26 per cent in the hospitality segment, according to an assess ment of The Associated Chambers of Commerce and Industry of India (ASSOCHAM).

However, metro rail projects accounted for the maximum of 27 per cent share in the total amount injected in metro cities for infrastructure development under Central, state and the local government, including corporates.

Sewerage and solid waste management investment in Tier I cities constituted the major chunk of investments, specifically via the government mode. Mumbai (Rs. 16694.672 crore), Chennai (Rs. 1588 crore) and Bangalore (Rs. 1354.92 crore) are the major recipients of sewerage related investment. In percentage terms, it worked out to be 16.90 per cent of the total infrastructure investment.

Indian metros continue to be the favourite destination for real estate development. The real estate projects constituting residential as well as commercial projects, have pocketed investment worth Rs. 15,710.5 crore, said Sajjan Jindal, president, ASSOCHAM.

The metro rail projects have been the key drivers of infrastructure investment in the cities with projects worth Rs.34,000 crore, he added.

The southern twin cities of Bangalore and Hyderabad have attracted maximum attention of real estate developers. Bangalore is the frontrunner in terms of real estate projects planned for the metros with an investment of Rs. 7990 crore. Hyderabad is at second place with projects worth Rs.4050 in the realty space.

Real Estate Intelligence Report, Friday, April 24, 2009

Dearer food prices push inflation to 0.26%

Dearer food prices push inflation to 0.26%
The Financial Express, April 24, 2009, Page 2

Press Trust of India, New Delhi

Inflation rose to 0.26% but remained around a three-decade low, even as essential food articles like vegetables and cereals turned costlier, something that is likely to become an issue in the Lok Sabha elections, which are under way. Wholesale price-based inflation rose by 0.08 percentage points during the week ended April 11 from 0.18% in the previous week.

“Some commodities are pressurising inflation. These are primary articles, especially food items like cereals and pulses,” said Crisil principal economist DK Joshi. Even as pulses varieties were cheaper by 0.3% over the previous week, they were expensive by 9.81% year-on-year.

Joshi said now there is enough stock of rice and wheat. But food prices are high as the minimum support prices are up and the production of coarse cereals and pulses has been low. Even on a weekly basis, prices of raw food as a whole rose by 0.5% due to tea turning expensive by 5%, bajara by 3%, vegetables by 2.6%, and mutton and maize by 1% each.

Political parties, including both the ruling Congress and the main opposition BJP, have promised a concessional supply of wheat and rice to the poor through the price distribution system.

On a yearly basis, food prices rose by 7.07%. Specifically, processed tea was costlier by 42.75%; sugar, khandsari and gur by 18.21%; common salt by 13.03%; cereals by 9.81%; and fruit and vegetables by 8.52%.

On Tuesday, the Reserve Bank cut two short-term key rates by 25 basis points each, but economists said there is no link between monetary policy and food prices. Joshi expects the RBI to cut key policy rates further by 25 basis points in the next policy in July.

Moody’s forecasts 5% growth this fiscal

Moody’s forecasts 5% growth this fiscal
The Financial Express, April 24, 2009, Page 2

Lending rates head into single digits

Lending rates head into single digits
The Financial Express, April 24, 2009, Page 1

Sunny Verma, New Delhi

In a likely pointer to lower lending rates, a clutch of Indian companies has borrowed medium-term funds at single digit interest rates. A large private bank has lent one-year funds to a big private company at a very attractive rate of close to 8%, while a public sector company borrowed 30-day money at 5.25% from the same bank, according to a senior executive at the bank, who said he was not authorised to speak to the media.

Other bankers and infrastructure companies expressed surprise at the 8% rate, but said early signs of cheaper credit are visible now.

A medium-sized infrastructure company, GMR, said rates have to fall into single digits. According to Subbarao Amarthaluru, group CFO of GMR, “Lending rates are now down to less than 11% from 13%, but we want them to drop below 10% for projects to become viable.”

Lending rates for top-notch companies are now close to single digits, though benchmark prime lending rates are still holding up. “Downside risks have clearly come down. Some stability is coming back into the system”, said G Ramachandran, head-global research group, ICICI Bank.

The spread that AAA-rated corporate borrowers have to pay over government bond yields has fallen to the pre-crisis level of 150 basis points from 400 basis points in December 2008. The spread on two-year AAA corporate bond is about 135 basis points. Yields on benchmark 10-year government bond are at about 6.2%. This means, a top-notch corporate actually borrowed at less than 8%.

Amarthaluru said the situation has improved a lot after September. “Getting funds is not as difficult now as it was in the last six months, especially after February.”

To prod the banks to pare lending and deposit rates, RBI had on Tuesday cut repo and reverse repo rate by 25 basis points each.

A senior bank official said discounts on loans below PLR have risen sharply in the past few weeks, with banks trying to lend their surplus funds.

Awash with funds, banks deposited over Rs 1,00,000 crore a day with the Reserve Bank in the last three weeks. “There is no dearth of funds now. Our credit growth is around 27-28%,” said Punjab National Bank chief general manager LP Agarwal.

PNB is charging around 10-11% for a one-year loan to top-rated companies, he said. He, however, said lending rates cannot fall sharply unless deposits rates tumble. RBI deputy governor Rakesh Mohan said in London on Thursday that banks were still saddled with high-cost deposits and so their lending rates would soften only gradually.

Noting that nearly 70% bank lending was at rates below benchmark PLR, RBI on Tuesday decided to set up a working group to review the BPLR system to make credit pricing more transparent.

GMR’s Amarthaluru said he expects interest rates to drop a bit more since the rates of bulk deposits have crashed. Between October 2008 and April 18, 2009, public sector banks have reduced term deposit rates by 125-250 basis points, while the reduction in bulk deposits have been much steeper. The weighted average lending rate fell from 12.3% in 2007-08 to around 10.9% in 2008-09, RBI said in its annual review of the monetary policy on Tuesday.

Three-day slide ends, Sensex surges 317 pts

Three-day slide ends, Sensex surges 317 pts
The Financial Express, April 24, 2009, Corporates & Markets.

fe Bureau, Mumbai

The markets finally snapped the three-day negative streak and closed the day with some smart gains on the back of strong cues from the Asian and European markets coupled with better-than-expected quarter results of HDFC Bank and strong buying in the benchmark indices.

The 30-share Sensex of the Bombay Stock Exchange (BSE) added 317.45 points or 2.93% and closed the day at 11,134.99 points. The broader S&P CNX Nifty of the National Stock Exchange (NSE) ended the day at 3,423.70 points, gaining 93.40 points or 2.8%.

The wholesale price index rose 0.26% for the week ended April 11. The domestic market opened marginally up and turned choppy, tracking mixed cues from US markets. The volatility remained throughout the trading session due to political uncertainty along with earning concerns. However, during the final hours of trading benchmark indices gained some ground on good buying witnessed in benchmark heavyweight and finally closed the day with huge gains.

Amitabh Chakraborty, president, equities, at Religare Securities, said, “The major reason for the markets to end in green was only due to the better-than-expected quarter results of Reliance Industries and HDFC Bank. Till now, results have been better then predicted, I think that markets are likely to go upward in the coming days also.”

Barring consumer durables, all sectors in the BSE ended the day on positive terrain, with IT and metal being the top performers of the day. The breadth of the markets remained strong as out of 2,600 stocks traded on BSE, 1,441 advanced, 1,056 declined while 103 remained unchanged. Among Sensex stocks, 27 ended in green while remaning three stocks closed below the dotted line.

“On Thursday, foreign institutional investors (FII) were net buyers which also had some positive impact on the markets. However since, stocks have rallied in the past few weeks and it will not be surprising if some profit booking can be witnessed in the markets at this level,” added Chakraborty.

IMF says policy rates in India still high

IMF says policy rates in India still high
The Economic Times, April 24, 2009, Economy, Finance & Markets.

WASHINGTON: The International Monetary Fund on Wednesday said that policy rates of the Reserve Bank are high, even as the central bank had cut the short-term lending and borrowing rates by 25 basis points each yesterday.

"Policy rates remain high in real terms in India and further rate cuts would help bolster credit growth," IMF said in its latest World Economic Outlook.

There is room for additional monetary easing in a number of economies, it said.

The RBI had yesterday slashed short term lending (repo) and borrowing (reverse repo) rates by 25 basis points each to 4.75 per cent and 3.25 per cent respectively.

Goldman Sachs CEO sees hopeful signs of US recovery

Goldman Sachs CEO sees hopeful signs of US recovery
The Hindu Business Line, April 24, 2009, Page 17

Our Bureau, Hyderabad

There are some `hopeful signs' of the recovery of the US economy, according to Mr Lloyd Blankfein, Chairman and Chief Executive Officer, Goldman Sachs Group.

"The decay in asset prices has slowed down and there are hopeful signs in the capital markets,'' he said while interacting with the students at Indian School of Business (ISB) here on Wednesday.

When asked about the likely duration of recession, he replied: "I don't know''.

He, however, observed that the feeling of completely falling off the cliff had gone and some dire concerns were removed.

On the performance of Goldman Sachs' group, Mr Blankfein said the business environment was not `ordinary' and he would remain optimistic.

"The investment banking activity is much lower while our transaction activity is above average.

"There are risks and backpeddlers. In general, I think we have gone through the crisis,'' he said.

Addressing students and some participants of `10, 000 Women' programme, launched by Goldman Sachs to train women in entrepreneurship by partnering with ISB last year, he said there was a link between growth and empowering women in business.

"Investing in women would increase the standard of life and ensure sustainable growth," said Mr Blankfein, who flew in his corporate jet, especially to participate in the two-hour programme, which is part of Goldman Sachs global initiative, focussed on the developing countries.

Stating that only 36 per cent of labour force in India was women (compared with 60 per cent average in Brazil, Russia, India and China - BRIC nations), he said higher women workforce would increase the gross domestic product by one per cent.

India was a vibrant economy with strong trends in demography, he said.

"We continue to invest in strong investment banking, securities and asset management presence here.

"Opportunity and growth in India remain as attractive as ever, '' he added.