Tuesday, March 31, 2009
Markets snap rally, dip over 4%
Markets snap rally, dip over 4%
The Financial Express, March 31, 2009, Corporates & Markets, P I
fe Bureau, Mumbai
Domestic bourses started the day with huge losses, after witnessing an upward rally during the past few weeks. Indices closed deep in the red on Monday, thereby recording one of the steepest drops in a day during the past two months. Weak global cues, coupled with short covering and renewed fears about the fate of the US auto industry also impacted the markets.
The 30-share Sensex of the Bombay Stock Exchange (BSE) closed at 9,568.14 points, down by 480.35 points, or 4.78%. The broader S&P CNX Nifty of the National Stock Exchange (NSE) was down by 130.50 points, or 4.20%, and ended the day at 2,978.15 points.
The interest rate-sensitive sectors like Realty and Banking took a huge beating on the domestic bourses, as investors booked profits. Dealers in the market said that fund managers also booked profits, as the quarter and fiscal year ends on Tuesday.
Ajay Parmar, research head at Emkay share and stock brokers, said, “We have to wait for a few more days to see how the markets shape up.”
Earlier in the day, Indian equity indices started below the dotted line and continued to trade in a range-bound manner. “Indian markets had reacted sharply to global markets in during the past couple of trading sessions; today was no different. In addition, there was some short covering in the markets during the past few trading sessions, but today, we lacked triggers and the markets ended with losses,” said Anil Advani, head of research, SBI Cap Securities.
Consumer Durables (CD) and Health Care (HC) were the only sectors on the BSE Sectoral indices that closed with some gains on Monday. Realty and Bankex were the worst performers of the day.
Dealers in the market said that investors are treading with caution, as the country’s economy is slowing and there is uncertainty on the political front ahead of the imminent general elections. Further fiscal and monetary policy measures might be needed to boost the economy; it is feared that the economy may fare worse than last year, said dealers.
Foreign institutional investors (FIIs), who, till last week were on the buying side, suddenly were net sellers at Rs 270.70 crore.
“There are chances that till the elections, there will not be much action on the FII front. However, it is quite difficult to predict the market movements and we might witness more volatility in the coming days,” said an analyst from a leading broking house.
The market breadth remained weak on Monday, as out of 2,473 stocks traded on the BSE, only 904 advanced; 1,471 stocks declined while 98 remained unchanged.
Among the Sensex pack, 28 stocks ended in red and the remaining two closed in green.
Dealers in the market said that in the ensuing days too, domestic markets will take the cue from their Western counterparts. They noted that till the quarterly earnings season starts mid-April, domestic markets are likely to remain under pressure.
India will grow 8%-plus as soon as global economy is back on track: Rakesh Mohan
India will grow 8%-plus as soon as global economy is back on track: Rakesh Mohan
The Financial Express, March 31, 2009, Page 4
Voicing his view on the growth of the economy, Reserve Bank of India deputy governor Rakesh Mohan said that while there will be some moderation in growth in the immediate future due to uncertain global market conditions, it is felt that India will return to its trend of 8% plus growth rate as and when global economy returns to normalcy. “This will however depend upon certain critical areas such as agriculture, infrastructure and fiscal consolidation being addressed,” he said.
Addressing the media in Mumbai on Monday while unveiling the report India’s financial sector assessment prepared by the central bank’s committee on financial sector assessment, he said, “Despite the widening trade deficit, the current account deficit has remained modest, largely due to high levels of private transfers and service sector exports. The low debt-to-equity ratio in the Indian corporate sector points to higher internal accrual and buoyancy in their revenues and profitability. Recent times have, however, seen a sharp correction in the valuations of listed firms as also in their profitability, as has happened globally. To that extent, there could be some reversal in the declining debt-to-equity ratio in the Indian corporate sector in the current context.
The global financial turmoil has led to a significant slowdown in net capital inflows in 2008-09 with net portfolio outflows, it is expected that overall India will still record net capital inflows, though modest, this year. Also, the Reserve Bank’s armoury of policy instruments for maintaining liquidity has, however, been effective in managing the current situation. Overall, during 2008-09, the rupee was volatile and the volatility was greatly accentuated from mid-September 2008 onwards. The Reserve Bank and the government have been active in taking a range of measures to meet shortfalls in rupee as also foreign exchange liquidity. It may be noted that among the countries surveyed by the Bank for International Settlements, the Indian foreign exchange market volumes have shown the fastest growth during 2004 to 2007. The foreign exchange market in India has continued to function well even during this time of turmoil.”
However, he added, “Given India’s high exposure to oil imports, coupled with the widespread impact in times of higher oil prices on the economy, a more efficient use of oil products is warranted. Another major concern, both domestically and globally, has been the rise in food prices. However, the recent correction in global prices, along with the series of measures already taken by the government on the supply side, has begun yielding results. There is a need to improve both the forward and backward linkages in agriculture through better credit delivery, investment in irrigation and rural infrastructure, improved cropping patterns and farming techniques, and development of the food processing industry and cold storage chains across the entire distribution system.”
“Going forward, it is essential to continue with focused attention on achieving a balance between financial development and financial stability. Also, for the growth momentum to be sustained, it is necessary to return to the path of fiscal prudence at both the central and state government levels. The key to maintaining high growth with reasonable price stability lies in rapid capacity additions through investments, productivity improvements, removal of infrastructure bottlenecks and amelioration of skill shortages,” he said.
Mixed growth signals
Mixed growth signals
The Hindu Business Line, March 31, 2009, Page 8
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Public spending should be directed at sectors that are finding growth hard to come by.
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February industrial output numbers have brought both good and bad news; the good news is that some core sector drivers are witnessing a revival of sorts. Steel output for instance rose 3.6 per cent following January’s 1.2 per cent growth and after persistently falling the preceding three months. The buoyancy in cement is even more promising since the expansion of 8.82 per cent in February follows the 6-11 per cent growth in output between October 2008 and January 2009. The bad news is that the rest of the core sector does not add up to scratch, with crude oil output declining 6.2 per cent and flat growth in petroleum refinery products; coal output did expand but at half the rate of last February. Usually month-wise data may be treated with caution for their randomness but in this case, given the trends in manufacturing over the last four months, short term fluctuations are vital clues on what needs to be done.
The data reflect well on the private sector, the largest players in cement and steel, and poorly on the public sector. In the latter, the worst performer is electricity with almost no sign of growth despite the heavy emphasis of planners on, and commitments of investments for, augmenting power production. Admittedly the growth of the cement and steel sectors has been predicated on the expansion in demand in semi-urban and rural areas, much of which has been generated by public investments in infrastructure. To that extent, policymakers need to push home the advantages that accrue from effective public spending and the consequent increases in purchasing power. The stimulus that will figure in the full budget later this year must be directed at those sectors that now find growth hard to come by; benefits will surely flow, for instance, from a plan to increase public housing. The most effective way of reaping benefits of Government spending, though, is to make sure that planned projects take off and that they are completed on time. Officials have from time to time aired their views on how much to spend to stimulate demand rather than how well the money can be spent.
Stimulus programs do not come free; the price the economy pays for heavy Government borrowing — Rs 2,41,000 crore over the next six months — keep bond rates high which in turn prevent lending rates from falling, as the RBI has frequently noted. “Crowding out” private investments this way may be necessary to flag off demand but for how long?
The Hindu Business Line, March 31, 2009, Page 8
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Public spending should be directed at sectors that are finding growth hard to come by.
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February industrial output numbers have brought both good and bad news; the good news is that some core sector drivers are witnessing a revival of sorts. Steel output for instance rose 3.6 per cent following January’s 1.2 per cent growth and after persistently falling the preceding three months. The buoyancy in cement is even more promising since the expansion of 8.82 per cent in February follows the 6-11 per cent growth in output between October 2008 and January 2009. The bad news is that the rest of the core sector does not add up to scratch, with crude oil output declining 6.2 per cent and flat growth in petroleum refinery products; coal output did expand but at half the rate of last February. Usually month-wise data may be treated with caution for their randomness but in this case, given the trends in manufacturing over the last four months, short term fluctuations are vital clues on what needs to be done.
The data reflect well on the private sector, the largest players in cement and steel, and poorly on the public sector. In the latter, the worst performer is electricity with almost no sign of growth despite the heavy emphasis of planners on, and commitments of investments for, augmenting power production. Admittedly the growth of the cement and steel sectors has been predicated on the expansion in demand in semi-urban and rural areas, much of which has been generated by public investments in infrastructure. To that extent, policymakers need to push home the advantages that accrue from effective public spending and the consequent increases in purchasing power. The stimulus that will figure in the full budget later this year must be directed at those sectors that now find growth hard to come by; benefits will surely flow, for instance, from a plan to increase public housing. The most effective way of reaping benefits of Government spending, though, is to make sure that planned projects take off and that they are completed on time. Officials have from time to time aired their views on how much to spend to stimulate demand rather than how well the money can be spent.
Stimulus programs do not come free; the price the economy pays for heavy Government borrowing — Rs 2,41,000 crore over the next six months — keep bond rates high which in turn prevent lending rates from falling, as the RBI has frequently noted. “Crowding out” private investments this way may be necessary to flag off demand but for how long?
DLF to divest its wind power biz
DLF to divest its wind power biz
Business Standard, March 31, 2009, Page 6
Arun Kumar / New Delhi
Had invested around Rs 1,500 crore in the business; may exit at Rs 1,100 crore.
India’s largest real estate developer, DLF Ltd, has decided to divest its windmill power generation business, which it says is non-core. Sources in the company said the management had decided to put the business on the block to raise resources for a more related business. The company has an installed capacity of around 260 Mw.
Sources said after concluding the acquisition of DLF Asset Ltd, a group company owned by DLF promoters’, KP Singh and family, they would start working on divesting the power generation business.
Rajeev Talwar, group executive director, DLF Ltd, refused comment.
The company had invested around Rs 1,500 crore in the business. After taking a depreciation claim of a significant amount, the company is looking at exiting at around Rs 1,100 crore, according to sources close to the development. The company had serious discussions with some private equity players, but there was no deal due to differences over valuation, they added.
The cost of setting up a windmill power plant is Rs 5-6 crore per Mw as against Rs 4-4.5 crore in case of a thermal power plant. Since the company is allowed to take a huge depreciation claim, the profit-making company will save a significant amount on tax obligation.
Another senior official said the company was in the midst of restructuring its businesses, which included buying DLF Asset Ltd. The company would continue to take steps to ensure better returns for shareholders, he added.
Power generation was not a core-business, the official said, adding that in the current environment, it was difficult to invest more in it. Without disclosing the size of the proposed transaction, the official said, “It depends on the offer price for such assets.”
DLF is in an advanced stage of concluding the acquisition of DLF Asset Ltd. According to indications, the company was hopeful of an announcement in the first week of April, the source said. A detailed due diligence by bankers and others is under progress. “Since the valuation of DLF Asset Ltd has come down marginally, investment bankers and legal experts are engaged in structuring the transaction so that the investors in DLF do not lose,” said a source.
DLF may offer more to Gurgaon project buyers
DLF may offer more to Gurgaon project buyers
Business Standard, March 31, 2009, Page 6
Joe C Mathew / New Delhi
DLF, the country’s biggest property developer, may announce a “relief package” for customers of its second Gurgaon project, ‘Express Greens’, a few days after it announced a similar package for those who had booked at its ‘New Town Heights’ residential project, also in Gurgaon.
The KP Singh-owned developer might announce a price reduction as well as construction-linked payment for Express Greens, sources said. The company had told its customers not to pay any instalment after the initial 35 per cent advance payment till construction commenced, some customers told Business Standard. A DLF spokesperson declined comment.
In the original agreement, DLF could take time-bound payments from customers without progress on construction. The company recently introduced a “construction-linked payment plan” for its New Town Heights customers.
Express Greens, launched in August 2008, is one of the biggest mid-income housing projects announced by DLF around Delhi. The company is in the process of getting plan layout approvals and environmental clearances for the project.
In a communication to customers, DLF reiterated its commitment to complete the project within three years and said the company had decided not to ask for installments till the start of construction. Express Greens is supposed to have three-bedroom apartments of 1,760 sq ft and four-bedroom houses of 2,125 sq ft, costing Rs 46 lakh to Rs 69 lakh.
The company also hinted that it was working on a relief package and the details would be finalised soon. Customers, however, want DLF to be clearer on when the work will start.
“DLF has not indicated what are the approvals they require and when they applied for these. We can only hope there is no delay,” said a person who had booked a flat in the project, declining to be named.
Last week, DLF offered as much as 20 per cent discounts to customers of the New Town Heights project. It announced 5 per cent discount on the basic sale price and a 10 per cent timely-payment rebate. The changes also included an increase in the compensation rates for delays from Rs 5 a sq ft per month to Rs 10 per sq ft.
Business Standard, March 31, 2009, Page 6
Joe C Mathew / New Delhi
DLF, the country’s biggest property developer, may announce a “relief package” for customers of its second Gurgaon project, ‘Express Greens’, a few days after it announced a similar package for those who had booked at its ‘New Town Heights’ residential project, also in Gurgaon.
The KP Singh-owned developer might announce a price reduction as well as construction-linked payment for Express Greens, sources said. The company had told its customers not to pay any instalment after the initial 35 per cent advance payment till construction commenced, some customers told Business Standard. A DLF spokesperson declined comment.
In the original agreement, DLF could take time-bound payments from customers without progress on construction. The company recently introduced a “construction-linked payment plan” for its New Town Heights customers.
Express Greens, launched in August 2008, is one of the biggest mid-income housing projects announced by DLF around Delhi. The company is in the process of getting plan layout approvals and environmental clearances for the project.
In a communication to customers, DLF reiterated its commitment to complete the project within three years and said the company had decided not to ask for installments till the start of construction. Express Greens is supposed to have three-bedroom apartments of 1,760 sq ft and four-bedroom houses of 2,125 sq ft, costing Rs 46 lakh to Rs 69 lakh.
The company also hinted that it was working on a relief package and the details would be finalised soon. Customers, however, want DLF to be clearer on when the work will start.
“DLF has not indicated what are the approvals they require and when they applied for these. We can only hope there is no delay,” said a person who had booked a flat in the project, declining to be named.
Last week, DLF offered as much as 20 per cent discounts to customers of the New Town Heights project. It announced 5 per cent discount on the basic sale price and a 10 per cent timely-payment rebate. The changes also included an increase in the compensation rates for delays from Rs 5 a sq ft per month to Rs 10 per sq ft.
Omaxe’s promoter pledges stake
Omaxe’s promoter pledges stake
Business Standard, march 31, 2009, Page 4
Real estate developer Omaxe Ltd. said one of its promoters had pledged a 13.76 per cent stake of the firm.
Monday, March 30, 2009
Global markets rally again
Global markets rally again
The Economic Times, March 30, 2009, Page 12
Some Signs Of Recovery Provide Hope
GLOBAL stock markets have rallied as isolated instances of economic recovery have emerged close on the heels of the US plan to buy toxic assets from banks, which promises to somewhat thaw the global financial system. Most markets, developed and emerging included, are up in the range of 25% from their lows reached earlier this month. The sensex, for instance, has rallied to over 10,000 from about 8,000 on March 6. The question is whether this recovery will sustain. The answer to that is normally available only in hindsight. What we do know is the equities typically start looking some six months before the real economy picks up. And there are some indications of revival. In the US, consumer spending was up second month running in February, and house sales have recovered slightly. Commodities are up sharply from their December 2009 lows, and manufacturing appears to be picking up in China. Back home, steel producers claim to be running at full capacity, cement dispatches are strong and consumer goods demand is firm. What has given greater weight to these early signs of revival is the growing belief that the plethora of fiscal and monetary measures by governments across the world would prevent the recession from taking deeper roots. The most decisive was perhaps the US plan to buy toxic assets even though its efficacy is still under cloud.
The immediate test for this small fig leaf for markets would be the January-March quarter results. Market will look out for a visible sign of improvement in earnings or at least stability. Any disappointment or for that matter signs of greater weakness could cause a sharp correction. In fact, volatility is more likely to increase in the coming months. Pitted against the possibly worst recession in decades is a once in lifetime opportunity to invest in shares which can potentially give handsome returns over the medium to long run. The money parked in virtually zero interest money market funds is waiting to rush in at the first sign of improvement. So, while good news could send the indices soaring, any deterioration could cause them to crash equally sharply. Those ready to take the plunge must be ready for a gut-wrenching ride.
The Economic Times, March 30, 2009, Page 12
Some Signs Of Recovery Provide Hope
GLOBAL stock markets have rallied as isolated instances of economic recovery have emerged close on the heels of the US plan to buy toxic assets from banks, which promises to somewhat thaw the global financial system. Most markets, developed and emerging included, are up in the range of 25% from their lows reached earlier this month. The sensex, for instance, has rallied to over 10,000 from about 8,000 on March 6. The question is whether this recovery will sustain. The answer to that is normally available only in hindsight. What we do know is the equities typically start looking some six months before the real economy picks up. And there are some indications of revival. In the US, consumer spending was up second month running in February, and house sales have recovered slightly. Commodities are up sharply from their December 2009 lows, and manufacturing appears to be picking up in China. Back home, steel producers claim to be running at full capacity, cement dispatches are strong and consumer goods demand is firm. What has given greater weight to these early signs of revival is the growing belief that the plethora of fiscal and monetary measures by governments across the world would prevent the recession from taking deeper roots. The most decisive was perhaps the US plan to buy toxic assets even though its efficacy is still under cloud.
The immediate test for this small fig leaf for markets would be the January-March quarter results. Market will look out for a visible sign of improvement in earnings or at least stability. Any disappointment or for that matter signs of greater weakness could cause a sharp correction. In fact, volatility is more likely to increase in the coming months. Pitted against the possibly worst recession in decades is a once in lifetime opportunity to invest in shares which can potentially give handsome returns over the medium to long run. The money parked in virtually zero interest money market funds is waiting to rush in at the first sign of improvement. So, while good news could send the indices soaring, any deterioration could cause them to crash equally sharply. Those ready to take the plunge must be ready for a gut-wrenching ride.
The world is starting to look up and ahead
The world is starting to look up and ahead
The Economic Times, March 30, 2009, Page 13
SUDESHNA SEN
RIGHT. Please don’t hang me if I’m wrong. But I sense a very, very faint green shoot under all the recessionary snow. It has nothing to do with my indices screens turning green, for a change, and there will probably be absolutely no change for at least six months. But yes, everyone I talk to also senses that something is happening. What, we don’t quite have a grip on yet. People seem to be emerging from their catatonic state through the winter, and actually beginning to go back to economic activity, with the accent on activity. Even if it isn’t resulting in anything, most people report a sudden jump in being busy during March. “We aren’t getting any orders, but we’re getting a lot more enquiries. It’s not as dead as it was in the last quarter.”
I have this theory, which is that as soon as people put their heads down and start doing things, anything, even if it is running a Red Queen’s Race, things are ‘going to begin to start to improve’.
Half the global recession is economic — the other half is psychological. The psychological bottom of the recession, if there is such a thing, seems to be where we are floundering now. Despair has given way to resigned, but positive activity. People have just given up on being depressed with bad news, stopped waiting for happy headlines, and are slowly, painfully, shaking themselves out of shock and getting on with the grim business of making a living in the bad new world. As one banker told me, “we’ve started cautiously venturing out and around — the past three months we were just going around feeling the walls to make sure they didn’t fall in on us.”
And, umm, since the entire concept of banking has always been some kind of mass induced hallucination, resting on a universal suspension of disbelief, and the kind of blind faith any messiah should enviously covet, psychology does matter. (Ask any bank which has had a run on it. The economists call it confidence, and trust, and so on. Everyone else calls it blind faith based on a self-perpetuating myth, ever since we came off the gold standard.)
If the global markets’ reaction to Tim Geithner’s latest bank rescue plan is any indication, when every theoretically approved action by any government over the past six months has failed, markets, financial services, the real economy, investors — everyone is now clutching at straws to start the upward climb again. It doesn’t matter if Mr Geithner’s hugely complex plan works or not. People want to believe it will, so it just may.
Again, indicators are beginning to fluctuate as much as the currency markets. Since October 2008, there was only one way every indicator went — straight down. Now, there’s a lot more confusion — one week a confidence survey in Germany looks good, the next it looks bad. One month we see retail sales arresting the slide, the next it’s down again. A purchasing manager’s survey in the Eurozone looks good, an employment number in US looks bad. Foreclosures are up, but so are mortgages. The signals are getting very mixed, but that’s a positive. At least, there’s something happening out there.
Make no mistake, to quote the unlamented Mr George Bush, there’s a lot of pain still to come. And knowing India, while the rest of the pundits are predicting we’ll come out of the downturn faster, I predict we won’t. What commentators like the RBI governor are missing is that sentiment in India has gone all technicolor tragedy, a good year after it went belly up in the west, and the recovery time lag will be the same. That herd mentality is alive and kicking, thanks. India took five years, almost, to recover from a dotcom bust which really should have affected us about as little as a dot. As an India watcher said ruefully, “If the western countries had even the thin cushion of comfort that India does, they’d be going all out to exploit it. But we’re busy whining and scaling back, and we’ll shoot ourselves in the foot.” Oh well. That’s the trouble with having too many decisions taken by the handful of Indian corporates who attend the same parties — and wakes — as Wall Street bankers and western CEOs do.
Here, at the epicentre of the economic earthquake though, I suspect that everyone’s finally reconciled to the fact that the world is going to be much poorer than before, and staggering up after the knockout.
After all, how long can you sit around twiddling your losses? Life goes on. There’s just that long you can mourn the loss of an old order. It could be the temporary effect of spring, but it is definitely not my imagination. It’s not exactly a buzz in the air, it’s more like crawling out of bed after a bad bout of flu and pottering groggily around the kitchen, but we are getting out of the sickbed. If I was the betting type, which I’m not, I’d say the world is starting to look up. Or at least look ahead. Hallelujah.
Economy to stay weak, but worst may be over
Economy to stay weak, but worst may be over
The Economic Times, March 30, 2009, Page 15
A temporary inventory-related bounce is likely, but don’t expect recession to cease so soon, says Morgan Stanley’s Asia ops chairman Stephen Roach
MOST economists think that a $1-trillion fund is not enough to buy America’s toxic banking assets. George Smith Alexander and Deeptha Rajkumar spoke to Stephen S Roach, one of the world’s leading bears. After holding the position of chief economist of Morgan Stanley for 16 years, Roach was promoted and named chairman of Morgan Stanley’s Asia operations in April 2007. He also served on the research staff of the Federal Reserve Board in Washington, DC.
What could be the impact of the $1-trillion fund, which is being set up to buy toxic assets?
The concept is good but there are some aspects that remain problematic, particularly the scale. It’s most likely that toxic assets in the system are somewhere around $2.5 trillion or $3 trillion. So it would require going back to the US Congress for further funding, and the politics of that are problematic. It remains to be seen how the actual implementation is planned, the price points that are offered by private investors, their attractiveness to banks. I give the plan a ‘B’ grade. It’s a noble effort, but it’s not big enough.
Is the recent rise in the market a bear rally?
I am suspicious that this rally is indicative of a bottoming in the global economy. The global economy is going to remain weak for some time. There have been terribly sharp declines in global growth in the fourth quarter of last year and the first quarter of this year. We cannot expect that to continue. Some of those declines are inventory related. There could be a temporary inventory-related bounce some point this year. But if the markets are rallying on hopes that the global recession is coming to an end, then those would be false hopes.
What are the signs to look for when the economy hits the bottom?
The most important sign would be the rebalancing of the American consumer. The biggest and the most important source of instability on the demand side of the global economy right now is the overly-extended, asset-dependant American consumer. And consumers have been hit by a massive wealth shock of around $12 trillion over the past year. It could not have come at a worst time for the 77-million baby boomers, who started to retire last year. There is a huge push for Americans to start saving again. The government is making a huge mistake by telling American consumers not to save. The consumers are, however, smarter than the government.
Where will US consumers invest their savings in?
This is not your normal modest bear market correction. This is a massive wealth shock. It comes at a time when the dreams of 77-million Americans, who are starting to retire, have been shattered. Behavioural finance argues that the pain of the loss has a more significant psychological imprint on investors than the joy of the gain. This points to a sea change in investor appetite towards risky assets, with strategies focused more towards fixed income and wealth preservation. It will be a much more conservative environment going forward.
Would they look at investing in emerging markets?
Investors have seen a massive correction in emerging market equities. It comes as a huge shock to many investors outside this region that were seduced by the so-called decoupling scenario — a belief that you were in the emerging market would get special dispensation from a global shock. That possibility — export-led developing economies could be an oasis in an otherwise weakening economic world — was snake oil. India has a smaller external sector than other emerging economies, but India is very heavily reliant on portfolio inflows to fund current account deficits. I think investors will be reluctant to make the same bets again.
What is the assessment of the effects of stimulus packages on China and India?
What worries me the most is the inclination of politicians to recreate the same type of boom that just went bust. That’s politically expedient, but it is reckless, irresponsible and dangerous. What the world needs here is not everybody to save. We need a shift in the mix of global saving. Those who don’t save need to save, and those who save in excess like the Chinese, need to draw down their savings and start consuming.
One of the dangerous things that has been allowed to occur in the world over the last decade is the imbalance between excess savers and those who didn’t save. I also worry about China because the Chinese are doing what they always do in a global downturn — they embrace what they call a proactive fiscal stimulus, which is driven by infrastructure and investment spending. They talk a lot about stimulating internal private consumption, but they never do. China perpetuates its export and investment-led growth model, hoping that their external demand will come back, led by US consumer. If that turns out to be the case — and I don’t think it will — China would be well positioned to capture this recovery in external demand.
Are we entering a phase of nasty asset price bubbles?
Not for a while. We have a lot of slack in the world right now and the inflationary implications of this slack on CPI inflation, or asset inflation, are not likely to be serious for a while. But as the slack gets absorbed in the global economy, and if the current monetary and fiscal stimulus remains in place, then you could have a renewed outbreak of asset inflation or CPI inflation or both.
The Economic Times, March 30, 2009, Page 15
A temporary inventory-related bounce is likely, but don’t expect recession to cease so soon, says Morgan Stanley’s Asia ops chairman Stephen Roach
MOST economists think that a $1-trillion fund is not enough to buy America’s toxic banking assets. George Smith Alexander and Deeptha Rajkumar spoke to Stephen S Roach, one of the world’s leading bears. After holding the position of chief economist of Morgan Stanley for 16 years, Roach was promoted and named chairman of Morgan Stanley’s Asia operations in April 2007. He also served on the research staff of the Federal Reserve Board in Washington, DC.
What could be the impact of the $1-trillion fund, which is being set up to buy toxic assets?
The concept is good but there are some aspects that remain problematic, particularly the scale. It’s most likely that toxic assets in the system are somewhere around $2.5 trillion or $3 trillion. So it would require going back to the US Congress for further funding, and the politics of that are problematic. It remains to be seen how the actual implementation is planned, the price points that are offered by private investors, their attractiveness to banks. I give the plan a ‘B’ grade. It’s a noble effort, but it’s not big enough.
Is the recent rise in the market a bear rally?
I am suspicious that this rally is indicative of a bottoming in the global economy. The global economy is going to remain weak for some time. There have been terribly sharp declines in global growth in the fourth quarter of last year and the first quarter of this year. We cannot expect that to continue. Some of those declines are inventory related. There could be a temporary inventory-related bounce some point this year. But if the markets are rallying on hopes that the global recession is coming to an end, then those would be false hopes.
What are the signs to look for when the economy hits the bottom?
The most important sign would be the rebalancing of the American consumer. The biggest and the most important source of instability on the demand side of the global economy right now is the overly-extended, asset-dependant American consumer. And consumers have been hit by a massive wealth shock of around $12 trillion over the past year. It could not have come at a worst time for the 77-million baby boomers, who started to retire last year. There is a huge push for Americans to start saving again. The government is making a huge mistake by telling American consumers not to save. The consumers are, however, smarter than the government.
Where will US consumers invest their savings in?
This is not your normal modest bear market correction. This is a massive wealth shock. It comes at a time when the dreams of 77-million Americans, who are starting to retire, have been shattered. Behavioural finance argues that the pain of the loss has a more significant psychological imprint on investors than the joy of the gain. This points to a sea change in investor appetite towards risky assets, with strategies focused more towards fixed income and wealth preservation. It will be a much more conservative environment going forward.
Would they look at investing in emerging markets?
Investors have seen a massive correction in emerging market equities. It comes as a huge shock to many investors outside this region that were seduced by the so-called decoupling scenario — a belief that you were in the emerging market would get special dispensation from a global shock. That possibility — export-led developing economies could be an oasis in an otherwise weakening economic world — was snake oil. India has a smaller external sector than other emerging economies, but India is very heavily reliant on portfolio inflows to fund current account deficits. I think investors will be reluctant to make the same bets again.
What is the assessment of the effects of stimulus packages on China and India?
What worries me the most is the inclination of politicians to recreate the same type of boom that just went bust. That’s politically expedient, but it is reckless, irresponsible and dangerous. What the world needs here is not everybody to save. We need a shift in the mix of global saving. Those who don’t save need to save, and those who save in excess like the Chinese, need to draw down their savings and start consuming.
One of the dangerous things that has been allowed to occur in the world over the last decade is the imbalance between excess savers and those who didn’t save. I also worry about China because the Chinese are doing what they always do in a global downturn — they embrace what they call a proactive fiscal stimulus, which is driven by infrastructure and investment spending. They talk a lot about stimulating internal private consumption, but they never do. China perpetuates its export and investment-led growth model, hoping that their external demand will come back, led by US consumer. If that turns out to be the case — and I don’t think it will — China would be well positioned to capture this recovery in external demand.
Are we entering a phase of nasty asset price bubbles?
Not for a while. We have a lot of slack in the world right now and the inflationary implications of this slack on CPI inflation, or asset inflation, are not likely to be serious for a while. But as the slack gets absorbed in the global economy, and if the current monetary and fiscal stimulus remains in place, then you could have a renewed outbreak of asset inflation or CPI inflation or both.
Cashing on the affordability factor
Cashing on the affordability factor
The Financial Express, March 29, 2009, Page 6
Mona Mehta
Extending the affordable housing scheme till the year 2010 and further increasing the supply of property in the buyer-starved market, will help spur the growth of the Rs 10,000-crore Indian real estate sector. This desperation comes at a time when the Indian real estate sector has contributed only 1.6% to India’s GDP in Q4 2008-09 due to severe liquidity crunch from banks since the past three quarters, as compared to 30% contribution it registered during the financial year 2007-08, believe industry experts.
Lalit Kumar Jain, President, Promoters Builders Association of Pune, and Vice-President Confederation of Real Estate Developer’s Associations of India (CREDAI), says, “We strongly believe that Indian real estate industry is all set to grow to Rs 30,000-32,000 crore at a rate of 40% by April 2010. We feel that the ongoing affordable housing schemes in the metros will be sold out completely by April 2011. But, since many of these cities are facing infrastructure and service-tax issues, not all developers will be able to start with affordable home projects as the land prices will still continue to be high in various locations.”
Inevitable crunch
Industry experts feel that post April 2011, there will be a severe supply crunch and real estate prices will be rising again as developers will not be able start any new construction immediately. And those who even start development will not be able to complete projects for the next one-and-a-half years. Jain, also Chairman of Kumar Builders, stated that the company is currently talking to various private equity players in order to infuse funds to develop affordable real estate projects.
For instance, there is a requirement of 4-5 lakh affordable homes in Mumbai alone, whereas the supply is only 40,000 flats, 80%-90% of which will be sold out by April 2010. Apart from Mumbai, other cities such as Delhi, Bangalore, Pune, Chennai too would join the race in selling out most affordable flats by April 2011. Infrastructure and service-tax issues are forcing developers from launching attractive schemes for the end buyers. This is despite the fact that property rates across the metros have dipped by 25% to 40%.
During Q4 2008-09, property prices in Kurla, Mumbai have reduced from Rs 8,000 to Rs 3,500 per sqft in Kurla. Thane has witnessed a drop from Rs 5,000 to Rs 3,000 per sqft. Similarly, prices in Virar have nosedived from Rs 3,000 to Rs 1,800 per sqft. As compared to Q3 2008-09, inquiries for properties have started increasing since February-March 2009, which has led to a fair conversion of flats in Thane, Bhandup, Vasai, Virar, Dombivali as these localities have close railway connectivity. Similarly, other leading builders such as Akruti City, Mayfair Housing, Evershine Builders, Lokhandwala Builders have all set visions of bringing in rising demand that matches the supply of properties as was seen during the financial year 2006-07.
Corrective measures
Following the recent announcement of third stimulus package by the government, realty bigwigs in India, bitten by severe credit crunch (since the past three quarters of the financial year 2008-09) have started strongly focusing on the affordable housing development and converting affordable properties into actual sales. With no other option left, developers are taking a final chance by reducing property prices in certain metros by about 25% to 40%, which will be compounded with the benefits they will be able to derive through the stimulus package.
Recently, the special home-loan schemes, was launched by the State Bank of India at 8%. Dewan Housing Finance Corporation Limited (DHFL) has announced a reduction in interest rates for both its new and existing customers. In line with various fiscal and other measures announced by the government of India and National Housing Bank (NHB), DHFL will now offer home loans starting at 9.75% variable interest rate for loans below Rs 20 lakh and at 11.25% variable interest rate for loans above Rs 20 lakh with immediate effect. With this, DHFL intends to provide more affordable home loans to lower and middle income group customers. For the existing customers, the rates will be reduced by 25 bps, according to company officials.
Rising demand?
Finally, with home loans getting cheaper, demand for residential properties in tier II and tier III cities is expected to pick up by 25% by the first half of 2009, from the current rate of 5%, feel industry experts. According to Rohit Rana, Head, Marketing and Communications, Sankalpan Group, the external periphery of Mangalore, Chandigarh, Dehradun, Nagpur, Kolhapur and Jaipur will start witnessing immediate emergence of demand due to the recent cheaper home loans announcement. Delhi-based Parsvanath Developers has already started constructing affordable homes in some of these locations, which can suffice the Rs 20 lakh limit of home loan borrowers.
According to Anand Gupta, Chairman, Builders Association of India, “There would be some acceleration in sales to the tune of 10% to 12% on tier I city outskirts where affordable housing is coming up through the ‘Budget Home Schemes’ and townships with a cluster of 3,000 to 5,000 homes in each township. Besides, demand for properties will emerge at Pen, Karjat and Lonavala as rates are between Rs 3 lakh and Rs 7-8 lakhs similar to that of Virar in far suburbs.”
However, despite the special home- loan schemes launched recently by the State Bank of India at 8%, the new applications still remain dull in various urban areas as the end-buyers are expecting further dip in real-estate prices and interest rates, said a senior SBI official from Mumbai. The moot point here is how will cheaper loans bridge the gap between demand and supply of residential properties in Tier II, III cities including metros? Anuj Puri, Chairman and Country Head, Jones Lang LaSalle Meghraj explained, “There will be increased absorption of existing supply in tier II, tier III cities and next to none in the metros. Affordable housing projects that are coming up on tier I city outskirts or in the far suburbs will also see increased sales. While such projects are not coming up in prime locations, reputable builders who concentrated largely on mid-to-upper-end homes are launching budget home schemes in far suburbs.” Affordable housing is the flavour of the future.
The Financial Express, March 29, 2009, Page 6
Mona Mehta
Extending the affordable housing scheme till the year 2010 and further increasing the supply of property in the buyer-starved market, will help spur the growth of the Rs 10,000-crore Indian real estate sector. This desperation comes at a time when the Indian real estate sector has contributed only 1.6% to India’s GDP in Q4 2008-09 due to severe liquidity crunch from banks since the past three quarters, as compared to 30% contribution it registered during the financial year 2007-08, believe industry experts.
Lalit Kumar Jain, President, Promoters Builders Association of Pune, and Vice-President Confederation of Real Estate Developer’s Associations of India (CREDAI), says, “We strongly believe that Indian real estate industry is all set to grow to Rs 30,000-32,000 crore at a rate of 40% by April 2010. We feel that the ongoing affordable housing schemes in the metros will be sold out completely by April 2011. But, since many of these cities are facing infrastructure and service-tax issues, not all developers will be able to start with affordable home projects as the land prices will still continue to be high in various locations.”
Inevitable crunch
Industry experts feel that post April 2011, there will be a severe supply crunch and real estate prices will be rising again as developers will not be able start any new construction immediately. And those who even start development will not be able to complete projects for the next one-and-a-half years. Jain, also Chairman of Kumar Builders, stated that the company is currently talking to various private equity players in order to infuse funds to develop affordable real estate projects.
For instance, there is a requirement of 4-5 lakh affordable homes in Mumbai alone, whereas the supply is only 40,000 flats, 80%-90% of which will be sold out by April 2010. Apart from Mumbai, other cities such as Delhi, Bangalore, Pune, Chennai too would join the race in selling out most affordable flats by April 2011. Infrastructure and service-tax issues are forcing developers from launching attractive schemes for the end buyers. This is despite the fact that property rates across the metros have dipped by 25% to 40%.
During Q4 2008-09, property prices in Kurla, Mumbai have reduced from Rs 8,000 to Rs 3,500 per sqft in Kurla. Thane has witnessed a drop from Rs 5,000 to Rs 3,000 per sqft. Similarly, prices in Virar have nosedived from Rs 3,000 to Rs 1,800 per sqft. As compared to Q3 2008-09, inquiries for properties have started increasing since February-March 2009, which has led to a fair conversion of flats in Thane, Bhandup, Vasai, Virar, Dombivali as these localities have close railway connectivity. Similarly, other leading builders such as Akruti City, Mayfair Housing, Evershine Builders, Lokhandwala Builders have all set visions of bringing in rising demand that matches the supply of properties as was seen during the financial year 2006-07.
Corrective measures
Following the recent announcement of third stimulus package by the government, realty bigwigs in India, bitten by severe credit crunch (since the past three quarters of the financial year 2008-09) have started strongly focusing on the affordable housing development and converting affordable properties into actual sales. With no other option left, developers are taking a final chance by reducing property prices in certain metros by about 25% to 40%, which will be compounded with the benefits they will be able to derive through the stimulus package.
Recently, the special home-loan schemes, was launched by the State Bank of India at 8%. Dewan Housing Finance Corporation Limited (DHFL) has announced a reduction in interest rates for both its new and existing customers. In line with various fiscal and other measures announced by the government of India and National Housing Bank (NHB), DHFL will now offer home loans starting at 9.75% variable interest rate for loans below Rs 20 lakh and at 11.25% variable interest rate for loans above Rs 20 lakh with immediate effect. With this, DHFL intends to provide more affordable home loans to lower and middle income group customers. For the existing customers, the rates will be reduced by 25 bps, according to company officials.
Rising demand?
Finally, with home loans getting cheaper, demand for residential properties in tier II and tier III cities is expected to pick up by 25% by the first half of 2009, from the current rate of 5%, feel industry experts. According to Rohit Rana, Head, Marketing and Communications, Sankalpan Group, the external periphery of Mangalore, Chandigarh, Dehradun, Nagpur, Kolhapur and Jaipur will start witnessing immediate emergence of demand due to the recent cheaper home loans announcement. Delhi-based Parsvanath Developers has already started constructing affordable homes in some of these locations, which can suffice the Rs 20 lakh limit of home loan borrowers.
According to Anand Gupta, Chairman, Builders Association of India, “There would be some acceleration in sales to the tune of 10% to 12% on tier I city outskirts where affordable housing is coming up through the ‘Budget Home Schemes’ and townships with a cluster of 3,000 to 5,000 homes in each township. Besides, demand for properties will emerge at Pen, Karjat and Lonavala as rates are between Rs 3 lakh and Rs 7-8 lakhs similar to that of Virar in far suburbs.”
However, despite the special home- loan schemes launched recently by the State Bank of India at 8%, the new applications still remain dull in various urban areas as the end-buyers are expecting further dip in real-estate prices and interest rates, said a senior SBI official from Mumbai. The moot point here is how will cheaper loans bridge the gap between demand and supply of residential properties in Tier II, III cities including metros? Anuj Puri, Chairman and Country Head, Jones Lang LaSalle Meghraj explained, “There will be increased absorption of existing supply in tier II, tier III cities and next to none in the metros. Affordable housing projects that are coming up on tier I city outskirts or in the far suburbs will also see increased sales. While such projects are not coming up in prime locations, reputable builders who concentrated largely on mid-to-upper-end homes are launching budget home schemes in far suburbs.” Affordable housing is the flavour of the future.
Developers respond to demand signals, focus now on housing
Developers respond to demand signals, focus now on housing
The Financial Express, March 30, 2009, Page 4
Kakoly Chatterjee, New Delhi
Flow of investment in the real estate sector for commercial space has dried up. A CMIE study—the think tank that tracks key economy indicators—says in the period during January-February this year 47 projects were launched for housing while only 4 came up in other sectors.
It seems real estate companies are now investing only in the housing segment.
This makes sense in a scenario where demand for office and shopping space has touched rock bottom. At the same time, excess supply is still sloshing around. So developers are not finding it profitable anymore to invest in commercial and retail segments. Realtors are also faced with a major problem of cash flow and consequently a crunch of their working capital cycle.
But there is something more here. Companies are now responding to demand signals rather than going by their estimate of profitability.
“This is the only survival strategy available for real estate companies. Till now they were not so much concerned about demand and built only what was more profitable for them. But now their construction activities are very much demand driven,” said a Bombay based analyst.
As a result the balance is tipped heavily towards residential projects. To make the residential projects attractive, realtors are also slashing the price of existing projects. The biggest realty player, DLF has already cut down prices of its Chennai, Bangalore and Hyderabad projects in the range of 20% to 30%. This will benefit both new and existing customers. This is expected to cascade onto others too.
In the January-February period, Omaxe has announced Gujarat Residential Township Project which is worth Rs 10,000 crore.
Akruti City has announced Just Perfect Homes’ Phase I Housing Project which will cost Rs 1,500 crore. Hindustan Construction Company has launched Sanand Township Project which is estimated to cost Rs 40,000 crore.
Ansal Properties & Infrastructure Ltd has launched Multi Location Low Cost Housing Project which will cost Rs 500 crore.
The learning process has taken time. After the slowdown started and it touched the Indian shores early last year real estate was hit very badly as sales dropped sharply. Price cuts followed after the RBI slashed interest cuts to save the situation.
But the stock of projects with the realtors were basically high margin ones. The premium housing segment generated profit margins when the going was good. But it is now that the companies are shifting their attention in terms of new projects to the demand driven low and medium cost housing.
Of the 121 projects captured in CMIE CapEx data base more than 100 projects are housing and most of them in the non-premium segment.
The Financial Express, March 30, 2009, Page 4
Kakoly Chatterjee, New Delhi
Flow of investment in the real estate sector for commercial space has dried up. A CMIE study—the think tank that tracks key economy indicators—says in the period during January-February this year 47 projects were launched for housing while only 4 came up in other sectors.
It seems real estate companies are now investing only in the housing segment.
This makes sense in a scenario where demand for office and shopping space has touched rock bottom. At the same time, excess supply is still sloshing around. So developers are not finding it profitable anymore to invest in commercial and retail segments. Realtors are also faced with a major problem of cash flow and consequently a crunch of their working capital cycle.
But there is something more here. Companies are now responding to demand signals rather than going by their estimate of profitability.
“This is the only survival strategy available for real estate companies. Till now they were not so much concerned about demand and built only what was more profitable for them. But now their construction activities are very much demand driven,” said a Bombay based analyst.
As a result the balance is tipped heavily towards residential projects. To make the residential projects attractive, realtors are also slashing the price of existing projects. The biggest realty player, DLF has already cut down prices of its Chennai, Bangalore and Hyderabad projects in the range of 20% to 30%. This will benefit both new and existing customers. This is expected to cascade onto others too.
In the January-February period, Omaxe has announced Gujarat Residential Township Project which is worth Rs 10,000 crore.
Akruti City has announced Just Perfect Homes’ Phase I Housing Project which will cost Rs 1,500 crore. Hindustan Construction Company has launched Sanand Township Project which is estimated to cost Rs 40,000 crore.
Ansal Properties & Infrastructure Ltd has launched Multi Location Low Cost Housing Project which will cost Rs 500 crore.
The learning process has taken time. After the slowdown started and it touched the Indian shores early last year real estate was hit very badly as sales dropped sharply. Price cuts followed after the RBI slashed interest cuts to save the situation.
But the stock of projects with the realtors were basically high margin ones. The premium housing segment generated profit margins when the going was good. But it is now that the companies are shifting their attention in terms of new projects to the demand driven low and medium cost housing.
Of the 121 projects captured in CMIE CapEx data base more than 100 projects are housing and most of them in the non-premium segment.
Real estate sales expected to improve after Diwali
Real estate sales expected to improve after Diwali
The Hindu Business Line, March 30, 2009, Page 3
MD of Orbit Corporation says they are prepared for the slowdown.
S. Shanker, Mumbai, March 29
Orbit Corporation is among the top real estate companies in Mumbai that cater to the high-end residential and commercial segments, primarily through redeveloping old and dilapidated properties. It has developed over 1.5 million sq.ft in prime locations of the city and the average price of properties sold has been about Rs 25,000 a sq.ft. The company has 11 lakh sq.ft slotted for completion in 2010 and another 20 lakh sq.ft scheduled for 2013.
Speaking to Business Line, Mr Pujit Aggarwal, Managing Director, shares his views on the real estate scenario and his strategy to combat the slowdown in trying times.
The premium housing segment has probably taken the worst beating in the slowdown and prices have dropped substantially. How much have you lowered prices?
We have cut prices by 30-35 per cent across projects. We are now quoting Rs 50,000 a sq.ft as against Rs 72,000 a sq.ft at Napean Sea Road. Similarly, we have lowered the price from Rs 24,000 to Rs 19,000 at Lower Parel.
What about sales?
The market is difficult. The last three months of 2008 were real bad to say the least. January was better with sale of one super-luxury apartment, while February went blank. March has been good thus far, logging sale of two to three apartments. The rules of the game have changed. Customers with cheque books in hand call the shots today.
What is your strategy at the current juncture?
We are prepared to take a hit. It has been cut-throat bargaining sessions with customers. But then, we have to move on and we cannot be lowering prices in slabs and end up sitting on high inventory. We intend to liquidate stocks and of 11 lakh sq.ft under construction we have sold 6.7 lakh sq.ft. This apart, we have about 2.75 lakh sq.ft in Andheri as well. So, from an unsold total of 7.75 lakh sq.ft, we intend to raise over Rs 1,550 crore over the next year and a half. Our objective is to sell at lower prices to generate cash to acquire distressed assets that come our way. So, any hit we take will be notional which will more or less average out with future projects. The key in these difficult times is timely project execution. We do have a certain amount of headroom in our projects, as once we get the rights from the landlord, a little restraint can be exercised in settlements with tenants and their rehabilitation process.
When do you expect the market to pick up?
Post-monsoon, after Diwali, is when I expect sentiments to improve and sales to kick in.
Do you have plans for entering the affordable home segment?
No. But then we are game if we get an asset with all clearances on board and which can be completed in two years. We understand HDIL has garnered sizable bookings in the segment with the right pricing strategy.
Orbit got Rs 200 crore from a Cyprus-based fund. How has the fund been deployed?
We are going to build beachfront villas near Alibaug. About Rs 110 acres have been acquired with the funds and another 90 acres have been tied up. Contrary to the current scenario, we anticipate no trouble in selling the premium villas of 4000 sq.ft to 15,000 sq.ft each in the price range of Rs 2 crore to Rs 15 crore.
The Hindu Business Line, March 30, 2009, Page 3
MD of Orbit Corporation says they are prepared for the slowdown.
S. Shanker, Mumbai, March 29
Orbit Corporation is among the top real estate companies in Mumbai that cater to the high-end residential and commercial segments, primarily through redeveloping old and dilapidated properties. It has developed over 1.5 million sq.ft in prime locations of the city and the average price of properties sold has been about Rs 25,000 a sq.ft. The company has 11 lakh sq.ft slotted for completion in 2010 and another 20 lakh sq.ft scheduled for 2013.
Speaking to Business Line, Mr Pujit Aggarwal, Managing Director, shares his views on the real estate scenario and his strategy to combat the slowdown in trying times.
The premium housing segment has probably taken the worst beating in the slowdown and prices have dropped substantially. How much have you lowered prices?
We have cut prices by 30-35 per cent across projects. We are now quoting Rs 50,000 a sq.ft as against Rs 72,000 a sq.ft at Napean Sea Road. Similarly, we have lowered the price from Rs 24,000 to Rs 19,000 at Lower Parel.
What about sales?
The market is difficult. The last three months of 2008 were real bad to say the least. January was better with sale of one super-luxury apartment, while February went blank. March has been good thus far, logging sale of two to three apartments. The rules of the game have changed. Customers with cheque books in hand call the shots today.
What is your strategy at the current juncture?
We are prepared to take a hit. It has been cut-throat bargaining sessions with customers. But then, we have to move on and we cannot be lowering prices in slabs and end up sitting on high inventory. We intend to liquidate stocks and of 11 lakh sq.ft under construction we have sold 6.7 lakh sq.ft. This apart, we have about 2.75 lakh sq.ft in Andheri as well. So, from an unsold total of 7.75 lakh sq.ft, we intend to raise over Rs 1,550 crore over the next year and a half. Our objective is to sell at lower prices to generate cash to acquire distressed assets that come our way. So, any hit we take will be notional which will more or less average out with future projects. The key in these difficult times is timely project execution. We do have a certain amount of headroom in our projects, as once we get the rights from the landlord, a little restraint can be exercised in settlements with tenants and their rehabilitation process.
When do you expect the market to pick up?
Post-monsoon, after Diwali, is when I expect sentiments to improve and sales to kick in.
Do you have plans for entering the affordable home segment?
No. But then we are game if we get an asset with all clearances on board and which can be completed in two years. We understand HDIL has garnered sizable bookings in the segment with the right pricing strategy.
Orbit got Rs 200 crore from a Cyprus-based fund. How has the fund been deployed?
We are going to build beachfront villas near Alibaug. About Rs 110 acres have been acquired with the funds and another 90 acres have been tied up. Contrary to the current scenario, we anticipate no trouble in selling the premium villas of 4000 sq.ft to 15,000 sq.ft each in the price range of Rs 2 crore to Rs 15 crore.
Interest rate cuts, offers bring first-timers to housing market
Interest rate cuts, offers bring first-timers to housing market
Business Standard, March 28, 2009, Page 4
GAUTAM CHAKRAVORTHY Mumbai
Renu Sud Karnad, joint managing director of HDFC, the country’s largest mortgage player, said she saw “increased interest” from first-time house buyers, courtesy the correction in property prices, interest rate cuts and developers introducing affordable housing by resizing the offered areas.
Property developers agree. Consider this:
HDIL Ltd launched a housing project at Kurla, a central suburb of Mumbai, in February, at a price 30 per cent lower than market rates. More than half its sales came from first-time home buyers. Of the 756 units on offer, the developer has already sold 575.
About 85 per cent of the 500 flats at DLF Westend Heights in Bangalore have already been sold. The project was aimed at information technology professionals and the flats were priced 24 per cent less than market rates.
DLF says about 60 per cent of the buyers are first-time house owners.
Unitech, which launched Uniworld Gardens–II at Sohna Road, Gurgaon, and cut prices by more than 20 per cent, has sold more than half the flats. It now plans to launch affordable housing projects in the Rs 5-10 lakh range in Chennai, Kolkata and other cities.
Bankers also see a sharp rise in enquiries from first-time buyers, after an 18-month hiatus. Bank of India Executive Director M Narendra said many first-time buyers were coming to the bank for loans as the availability of affordable projects had increased.
Cuts in interest rates and property prices have improved affordability. First-time buyers have been a huge beneficiary of the former. Every 0.5 per cent increase in the interest rate reduces home loan eligibility by about 7per cent, shows a study by Liases Foras, a real estate rating & research agency. Liases said real estate would attain the 2005 efficiency if home loan rates came down to 7.5 per cent and property prices fall by 5 per cent. The risk spread in the real estate sector would then be negligible.
First-time home buyers have stayed away from the market ever since developers, in a bid to cash in on the market sentiment, focused on launching luxurious projects, bigger in size and priced beyond the reach of average buyers.
Property prices across India more than tripled from 2003-07, owing to rising incomes, mortgage availability at inexpensive rates, higher tax benefits and speculators flocking to the market.
As a result, inventory levels of property jumped to 40 months of equivalent sales, compared with eight months or lower a few years ago, said Pankaj Kapoor, CEO of Liases Foras.
However, some analysts and experts said it might be difficult to sustain the momentum as several genuine buyers were expecting a further drop in prices and uncertainty in the job market might make matters worse.
Business Standard, March 28, 2009, Page 4
GAUTAM CHAKRAVORTHY Mumbai
Renu Sud Karnad, joint managing director of HDFC, the country’s largest mortgage player, said she saw “increased interest” from first-time house buyers, courtesy the correction in property prices, interest rate cuts and developers introducing affordable housing by resizing the offered areas.
Property developers agree. Consider this:
HDIL Ltd launched a housing project at Kurla, a central suburb of Mumbai, in February, at a price 30 per cent lower than market rates. More than half its sales came from first-time home buyers. Of the 756 units on offer, the developer has already sold 575.
About 85 per cent of the 500 flats at DLF Westend Heights in Bangalore have already been sold. The project was aimed at information technology professionals and the flats were priced 24 per cent less than market rates.
DLF says about 60 per cent of the buyers are first-time house owners.
Unitech, which launched Uniworld Gardens–II at Sohna Road, Gurgaon, and cut prices by more than 20 per cent, has sold more than half the flats. It now plans to launch affordable housing projects in the Rs 5-10 lakh range in Chennai, Kolkata and other cities.
Bankers also see a sharp rise in enquiries from first-time buyers, after an 18-month hiatus. Bank of India Executive Director M Narendra said many first-time buyers were coming to the bank for loans as the availability of affordable projects had increased.
Cuts in interest rates and property prices have improved affordability. First-time buyers have been a huge beneficiary of the former. Every 0.5 per cent increase in the interest rate reduces home loan eligibility by about 7per cent, shows a study by Liases Foras, a real estate rating & research agency. Liases said real estate would attain the 2005 efficiency if home loan rates came down to 7.5 per cent and property prices fall by 5 per cent. The risk spread in the real estate sector would then be negligible.
First-time home buyers have stayed away from the market ever since developers, in a bid to cash in on the market sentiment, focused on launching luxurious projects, bigger in size and priced beyond the reach of average buyers.
Property prices across India more than tripled from 2003-07, owing to rising incomes, mortgage availability at inexpensive rates, higher tax benefits and speculators flocking to the market.
As a result, inventory levels of property jumped to 40 months of equivalent sales, compared with eight months or lower a few years ago, said Pankaj Kapoor, CEO of Liases Foras.
However, some analysts and experts said it might be difficult to sustain the momentum as several genuine buyers were expecting a further drop in prices and uncertainty in the job market might make matters worse.
DLF’s retail arm plans 500 luxury lifestyle stores
DLF’s retail arm plans 500 luxury lifestyle stores
Business Standard, March 28, 2009, Page 4
REALTY SHOWS SIGNS OF BOUNCE-BACK
RAGHAVENDRA KAMATH Mumbai, 27 March
DLF Brands, the retail management subsidiary of DLF, the country’s biggest developer, plans to open 500 stores selling luxury lifestyle labels in the next five years, entailing an investment of over Rs 1,000 crore, a top group official said.
Already partnering seven international brands such as Giorgio Armani and Salvatore Ferragamo, it also plans to tie up with 12-15 global brands in the next five years. The company plans to fund its expansion through a mix of equity and debt and go in for tie-ups through joint ventures (JVs) and franchise routes. The focus of expansion would be in metros such as Delhi, Mumbai, Hyderabad and Chennai in the initial phase, the official said.
DLF Brands currently has joint ventures with international brands such as Giorgio Armani Holding BV, Salvatore Ferragamo and Boggi, and franchising agreements with brands such as Alcott, Sia Home Fashion and Sun Glass Hut. With its current portfolio, DLF has over adozen stores in the country.
“The retailer plans to have at least four stores for each of the international brands by the end of 2009,” said Kelvin Coyle, its managing director. On Wednesday, it entered into a franchisee agreement with Donna Karan Studio LLC, part of the luxury goods maker LVMH Moet Hennessy Louis Vuitton SA. The company is expected to invest as much as Rs 65 crore in opening 28 Donna Karan stores in the next five years.
“We know there is an economic slowdown. Today, our business plans are not the same as we were looking at a year ago. While chalking out our current plans, we have factored in the downturn and reduced the plans by 25 per cent,’’ said Coyle.
On anticipated investment, he said it might go up or down, depending on overall conditions and the retail environment. The company plans to open at least 100 stores by the end of 2010, Coyle has said.
The company is also in talks with a couple of international brands and expected to tieup with two-three brands in the next year, which Coyle refused to name, citing confidentiality agreements.
“Ultimately, we will have atie-up with 12-15 brands in the luxury and premium market,’’ he said.
According to retail experts, though the untapped market for luxury goods is attracting global players to India, most will tread cautiously during the current downturn. “India is still attractive, given the saturation in western markets. That is why international brands are looking at India, China and other South East Asian markets. But, if they planned to open 20 stores acouple of years ago, they will open only four-five stores in the current scenario,’’ said Hemant Kalbag, partner and vice-president, AT Kearney India, a business consultancy.
“The luxury brands market will continue to be a niche market in Indian metros and they will not be able to penetrate in India as deeply as they have done in the US, Europe and other developed countries,’’ he added.
Coyle agrees the current downturn is impacting all walks of life. “We have a strategy in mind which is in tune with the slowdown. It will move with a slower start and grow rapidly when things get back to normalcy.’’ DLF Brands, says Coyle, is striving to provide price parity for its international brands in India in comparison with their home markets and absorb duties to keep pricing under check. Coyle said that RayBan of the Luxottica group sold for 50 per cent less in the Indian market compared to western ones, and Sia Home sold for 20 per cent less than its home market, France.
DLF Brands currently has joint ventures with international brands such as Giorgio Armani Holding BV, Salvatore Ferragamo and Boggi, and franchising agreements with brands such as Alcott, Sia Home Fashion and Sun Glass Hut
Business Standard, March 28, 2009, Page 4
REALTY SHOWS SIGNS OF BOUNCE-BACK
RAGHAVENDRA KAMATH Mumbai, 27 March
DLF Brands, the retail management subsidiary of DLF, the country’s biggest developer, plans to open 500 stores selling luxury lifestyle labels in the next five years, entailing an investment of over Rs 1,000 crore, a top group official said.
Already partnering seven international brands such as Giorgio Armani and Salvatore Ferragamo, it also plans to tie up with 12-15 global brands in the next five years. The company plans to fund its expansion through a mix of equity and debt and go in for tie-ups through joint ventures (JVs) and franchise routes. The focus of expansion would be in metros such as Delhi, Mumbai, Hyderabad and Chennai in the initial phase, the official said.
DLF Brands currently has joint ventures with international brands such as Giorgio Armani Holding BV, Salvatore Ferragamo and Boggi, and franchising agreements with brands such as Alcott, Sia Home Fashion and Sun Glass Hut. With its current portfolio, DLF has over adozen stores in the country.
“The retailer plans to have at least four stores for each of the international brands by the end of 2009,” said Kelvin Coyle, its managing director. On Wednesday, it entered into a franchisee agreement with Donna Karan Studio LLC, part of the luxury goods maker LVMH Moet Hennessy Louis Vuitton SA. The company is expected to invest as much as Rs 65 crore in opening 28 Donna Karan stores in the next five years.
“We know there is an economic slowdown. Today, our business plans are not the same as we were looking at a year ago. While chalking out our current plans, we have factored in the downturn and reduced the plans by 25 per cent,’’ said Coyle.
On anticipated investment, he said it might go up or down, depending on overall conditions and the retail environment. The company plans to open at least 100 stores by the end of 2010, Coyle has said.
The company is also in talks with a couple of international brands and expected to tieup with two-three brands in the next year, which Coyle refused to name, citing confidentiality agreements.
“Ultimately, we will have atie-up with 12-15 brands in the luxury and premium market,’’ he said.
According to retail experts, though the untapped market for luxury goods is attracting global players to India, most will tread cautiously during the current downturn. “India is still attractive, given the saturation in western markets. That is why international brands are looking at India, China and other South East Asian markets. But, if they planned to open 20 stores acouple of years ago, they will open only four-five stores in the current scenario,’’ said Hemant Kalbag, partner and vice-president, AT Kearney India, a business consultancy.
“The luxury brands market will continue to be a niche market in Indian metros and they will not be able to penetrate in India as deeply as they have done in the US, Europe and other developed countries,’’ he added.
Coyle agrees the current downturn is impacting all walks of life. “We have a strategy in mind which is in tune with the slowdown. It will move with a slower start and grow rapidly when things get back to normalcy.’’ DLF Brands, says Coyle, is striving to provide price parity for its international brands in India in comparison with their home markets and absorb duties to keep pricing under check. Coyle said that RayBan of the Luxottica group sold for 50 per cent less in the Indian market compared to western ones, and Sia Home sold for 20 per cent less than its home market, France.
DLF Brands currently has joint ventures with international brands such as Giorgio Armani Holding BV, Salvatore Ferragamo and Boggi, and franchising agreements with brands such as Alcott, Sia Home Fashion and Sun Glass Hut
DLF offers price cuts for housing project delays
DLF offers price cuts for housing project delays
Business Standard, March 28, 2009, Page 6
JOE C MATHEW New Delhi
Realty giant DLF has offered some sweeteners for the buyers of its new housing project at Gurgaon. In a first-of-its-kind move, the company wrote to people who had booked flats at its New Town Heights residential project, where construction is yet to start, of an amendment to its sale agreement. The change entitles customers to benefits that will work out to a price reduction, it says, of about 20 per cent.
The company has announced a 5 per cent discount over the basic sale price. It has also announced another 10 per cent timely-payment rebate. The changes also include an increase in the compensation rates for delays from Rs 5 per sq ft per month to Rs 10.
It has also rescheduled the payment plan. Now, instalments have been linked to various construction milestones. All payments received over and above 35 per cent of the sale price will thus be treated as advance payment, and a rebate equivalent to 13 per cent interest will be allowed to the customer.
The company said the move was in tune with its earlier announcement to cut the prices of residential projects by 15-20 per cent.
“We have been implementing the price correction on a project to project basis.
Different models were worked out in cities like Chennai and Bangalore. In Hyderabad, reduced prices were announced. Each model reflects the price correction happening in specific cities,” Rajiv Talwar, group executive director, DLF said.
According to him, DLF’s attempt is to hold all existing clients, boost customer confidence and attract new customers, to ensure continued cash flow in the times of global recession. “We are trying to be responsive to the market,” he said.
Customers, however, said it wasn’t such agenerous thing. Commenting on the 10 per cent timely payment rebate, they said the rebate was on 65 per cent of the total amount, as 35 per cent was always paid as advance. “This means the rebate is effectively 6 per cent and not 10 as claimed by DLF. When the total benefit may not be more than 11 per cent, how can the company claim to offer 20 per cent discount?” they asked.
The project-specific and city-specific plans also came under criticism. However, the customers agreed that the DLF move was not a legal compulsion but a goodwill gesture.
The move has generated interest among other players also. Delhi-based property developer, Omaxe, said the company was working out a similar offer for its Greater Noida customers.
The move aims to hold existing customers, attract new ones and ensure continued cash flow in the times of global recession
Business Standard, March 28, 2009, Page 6
JOE C MATHEW New Delhi
Realty giant DLF has offered some sweeteners for the buyers of its new housing project at Gurgaon. In a first-of-its-kind move, the company wrote to people who had booked flats at its New Town Heights residential project, where construction is yet to start, of an amendment to its sale agreement. The change entitles customers to benefits that will work out to a price reduction, it says, of about 20 per cent.
The company has announced a 5 per cent discount over the basic sale price. It has also announced another 10 per cent timely-payment rebate. The changes also include an increase in the compensation rates for delays from Rs 5 per sq ft per month to Rs 10.
It has also rescheduled the payment plan. Now, instalments have been linked to various construction milestones. All payments received over and above 35 per cent of the sale price will thus be treated as advance payment, and a rebate equivalent to 13 per cent interest will be allowed to the customer.
The company said the move was in tune with its earlier announcement to cut the prices of residential projects by 15-20 per cent.
“We have been implementing the price correction on a project to project basis.
Different models were worked out in cities like Chennai and Bangalore. In Hyderabad, reduced prices were announced. Each model reflects the price correction happening in specific cities,” Rajiv Talwar, group executive director, DLF said.
According to him, DLF’s attempt is to hold all existing clients, boost customer confidence and attract new customers, to ensure continued cash flow in the times of global recession. “We are trying to be responsive to the market,” he said.
Customers, however, said it wasn’t such agenerous thing. Commenting on the 10 per cent timely payment rebate, they said the rebate was on 65 per cent of the total amount, as 35 per cent was always paid as advance. “This means the rebate is effectively 6 per cent and not 10 as claimed by DLF. When the total benefit may not be more than 11 per cent, how can the company claim to offer 20 per cent discount?” they asked.
The project-specific and city-specific plans also came under criticism. However, the customers agreed that the DLF move was not a legal compulsion but a goodwill gesture.
The move has generated interest among other players also. Delhi-based property developer, Omaxe, said the company was working out a similar offer for its Greater Noida customers.
The move aims to hold existing customers, attract new ones and ensure continued cash flow in the times of global recession
Unitech reschedules, repays Rs 600-700-cr debt due by March
Unitech reschedules, repays Rs 600-700-cr debt due by March
The Hindu Business Line, March 28, 2009, Page 15
Liquidity position improves on good response for housing projects.
Moumita Bakshi Chatterjee, New Delhi
Real estate company Unitech Ltd has rescheduled and repaid about Rs 600-700 crore of debt, which was due by March 2009. The stock price of the company gained 33 per cent this week. It closed at Rs 35.90 on Friday.
However, there is no clarity on how much of the debt has been restructured and the proportion that has been repaid. While a questionnaire sent to the company spokesperson remained unanswered, a person in the know said the liquidity position of Unitech has improved on several counts — namely the sale of hotel property, funds received from Telenor deal, and an “encouraging” response for new affordable housing projects.
Money matters
Unitech recently sold its hotel in Gurgaon for Rs 235 crore, of which it has received 45 per cent of the payment; the balance 55 per cent will come in April. Besides this, with Telenor’s infusion of the first tranche of investment (of Rs 1,250 crore) into Unitech Wireless, nearly Rs 380 crore has come to Unitech Ltd’s coffers.
This is in lieu of advances Unitech Ltd extended to Unitech Wireless in the past. In addition, about Rs 2,000 crore telecom debt is now off Unitech; it got transferred from the erstwhile consolidated balance sheet of the Unitech Group to Unitech Wireless’ new balance sheet.
Settling counts
The balance debt on Unitech’s books now stands at Rs 8,000 crore, sources said. Unitech’s Managing Director, Mr Sanjay Chandra, had told reporters in January this year, that the company was able to repay or reschedule nearly three-fourths of Rs 2,500 crore loans then due by March 2009; at that point it needed to retire the balance (Rs 600-700 crore) debt. Sources said this Rs 600-700 crore debt has now been settled.
Sources said that in the first phase of the new affordable housing project in Gurgaon (priced at Rs 30-Rs 40 lakh) where the company had offered 150 apartments, the entire stock was sold-out within first 15 days. “The company then launched phase-II of the project and by now has sold 300 apartments (from phase-I and Phase-II). The project in Dadar, Mumbai has also been getting very good response,” sources said.
When contacted, a Mumbai-based analyst said the rally in share price may be in line with the broader markets. “I do not see any company-specific or sector-specific improvement. Even if they have been able to restructure their debt due by March 2009, that is on the expected lines post the completion of the Telenor deal,” the analyst said.
Another real estate analyst from a Mumbai-based brokerage firm pointed out that stock was “oversold and has got corrected now. No one expected the company to default on the loans, anyway.”
The Hindu Business Line, March 28, 2009, Page 15
Liquidity position improves on good response for housing projects.
Moumita Bakshi Chatterjee, New Delhi
Real estate company Unitech Ltd has rescheduled and repaid about Rs 600-700 crore of debt, which was due by March 2009. The stock price of the company gained 33 per cent this week. It closed at Rs 35.90 on Friday.
However, there is no clarity on how much of the debt has been restructured and the proportion that has been repaid. While a questionnaire sent to the company spokesperson remained unanswered, a person in the know said the liquidity position of Unitech has improved on several counts — namely the sale of hotel property, funds received from Telenor deal, and an “encouraging” response for new affordable housing projects.
Money matters
Unitech recently sold its hotel in Gurgaon for Rs 235 crore, of which it has received 45 per cent of the payment; the balance 55 per cent will come in April. Besides this, with Telenor’s infusion of the first tranche of investment (of Rs 1,250 crore) into Unitech Wireless, nearly Rs 380 crore has come to Unitech Ltd’s coffers.
This is in lieu of advances Unitech Ltd extended to Unitech Wireless in the past. In addition, about Rs 2,000 crore telecom debt is now off Unitech; it got transferred from the erstwhile consolidated balance sheet of the Unitech Group to Unitech Wireless’ new balance sheet.
Settling counts
The balance debt on Unitech’s books now stands at Rs 8,000 crore, sources said. Unitech’s Managing Director, Mr Sanjay Chandra, had told reporters in January this year, that the company was able to repay or reschedule nearly three-fourths of Rs 2,500 crore loans then due by March 2009; at that point it needed to retire the balance (Rs 600-700 crore) debt. Sources said this Rs 600-700 crore debt has now been settled.
Sources said that in the first phase of the new affordable housing project in Gurgaon (priced at Rs 30-Rs 40 lakh) where the company had offered 150 apartments, the entire stock was sold-out within first 15 days. “The company then launched phase-II of the project and by now has sold 300 apartments (from phase-I and Phase-II). The project in Dadar, Mumbai has also been getting very good response,” sources said.
When contacted, a Mumbai-based analyst said the rally in share price may be in line with the broader markets. “I do not see any company-specific or sector-specific improvement. Even if they have been able to restructure their debt due by March 2009, that is on the expected lines post the completion of the Telenor deal,” the analyst said.
Another real estate analyst from a Mumbai-based brokerage firm pointed out that stock was “oversold and has got corrected now. No one expected the company to default on the loans, anyway.”
Parsvnath goes slow on hotel expansion
Parsvnath goes slow on hotel expansion
Sunday Business Standard, March 29, 2009, Page 3
To conserve cash, the firm is not buying new land for hotels and projects have been pushed back 12-18 months
BS REPORTER
New Delhi-based Parsvnath Developers is going slow on hotel expansion to conserve cash in the business, a top company official has said.
Parsvnath had planned to open 100 hotels in seven years with about 10,000 rooms. Now, the company is not buying any land for hotels apart from what it has for its 20 hotel projects, of which six are under way.
“We will not buy new land for now. We are focussing on six projects and will start the other 14 in due course of time,” said Parsvnath Chairman Pradeep Jain.
Most real estate developers, like DLF, Unitech and others, are scaling down or slowing hotel plans due to the current slowdown in the property sector and the cash crunch. While property prices have dropped as much as 50 per cent from their peak in 2008 in metros and sales have declined 70 per cent compared with last year, banks have tightened lending to property developers.
According to experts, 2030 per cent of the room capacity planned by 2010 would be deferred by at two to three years.
DLF, the country’s largest property developer, is said to be pushing back its hotel plans by 12-18 months due to the tough credit environment, while Unitech, another New Delhi-based developer, has sold its Gurgaon hotel to reduce its debt burden.
Even hotel chains are passing through a rough patch with occupancies falling 58 per cent in January 2009 and average room rates declining 14 per cent in the month.
Analysts expect Parsvnath’s balance sheet to be under pressure in the current quarter and the next financial year due to decline in execution, high receivables and overall slowdown in the property market.
The company’s consolidated third-quarter profit fell 95 per cent to Rs 5.42 crore and sales dropped 80 per cent to Rs 90.52 crore. In the fourth quarter, on a year-on-year basis, analysts expect revenues and net profit to drop further.
The company’s execution slowed in every quarter of the current financial year. The company has an executed space of 1.3 million sq ft in Q3 of FY09, compared with 2.2 million in Q2. Receivables from buyers went up to Rs 1,496 crore by the end of the December quarter, from Rs 1,346 crore in the September quarter.
“Developers cannot launch new projects when sales are slow and cash is hard to come by,” said an analyst with a Mumbai-based brokerage firm.
Parsvnath is developing six hotels in Mohali, Shirdi, Hyderabad, Lucknow, Ahmedabad, and expects to start the rollout by the second half of 2009. The company is in the process of getting approvals for 14 other projects, which are expected to start in the next 12 months.
Jain said the company was looking at diluting stakes in individual hotel projects and drop its earlier plan to dilute stake in the entire portfolio. “Today, there are no takers for consolidated assets. That is why we are looking at divesting stakes in individual projects,” said Jain.
Sunday Business Standard, March 29, 2009, Page 3
To conserve cash, the firm is not buying new land for hotels and projects have been pushed back 12-18 months
BS REPORTER
New Delhi-based Parsvnath Developers is going slow on hotel expansion to conserve cash in the business, a top company official has said.
Parsvnath had planned to open 100 hotels in seven years with about 10,000 rooms. Now, the company is not buying any land for hotels apart from what it has for its 20 hotel projects, of which six are under way.
“We will not buy new land for now. We are focussing on six projects and will start the other 14 in due course of time,” said Parsvnath Chairman Pradeep Jain.
Most real estate developers, like DLF, Unitech and others, are scaling down or slowing hotel plans due to the current slowdown in the property sector and the cash crunch. While property prices have dropped as much as 50 per cent from their peak in 2008 in metros and sales have declined 70 per cent compared with last year, banks have tightened lending to property developers.
According to experts, 2030 per cent of the room capacity planned by 2010 would be deferred by at two to three years.
DLF, the country’s largest property developer, is said to be pushing back its hotel plans by 12-18 months due to the tough credit environment, while Unitech, another New Delhi-based developer, has sold its Gurgaon hotel to reduce its debt burden.
Even hotel chains are passing through a rough patch with occupancies falling 58 per cent in January 2009 and average room rates declining 14 per cent in the month.
Analysts expect Parsvnath’s balance sheet to be under pressure in the current quarter and the next financial year due to decline in execution, high receivables and overall slowdown in the property market.
The company’s consolidated third-quarter profit fell 95 per cent to Rs 5.42 crore and sales dropped 80 per cent to Rs 90.52 crore. In the fourth quarter, on a year-on-year basis, analysts expect revenues and net profit to drop further.
The company’s execution slowed in every quarter of the current financial year. The company has an executed space of 1.3 million sq ft in Q3 of FY09, compared with 2.2 million in Q2. Receivables from buyers went up to Rs 1,496 crore by the end of the December quarter, from Rs 1,346 crore in the September quarter.
“Developers cannot launch new projects when sales are slow and cash is hard to come by,” said an analyst with a Mumbai-based brokerage firm.
Parsvnath is developing six hotels in Mohali, Shirdi, Hyderabad, Lucknow, Ahmedabad, and expects to start the rollout by the second half of 2009. The company is in the process of getting approvals for 14 other projects, which are expected to start in the next 12 months.
Jain said the company was looking at diluting stakes in individual hotel projects and drop its earlier plan to dilute stake in the entire portfolio. “Today, there are no takers for consolidated assets. That is why we are looking at divesting stakes in individual projects,” said Jain.
DDA to lend Rs 100 crore to Emaar
DDA to lend Rs 100 crore to Emaar
The Economic Times, March 28, 2009, Page 15
Sanjeev Choudhary NEW DELHI
DELHI Development Authority (DDA) has agreed to lend Rs 100 crore to cashstrapped realty firm Emaar MGF to ensure the Commonwealth Games Village project is completed on time, a DDA official said.
But the development agency is willing to consider lending more later, he added. DDA would extend the Rs 100-crore loan if Emaar MGF offers apartments worth the same value either as collateral or for outright sale to the government-run body. The Village will have 1,168 apartments to accommodate 8,500 athletes likely to participate in the Commonwealth Games.
DDA has set up a committee to decide on the value of apartments in the village. The panel is expected to submit the valuation report in two weeks. Following this, DDA will decide if it wants to buy these apartments or give a loan using them as security.
It will be difficult for DDA to justify buying apartments at a steep price because it will have to sell them later. DDA is known to sell apartments at 30-40% discount to market rate.
Emaar MGF has been insisting DDA to buy apartments because the purchase can bring in some cash to the developer, whereas a loan will have to be repaid in a falling market.
A DDA spokesman said: “We are yet to take a final decision, but DDA will do all that is required to facilitate the timely completion of Commonwealth Games Village.”
Three months ago, Emaar MGF had requested DDA for a Rs 300-crore loan, saying it would not be able to meet the deadline of April 2010 due to a cash crunch.
Emaar MGF had bagged the project in 2007 after bidding Rs 321 crore for it. According to its contract with DDA, Emaar MGF can sell twothird of the total apartments. The balance will be handed over to DDA for free. The village, located on the bank of river Yamuna in east Delhi, is almost 45% complete.
A booming realty market, good location and high-quality features had encouraged Emaar MGF to price the project aggressively.
With a price tag ranging from Rs 1.8-4.8 crore, apartments in the athletes village are being offered by Emaar MGF for an average price of Rs 13,000 per sq ft.
But, a combination of global and local economic factors have badly impacted the property market and sent prices crashing. Buyers are staying away, waiting for a price cut similar to those in some projects belonging to country’s largest realty company DLF.
DLF will shortly launch a housing project in Delhi, around 7 km from Connaught Place, almost the same distance as Emaar MGF’s Village. But DLF’s project is likely to be priced at almost half Emaar’s rate.
Emaar MGF officials say the company will not lower prices to induce buying as the project is already competitively priced. Around 260 apartments have been sold so far and last four months have been very bad, they added.
NEW LIFE
Delhi Development Authority agrees to lend to ensure timely completion of the Commonwealth Games Village project
It may lend more if Emaar offers apartments worth the same value either as collateral or for outright sale
DDA has also set up a committee to decide on the value of apartments which is expected to submit the report in two weeks
Emaar MGF had earlier requested DDA for a Rs 300-crore loan, saying it would not be able to meet the April 2010 deadline due to a cash crunch
The Economic Times, March 28, 2009, Page 15
Sanjeev Choudhary NEW DELHI
DELHI Development Authority (DDA) has agreed to lend Rs 100 crore to cashstrapped realty firm Emaar MGF to ensure the Commonwealth Games Village project is completed on time, a DDA official said.
But the development agency is willing to consider lending more later, he added. DDA would extend the Rs 100-crore loan if Emaar MGF offers apartments worth the same value either as collateral or for outright sale to the government-run body. The Village will have 1,168 apartments to accommodate 8,500 athletes likely to participate in the Commonwealth Games.
DDA has set up a committee to decide on the value of apartments in the village. The panel is expected to submit the valuation report in two weeks. Following this, DDA will decide if it wants to buy these apartments or give a loan using them as security.
It will be difficult for DDA to justify buying apartments at a steep price because it will have to sell them later. DDA is known to sell apartments at 30-40% discount to market rate.
Emaar MGF has been insisting DDA to buy apartments because the purchase can bring in some cash to the developer, whereas a loan will have to be repaid in a falling market.
A DDA spokesman said: “We are yet to take a final decision, but DDA will do all that is required to facilitate the timely completion of Commonwealth Games Village.”
Three months ago, Emaar MGF had requested DDA for a Rs 300-crore loan, saying it would not be able to meet the deadline of April 2010 due to a cash crunch.
Emaar MGF had bagged the project in 2007 after bidding Rs 321 crore for it. According to its contract with DDA, Emaar MGF can sell twothird of the total apartments. The balance will be handed over to DDA for free. The village, located on the bank of river Yamuna in east Delhi, is almost 45% complete.
A booming realty market, good location and high-quality features had encouraged Emaar MGF to price the project aggressively.
With a price tag ranging from Rs 1.8-4.8 crore, apartments in the athletes village are being offered by Emaar MGF for an average price of Rs 13,000 per sq ft.
But, a combination of global and local economic factors have badly impacted the property market and sent prices crashing. Buyers are staying away, waiting for a price cut similar to those in some projects belonging to country’s largest realty company DLF.
DLF will shortly launch a housing project in Delhi, around 7 km from Connaught Place, almost the same distance as Emaar MGF’s Village. But DLF’s project is likely to be priced at almost half Emaar’s rate.
Emaar MGF officials say the company will not lower prices to induce buying as the project is already competitively priced. Around 260 apartments have been sold so far and last four months have been very bad, they added.
NEW LIFE
Delhi Development Authority agrees to lend to ensure timely completion of the Commonwealth Games Village project
It may lend more if Emaar offers apartments worth the same value either as collateral or for outright sale
DDA has also set up a committee to decide on the value of apartments which is expected to submit the report in two weeks
Emaar MGF had earlier requested DDA for a Rs 300-crore loan, saying it would not be able to meet the April 2010 deadline due to a cash crunch
Demand-supply mismatch to dog cement industry amid capacity rise
Demand-supply mismatch to dog cement industry amid capacity rise
Business Standard, March 30, 2009, Page 8
Business Standard, March 30, 2009, Page 8
Steel makers witness revival of demand
Steel makers witness revival of demand
Business Standard, March 30, 2009, Page 8
PRESS TRUST OF INDIA New Delhi
Steel makers, including the Steel Authority of India (SAIL), Tata Steel and JSW Steel, are witnessing a revival of demand following improved consumption from sectors such as construction and automobile.
“The steel sector is doing quite well now. There is an overall growth in demand. It is a positive sign,” JSW Steel ViceChairman and MD Sajjan Jindal said.
Steel companies saw the demand for the alloy waning due to the global industrial downturn in the second half of the current financial year. However, JSW Steel expects demand to improve by 4-5 per cent in the next fianancial year.
“This whole year, we will see aslight growth in demand, maybe by 4-5 per cent as consumption increases,” Jindal said.
Ruling out any changes in the price structure, Jindal said, “Domestic steel prices have already come down. We have already more or less bottomed out. Let’s not talk about pushing it further down,” he said.
Echoing the sentiments, other domestic producers such as Essar Steel and VISA Steel said they expect the improving trend to continue in the next financial year.
“Domestic demand is picking up. The offtake in February was better than in January. March will be better than February and the trend is expected to continue,” Essar Steel Business Group CEO J Mehra said, adding, howe ver, that the export market continues to be in bad shape.
Global steel majors such as ArcelorMittal and Posco have cut their output by up to 45 per cent due to the fall in demand. Steel prices have almost halved to $450 a tonne from highs of $1,150-1,250 a tonne seen last year. Following the trend, the Indian companies had also cut prices and output.
But the recent increase in demand has seen domestic steel mills embracing full capacity.
“Along with demand, capacity of steel mills in India are also growing in the past few months,” Visa Steel Chairman Vishambar Saran said.
The country’s steel behemoths — SAIL and Tata Steel —are witnessing a better demand for the commodity in the last quarter of the financial year than the previous quarter, mainly on improving demand in the construction sector.
Business Standard, March 30, 2009, Page 8
PRESS TRUST OF INDIA New Delhi
Steel makers, including the Steel Authority of India (SAIL), Tata Steel and JSW Steel, are witnessing a revival of demand following improved consumption from sectors such as construction and automobile.
“The steel sector is doing quite well now. There is an overall growth in demand. It is a positive sign,” JSW Steel ViceChairman and MD Sajjan Jindal said.
Steel companies saw the demand for the alloy waning due to the global industrial downturn in the second half of the current financial year. However, JSW Steel expects demand to improve by 4-5 per cent in the next fianancial year.
“This whole year, we will see aslight growth in demand, maybe by 4-5 per cent as consumption increases,” Jindal said.
Ruling out any changes in the price structure, Jindal said, “Domestic steel prices have already come down. We have already more or less bottomed out. Let’s not talk about pushing it further down,” he said.
Echoing the sentiments, other domestic producers such as Essar Steel and VISA Steel said they expect the improving trend to continue in the next financial year.
“Domestic demand is picking up. The offtake in February was better than in January. March will be better than February and the trend is expected to continue,” Essar Steel Business Group CEO J Mehra said, adding, howe ver, that the export market continues to be in bad shape.
Global steel majors such as ArcelorMittal and Posco have cut their output by up to 45 per cent due to the fall in demand. Steel prices have almost halved to $450 a tonne from highs of $1,150-1,250 a tonne seen last year. Following the trend, the Indian companies had also cut prices and output.
But the recent increase in demand has seen domestic steel mills embracing full capacity.
“Along with demand, capacity of steel mills in India are also growing in the past few months,” Visa Steel Chairman Vishambar Saran said.
The country’s steel behemoths — SAIL and Tata Steel —are witnessing a better demand for the commodity in the last quarter of the financial year than the previous quarter, mainly on improving demand in the construction sector.
Friday, March 27, 2009
Upbeat Global Mood Lifts Market Past 10,000 Pts
Upbeat Global Mood Lifts Market Past 10,000 Pts
The Economic Times, March 27, 2009, Page 1
SENSEX ON ROAD TO REDEMPTION
TENTH PASS
GREEN SIGNALS: RECOVERY ROUND THE CORNER? The pall of gloom over the economy may just be lifting if the Sensex’s good run in recent days—on Thursday, it rose 335 points to breach 10k—and pickup in steel production are any indicators...
Our Bureau MUMBAI
THE Sensex closed above the psychological 10,000 mark on Thursday after more than two-and-a-half months, reviving fond memories of the boom days and hopes that equities may finally be on the recovery path. Brokers attributed the gains to frantic covering of short positions in the derivatives segment—Thursday being settlement day—and the upbeat mood in world markets.
While Indian stocks have gained nearly 23% since the worldwide rally in equities began early this month, market watchers are still unsure if the rally is indicative of an impending economic recovery. Since March 9, the Sensex has gained 1,842 points, with five stocks—Reliance Industries, Infosys Technologies, ICICI Bank, HDFC and HDFC Bank—accounting for over 53% of those gains. Reliance alone made up for 25% of the rise, as the market is expecting some announcement relating to production of gas from its KG Basin blocks shortly.
The Sensex closed at 10,003.10, up 335.20 points, or 3.5%, over its previous close while the 50-share Nifty closed at 3082.25, up 97.90 points, or 3.3%. According to BSE provisional data, foreign funds net bought shares worth around Rs 1,300 crore, easily offsetting the net sales worth Rs 462 crore by local institutions.
“Even after the recent run-up, shares are not significantly expensive,” says Bajaj Allianz Life Insurance CIO Sashi Krishnan.
The Economic Times, March 27, 2009, Page 1
SENSEX ON ROAD TO REDEMPTION
TENTH PASS
GREEN SIGNALS: RECOVERY ROUND THE CORNER? The pall of gloom over the economy may just be lifting if the Sensex’s good run in recent days—on Thursday, it rose 335 points to breach 10k—and pickup in steel production are any indicators...
Our Bureau MUMBAI
THE Sensex closed above the psychological 10,000 mark on Thursday after more than two-and-a-half months, reviving fond memories of the boom days and hopes that equities may finally be on the recovery path. Brokers attributed the gains to frantic covering of short positions in the derivatives segment—Thursday being settlement day—and the upbeat mood in world markets.
While Indian stocks have gained nearly 23% since the worldwide rally in equities began early this month, market watchers are still unsure if the rally is indicative of an impending economic recovery. Since March 9, the Sensex has gained 1,842 points, with five stocks—Reliance Industries, Infosys Technologies, ICICI Bank, HDFC and HDFC Bank—accounting for over 53% of those gains. Reliance alone made up for 25% of the rise, as the market is expecting some announcement relating to production of gas from its KG Basin blocks shortly.
The Sensex closed at 10,003.10, up 335.20 points, or 3.5%, over its previous close while the 50-share Nifty closed at 3082.25, up 97.90 points, or 3.3%. According to BSE provisional data, foreign funds net bought shares worth around Rs 1,300 crore, easily offsetting the net sales worth Rs 462 crore by local institutions.
“Even after the recent run-up, shares are not significantly expensive,” says Bajaj Allianz Life Insurance CIO Sashi Krishnan.
RBI guv sees swifter recovery
RBI guv sees swifter recovery
The Economic Times, March 27, 2009, Page 16
Our Bureau NEW DELHI
RESERVE Bank of India (RBI) governor D Subbarao on Thursday said that the next fiscal (2008-09) will be more challenging than the present fiscal in terms of maintaining a positive growth momentum.
He, however, added that India’s turnaround would be steeper and swifter once there is a turnaround in global economy.
“We believe that growth moderation might be steeper than we had thought earlier. I believe 2009-10 is going to be a more challenging year than 2008-09,” Mr Subbarao said at a conference organised by Confederation of Indian Industry (CII).
Growth in present fiscal was sustained because of development of the brownfield projects (projects which were up for expansion) while most of the industrial houses put the greenfield (new) projects on hold. This may have an impact on the world’s economy in the month’s to come, the RBI chief said.
On the possibility of deflation in Indian economy Mr Subbarao ruled out any possibility of a sustained deflation. He said that inflationary tendencies are likely to be healthy in the coming days.
“Consumer Price Index (CPI) is still elevated. There are four indices of CPI. Some of them are still in double digits. Our own view is that there is no fear of sustained deflation in India,” he said. On the need of a further stimulus package Mr Subbarao said that there is a need that the policy-makers and government should first allow the first two packages to percolate completely.
“There is a cost to support further stimulus, there will be pressure on the credit market. I personally think we should give them (earlier packages) time to run for the moment,” he said.
The Economic Times, March 27, 2009, Page 16
Our Bureau NEW DELHI
RESERVE Bank of India (RBI) governor D Subbarao on Thursday said that the next fiscal (2008-09) will be more challenging than the present fiscal in terms of maintaining a positive growth momentum.
He, however, added that India’s turnaround would be steeper and swifter once there is a turnaround in global economy.
“We believe that growth moderation might be steeper than we had thought earlier. I believe 2009-10 is going to be a more challenging year than 2008-09,” Mr Subbarao said at a conference organised by Confederation of Indian Industry (CII).
Growth in present fiscal was sustained because of development of the brownfield projects (projects which were up for expansion) while most of the industrial houses put the greenfield (new) projects on hold. This may have an impact on the world’s economy in the month’s to come, the RBI chief said.
On the possibility of deflation in Indian economy Mr Subbarao ruled out any possibility of a sustained deflation. He said that inflationary tendencies are likely to be healthy in the coming days.
“Consumer Price Index (CPI) is still elevated. There are four indices of CPI. Some of them are still in double digits. Our own view is that there is no fear of sustained deflation in India,” he said. On the need of a further stimulus package Mr Subbarao said that there is a need that the policy-makers and government should first allow the first two packages to percolate completely.
“There is a cost to support further stimulus, there will be pressure on the credit market. I personally think we should give them (earlier packages) time to run for the moment,” he said.
Revival process may start soon: Tendulkar
Revival process may start soon: Tendulkar
The Economic Times, March 27, 2009, Page 16
Even as the Sensex pierced the 10K barrier on Thursday after months of economic gloom, Prime Minister’s Economic Advisory Council chairman Suresh Tendulkar spread cheer by forecasting that the economy might be on a recovery path by September 2009, reports Our Bureau from Kolkata. Speaking at a seminar organised by Merchant Chamber of Commerce on Thursday, he said: “I am reasonably hopeful that the low interest rate regime will come as a relief and with that I expect the revival process to start in the next 3-6 months.”
OPTIMISTIC: D Subbarao
The Economic Times, March 27, 2009, Page 16
Even as the Sensex pierced the 10K barrier on Thursday after months of economic gloom, Prime Minister’s Economic Advisory Council chairman Suresh Tendulkar spread cheer by forecasting that the economy might be on a recovery path by September 2009, reports Our Bureau from Kolkata. Speaking at a seminar organised by Merchant Chamber of Commerce on Thursday, he said: “I am reasonably hopeful that the low interest rate regime will come as a relief and with that I expect the revival process to start in the next 3-6 months.”
OPTIMISTIC: D Subbarao
Interest rates unlikely to come down further
Interest rates unlikely to come down further
The Times of India, March 27, 2009, Page 23
‘Govt Borrowing For Stimulus Hampering RBI’s Efforts, 0.27% Inflation Won’t Help’
Prabhakar Sinha TNN
New Delhi: The stimulus packages offered by government to fight the impact of global recession on Indian economy seem to be backfiring. At present, it is discouraging the efforts of RBI to bring down the interest rates to revive demand in the domestic market.
On Thursday, interest rate on 10-year government bond scaled the 7% mark to touch 7.02%. The rate had fallen to 4.86% in January 2009. The interest rates firmed up as the government announced that it would borrow Rs 2,41,000 crore in the first six months of 2009-10 to fund stimulus packages. Government would borrow Rs 48,000 crore every month in the first quarter and Rs 32,000 crore every month of the second quarter, which is putting pressure on interest rates.
Indian Bank's Association chairman TS Narayansami said this huge government borrowing programme is creating upward pressure on interest rates. So, RBI's step to cut its short term lending rate to banks (repo rate) will not help in bringing down the rates, he added.
Meanwhile, RBI governor D Subbarao at a CII conference said he was talking to various banks to understand why the lending rates are not coming down despite the central bank has cut the key rates. ‘‘Policy rates have to be transmitted to lending rates by banks. We are looking into the transmission mechanism,'' Subbarao said. He added that interest rates should soften for India to become competitive. Fall in lending rates will revive the demand and so the economic activities.
However, bankers feel that the softening of interest rate is no more linked to cut in key policy rates. Narayansami said, ‘‘RBI's repo rate cut will not have any effect as the interest rates on government bonds are firming up.'' This means, even if RBI reduces the policy rates, taking advantage of inflation touching zero, it will not bring down the interest rates in the present condition.
ICICI MD KV Kamath also said that firming up of the interest rates on government bond is not allowing lending rates to come down. Because of rise in the bond rates, cost of funds is not reducing, prompting banks to hold interest rates at higher levels.
As the government's spending as part of the stimulus packages would be financed from the borrowed money, this will affect availability of funds to the private sector and create upward pressure on interest rates.
In the current financial year, government's borrowing has increased to Rs 3,26,000 crore as again the budgeted amount of Rs 1,33,000 crore. In the 2009-10 also, government will have to borrow around Rs 3,40,000 crore to fund revenue shortfall.
Bankers are arguing that RBI should buy bonds from the market and inject money into the system. Narayansami said instead of cutting the policy rates, RBI should pump more money by purchasing government bonds from the market. As the inflation has already fallen to 0.27% during the week ending March 14, the government can inject liquidity without worrying about the inflation. This would only help in bringing down the interest rates, bankers said.
The Times of India, March 27, 2009, Page 23
‘Govt Borrowing For Stimulus Hampering RBI’s Efforts, 0.27% Inflation Won’t Help’
Prabhakar Sinha TNN
New Delhi: The stimulus packages offered by government to fight the impact of global recession on Indian economy seem to be backfiring. At present, it is discouraging the efforts of RBI to bring down the interest rates to revive demand in the domestic market.
On Thursday, interest rate on 10-year government bond scaled the 7% mark to touch 7.02%. The rate had fallen to 4.86% in January 2009. The interest rates firmed up as the government announced that it would borrow Rs 2,41,000 crore in the first six months of 2009-10 to fund stimulus packages. Government would borrow Rs 48,000 crore every month in the first quarter and Rs 32,000 crore every month of the second quarter, which is putting pressure on interest rates.
Indian Bank's Association chairman TS Narayansami said this huge government borrowing programme is creating upward pressure on interest rates. So, RBI's step to cut its short term lending rate to banks (repo rate) will not help in bringing down the rates, he added.
Meanwhile, RBI governor D Subbarao at a CII conference said he was talking to various banks to understand why the lending rates are not coming down despite the central bank has cut the key rates. ‘‘Policy rates have to be transmitted to lending rates by banks. We are looking into the transmission mechanism,'' Subbarao said. He added that interest rates should soften for India to become competitive. Fall in lending rates will revive the demand and so the economic activities.
However, bankers feel that the softening of interest rate is no more linked to cut in key policy rates. Narayansami said, ‘‘RBI's repo rate cut will not have any effect as the interest rates on government bonds are firming up.'' This means, even if RBI reduces the policy rates, taking advantage of inflation touching zero, it will not bring down the interest rates in the present condition.
ICICI MD KV Kamath also said that firming up of the interest rates on government bond is not allowing lending rates to come down. Because of rise in the bond rates, cost of funds is not reducing, prompting banks to hold interest rates at higher levels.
As the government's spending as part of the stimulus packages would be financed from the borrowed money, this will affect availability of funds to the private sector and create upward pressure on interest rates.
In the current financial year, government's borrowing has increased to Rs 3,26,000 crore as again the budgeted amount of Rs 1,33,000 crore. In the 2009-10 also, government will have to borrow around Rs 3,40,000 crore to fund revenue shortfall.
Bankers are arguing that RBI should buy bonds from the market and inject money into the system. Narayansami said instead of cutting the policy rates, RBI should pump more money by purchasing government bonds from the market. As the inflation has already fallen to 0.27% during the week ending March 14, the government can inject liquidity without worrying about the inflation. This would only help in bringing down the interest rates, bankers said.
‘Economy to revive in 3-6 months’
‘Economy to revive in 3-6 months’
The Times of India, March 27, 2009, Page 23
Kolkata: Despite the turmoil worldwide, Indian economy will commence on its upward recovery curve by the middle of this year, Suresh D Tendulkar, chairman of the Prime Minister's Economic Advisory Council indicated here on Thursday. "The stimulus packages and monetary policies will take some time to come into effect. This, along with, the low lending rate regime will help the economic situation. The revival process in India should begin in another 3-6 months," Tendulkar said. He was speaking at an event organised by the Merchants' Chamber of Commerce.
Tendulkar said the country's robust internal demand coupled with a well-capitalised banking system will ensure an expedited recovery process. "There has been a 4.5% growth in the agricultural sector and the harvest this year is expected to be good. Bulk of the rural purchasing power is not going to be affected. The banks, too, as compared to the west, are doing well and hopefully the credit flow will start soon," he said. He said an exported "psychology of doom and gloom" had inflated the risk aversion sentiment in the country which, in turn, had intensified the slowdown in India. TNN
The Times of India, March 27, 2009, Page 23
Kolkata: Despite the turmoil worldwide, Indian economy will commence on its upward recovery curve by the middle of this year, Suresh D Tendulkar, chairman of the Prime Minister's Economic Advisory Council indicated here on Thursday. "The stimulus packages and monetary policies will take some time to come into effect. This, along with, the low lending rate regime will help the economic situation. The revival process in India should begin in another 3-6 months," Tendulkar said. He was speaking at an event organised by the Merchants' Chamber of Commerce.
Tendulkar said the country's robust internal demand coupled with a well-capitalised banking system will ensure an expedited recovery process. "There has been a 4.5% growth in the agricultural sector and the harvest this year is expected to be good. Bulk of the rural purchasing power is not going to be affected. The banks, too, as compared to the west, are doing well and hopefully the credit flow will start soon," he said. He said an exported "psychology of doom and gloom" had inflated the risk aversion sentiment in the country which, in turn, had intensified the slowdown in India. TNN
India to grow at 6% in 2009: UN survey
India to grow at 6% in 2009: UN survey
The Times of India, March 27, 2009, Page 24
New Delhi: India is expected to grow at a rate of around 6% in 2009 mainly supported by fiscal measures taken by government amid many developed economies falling into recession, says a report by the United Nations .
"The government took measures to improve the liquidity of the financial sector and relaxed monetary policy. It also introduced fiscal stimulus packages which should soften the economic downturn," the report by UN Economic and Social Commission for Asia and the Pacific (UN-ESCAP) said.
Supported by the measures announced by the government, the Indian economy is expected to grow at around 6% in 2009, the report said. Real economies of South Asia are set to weather the effects of the global slowdown better than many in the Asia-Pacific region due to India's economic growth, it added.
India's growth rate in 2009, however, would be lower than 7.1% estimated in 2008 mainly on account of fall in exports, economic affairs officer of ESCAP Shuvojit Banerjee said after releasing the report.
Developed nations such as the US, UK and Japan are already in recession. On inflation, the report said with falling prices of oil and other commodities in the international market, the rate of price rise is expected to dip further.
It added that due to increase in government salaries and subsidies for food, fertiliser and certain fuel products, the budget deficit is estimated to rise to 6% of the GDP in 2008. AGENCIES
The Times of India, March 27, 2009, Page 24
New Delhi: India is expected to grow at a rate of around 6% in 2009 mainly supported by fiscal measures taken by government amid many developed economies falling into recession, says a report by the United Nations .
"The government took measures to improve the liquidity of the financial sector and relaxed monetary policy. It also introduced fiscal stimulus packages which should soften the economic downturn," the report by UN Economic and Social Commission for Asia and the Pacific (UN-ESCAP) said.
Supported by the measures announced by the government, the Indian economy is expected to grow at around 6% in 2009, the report said. Real economies of South Asia are set to weather the effects of the global slowdown better than many in the Asia-Pacific region due to India's economic growth, it added.
India's growth rate in 2009, however, would be lower than 7.1% estimated in 2008 mainly on account of fall in exports, economic affairs officer of ESCAP Shuvojit Banerjee said after releasing the report.
Developed nations such as the US, UK and Japan are already in recession. On inflation, the report said with falling prices of oil and other commodities in the international market, the rate of price rise is expected to dip further.
It added that due to increase in government salaries and subsidies for food, fertiliser and certain fuel products, the budget deficit is estimated to rise to 6% of the GDP in 2008. AGENCIES
Cement industry's Q4 may be the best in FY09
Cement industry's Q4 may be the best in FY09
Business Standard – Commodity, March 27, 2009, Section II, Page 4
Chandan Kishore Kant / Mumbai
This is the concluding part of the two-part series on the sectoral impact of a revival in demand for commodities.
The over Rs 85,000-crore domestic cement industry is set to see some relief in the March quarter. Industry analysts and market players feel that the current quarter will turn out to be the best in the current financial year in terms of revenues, margins and profitability.
Higher prices, significant despatches resulting from better-than-expected demand, declining input costs, favourable government decisions such as cutting excise duty and re-imposition of counter-vailing duty on imported cement are expected to help the industry come up with a better performance than the past three quarters.
Barring southern market, which saw lower despatches and weak prices, the industry anticipates better results in other parts of the country.
Vinod Juneja, managing director, Binani Cement (a North-based manufacturer), said, “The fourth quarter will be the best in FY09. Prices have improved from Rs 230-235 per bag last year (same quarter) to Rs 245-250 in the North. No company is having any inventory as despatches are good.”
The current quarter saw prices being hiked in two-three tranches by around Rs 8-12 per bag. The eastern and northern markets saw a firm pricing trend. In January and February, despatches grew by 8.26 per cent and 8.73 per cent at 16.13 million tonnes and 16.07 million tonnes, respectively.
Looking at the despatches trend, March is expected to clock despataches of over 17.5 million tonnes, which will be the highest ever for the industry.
On a year-on-year basis, the March quarter might not see a rise in profits, but in sequential terms, margins would be better and so the profitability, said an industry analyst.
He added that in the first three quarters, the industry saw margins getting shrunk by as much as 4-5 per cent compared to the corresponding quarters of the last financial year, whereas in the current quarter, margins will either be flat or shrink by not more than 1-2 per cent.
Hari Mohan Bangur, chairman and managing director of Shree Cement, and president of the Cement Manufacturers’ Association, said, “The industry saw a price rise in February as well as in March. The quarter will be a little better than the earlier quarters. Profitability is expected to maintain pace as far as Shree is concerned.”
When asked about the depreciation impact on new capacity additions, Bangur said that it (depreciation) would not have much effect. He added that despatches growth rate in March was expected to remain above 8 per cent. Along with Shree Cement, UltraTech, Grasim and India Cements too are adding new capacities.
For most of the cement makers, profits in the first three quarters remained low compared with the last year. “The current quarter will not be any different but it will certainly improve on a sequential basis,” said an analyst.
Industry experts are expecting a rise of around 10-12 per cent in revenues on y-o-y basis as prices have gone up by 6-7 per cent in the March quarter. Last year during the same period, the average price of a 50-kg cement bag across the country was Rs 230, whereas now it is ruling around Rs 240-245.
Business Standard – Commodity, March 27, 2009, Section II, Page 4
Chandan Kishore Kant / Mumbai
This is the concluding part of the two-part series on the sectoral impact of a revival in demand for commodities.
The over Rs 85,000-crore domestic cement industry is set to see some relief in the March quarter. Industry analysts and market players feel that the current quarter will turn out to be the best in the current financial year in terms of revenues, margins and profitability.
Higher prices, significant despatches resulting from better-than-expected demand, declining input costs, favourable government decisions such as cutting excise duty and re-imposition of counter-vailing duty on imported cement are expected to help the industry come up with a better performance than the past three quarters.
Barring southern market, which saw lower despatches and weak prices, the industry anticipates better results in other parts of the country.
Vinod Juneja, managing director, Binani Cement (a North-based manufacturer), said, “The fourth quarter will be the best in FY09. Prices have improved from Rs 230-235 per bag last year (same quarter) to Rs 245-250 in the North. No company is having any inventory as despatches are good.”
The current quarter saw prices being hiked in two-three tranches by around Rs 8-12 per bag. The eastern and northern markets saw a firm pricing trend. In January and February, despatches grew by 8.26 per cent and 8.73 per cent at 16.13 million tonnes and 16.07 million tonnes, respectively.
Looking at the despatches trend, March is expected to clock despataches of over 17.5 million tonnes, which will be the highest ever for the industry.
On a year-on-year basis, the March quarter might not see a rise in profits, but in sequential terms, margins would be better and so the profitability, said an industry analyst.
He added that in the first three quarters, the industry saw margins getting shrunk by as much as 4-5 per cent compared to the corresponding quarters of the last financial year, whereas in the current quarter, margins will either be flat or shrink by not more than 1-2 per cent.
Hari Mohan Bangur, chairman and managing director of Shree Cement, and president of the Cement Manufacturers’ Association, said, “The industry saw a price rise in February as well as in March. The quarter will be a little better than the earlier quarters. Profitability is expected to maintain pace as far as Shree is concerned.”
When asked about the depreciation impact on new capacity additions, Bangur said that it (depreciation) would not have much effect. He added that despatches growth rate in March was expected to remain above 8 per cent. Along with Shree Cement, UltraTech, Grasim and India Cements too are adding new capacities.
For most of the cement makers, profits in the first three quarters remained low compared with the last year. “The current quarter will not be any different but it will certainly improve on a sequential basis,” said an analyst.
Industry experts are expecting a rise of around 10-12 per cent in revenues on y-o-y basis as prices have gone up by 6-7 per cent in the March quarter. Last year during the same period, the average price of a 50-kg cement bag across the country was Rs 230, whereas now it is ruling around Rs 240-245.
Real estate firms do a 'Nano'...
Real estate firms do a 'Nano'...
Business Standard, March 27, 2009, Page 4
Joe C Mathew / New Delhi/ Mumbai March 27, 2009, 0:17 IST
...bet big on sub-Rs 5 lakh flats.
R Nagaraju, head, corporate planning and strategy, Unitech, calls it “the Nano effect.” His company is now pinning hopes on the sub-Rs 5 lakh category of flats to counter slowdown in the property sector.
So are a host of others. Apart from Unitech, others such as Omaxe, Raheja, Tata Housing and Ansal API are planning new projects in the suburbs of satellite towns or smaller cities to target the bottom segment, to generate more cash.
New Delhi-based Unitech and the Raheja group are planning to build single-bedroom homes in and around Gurgaon. While Unitech is busy conceptualising the project, Raheja has announced plans to construct 10,000 flats in the Rs 5 lakh range at Gurgaon, the satellite town bordering New Delhi. Tata Housing Development, too, is working out the feasibility of a sub-Rs 5 lakh housing project.
Unitech plans to launch mid-segment residential projects in the Rs 5-10 lakh range in metros like Chennai and Kolkata, and suburban cities like Gurgaon, over the next few months.
Another developer, Omaxe, is planning a sub-Rs 4-10 lakh project at Peetampur and the Dewas industrial area near Indore to target workers. In the first phase, to be launched in the next 10 days, Omaxe would launch 5,000 flats and in the second phase, 5,000 more flats, the company said.
“The inspiration to develop smaller and cheaper apartments comes from the Nano, which is eliciting a tremendous response. I am sure our project will see a similar response, given the fact that we will come up with such low-cost apartments near metros,” said Nagaraju.
“Many industries around Udyog Vihar and Manesar are looking for houses for their workers. Our demand survey has shown tremendous interest among such firms to provide houses for their employees in the vicinity of the workplace. The new project will take care of their interest,” said Navin M Raheja, managing director, Raheja Developers.
“Nothing is selling today, as people do not have money. When both large and mid-income projects are not selling, developers have to come up with smaller projects, though they cannot earn the 30-50 per cent margins that they used to make earlier,” said Akshaya Kumar, chief executive of Park Lane Property Advisors.
Developers are battling slowing sales since the beginning of 2008. Higher property prices, which more than doubled in metro cities during 2004-07, and high interest rates have made property buyers stay away from new purchases. Despite a nearly 30 per cent fall in property prices and a cut in loan rates from 11 per cent to 8.5 per cent in recent months, property sales have fallen 70 per cent from their peak last year.
DLF, Unitech, Parsvnath and all other major developers have entered the Rs 20-40 lakh segment to generate liquidity, even as their top line fell as much as 80 per cent in the last quarter.
But property experts believe sub-Rs 5 lakh projects have few takers, even in smaller cities like Indore. “Even a good wage earner wants to stay in a comfortable home, which costs between Rs 8 lakh and Rs 10 lakh in smaller cities and Rs 18 lakh and Rs 20 lakh in the metros,” said a top executive of a New Delhi-based realty firm who did not wish to be quoted.
“At such as a price (sub Rs 5 lakh), either the houses have to be small or not in a good location. Prices should at least be in the range of Rs 10-15 lakh (per flat) for a project to make profit,” said Kumar of Park Lane Advisors.
But developers are still launching projects to generate cash. Ansal API has launched 4,000 apartments in Jaipur, Jodhpur, Agra and Meerut. “We have priced these apartments in the range of Rs 5-10 lakh per unit, keeping in mind customers who are ready to buy small apartments. The size of a one-bedroom apartment is 500-550 sq ft, while a two-bedroom apartment has an area of 850-900 sq ft,” said a company spokesperson. The company will launch another 6,000 apartments in the coming months.
In associate with Raghavendra Kamath & Neeraj Thakur.
Business Standard, March 27, 2009, Page 4
Joe C Mathew / New Delhi/ Mumbai March 27, 2009, 0:17 IST
...bet big on sub-Rs 5 lakh flats.
R Nagaraju, head, corporate planning and strategy, Unitech, calls it “the Nano effect.” His company is now pinning hopes on the sub-Rs 5 lakh category of flats to counter slowdown in the property sector.
So are a host of others. Apart from Unitech, others such as Omaxe, Raheja, Tata Housing and Ansal API are planning new projects in the suburbs of satellite towns or smaller cities to target the bottom segment, to generate more cash.
New Delhi-based Unitech and the Raheja group are planning to build single-bedroom homes in and around Gurgaon. While Unitech is busy conceptualising the project, Raheja has announced plans to construct 10,000 flats in the Rs 5 lakh range at Gurgaon, the satellite town bordering New Delhi. Tata Housing Development, too, is working out the feasibility of a sub-Rs 5 lakh housing project.
Unitech plans to launch mid-segment residential projects in the Rs 5-10 lakh range in metros like Chennai and Kolkata, and suburban cities like Gurgaon, over the next few months.
Another developer, Omaxe, is planning a sub-Rs 4-10 lakh project at Peetampur and the Dewas industrial area near Indore to target workers. In the first phase, to be launched in the next 10 days, Omaxe would launch 5,000 flats and in the second phase, 5,000 more flats, the company said.
“The inspiration to develop smaller and cheaper apartments comes from the Nano, which is eliciting a tremendous response. I am sure our project will see a similar response, given the fact that we will come up with such low-cost apartments near metros,” said Nagaraju.
“Many industries around Udyog Vihar and Manesar are looking for houses for their workers. Our demand survey has shown tremendous interest among such firms to provide houses for their employees in the vicinity of the workplace. The new project will take care of their interest,” said Navin M Raheja, managing director, Raheja Developers.
“Nothing is selling today, as people do not have money. When both large and mid-income projects are not selling, developers have to come up with smaller projects, though they cannot earn the 30-50 per cent margins that they used to make earlier,” said Akshaya Kumar, chief executive of Park Lane Property Advisors.
Developers are battling slowing sales since the beginning of 2008. Higher property prices, which more than doubled in metro cities during 2004-07, and high interest rates have made property buyers stay away from new purchases. Despite a nearly 30 per cent fall in property prices and a cut in loan rates from 11 per cent to 8.5 per cent in recent months, property sales have fallen 70 per cent from their peak last year.
DLF, Unitech, Parsvnath and all other major developers have entered the Rs 20-40 lakh segment to generate liquidity, even as their top line fell as much as 80 per cent in the last quarter.
But property experts believe sub-Rs 5 lakh projects have few takers, even in smaller cities like Indore. “Even a good wage earner wants to stay in a comfortable home, which costs between Rs 8 lakh and Rs 10 lakh in smaller cities and Rs 18 lakh and Rs 20 lakh in the metros,” said a top executive of a New Delhi-based realty firm who did not wish to be quoted.
“At such as a price (sub Rs 5 lakh), either the houses have to be small or not in a good location. Prices should at least be in the range of Rs 10-15 lakh (per flat) for a project to make profit,” said Kumar of Park Lane Advisors.
But developers are still launching projects to generate cash. Ansal API has launched 4,000 apartments in Jaipur, Jodhpur, Agra and Meerut. “We have priced these apartments in the range of Rs 5-10 lakh per unit, keeping in mind customers who are ready to buy small apartments. The size of a one-bedroom apartment is 500-550 sq ft, while a two-bedroom apartment has an area of 850-900 sq ft,” said a company spokesperson. The company will launch another 6,000 apartments in the coming months.
In associate with Raghavendra Kamath & Neeraj Thakur.
STEEL IS STAINLESS AGAIN
STEEL IS STAINLESS AGAIN
The Economic Times, March 27, 2009, Page 1
Big steel cos operating at full capacity after long lull
Pramugdha Mamgain & Subhash Narayan, NEW DELHI
INDIA’S largest steelmakers are operating at full capacity after a five-month lull that saw them cutting production, raising hopes of an imminent economic recovery.
SAIL, Tata Steel, JSW and Essar have all resumed normal production, a marked contrast from last October when most steel companies were forced to cut output by up to 40% due to a steep fall in demand.
The steel sector’s revival can be linked to an improvement in the economic scene since January, largely due to the fiscal and monetary moves taken by the Centre and RBI to spur demand. Demand in the rural sector has also risen in the last two months.
“Since steel has a high co-relation with the GDP, a pickup in production is a clear indication of an increase in manufacturing and industrial growth,” said HDFC Bank chief economist Abheek Barua.
Local steel prices fell by over 35% from the July 2008 peak of Rs 50,000/tonne to Rs 28,000-30,000/tonne earlier this month. Prices have more or less stabilised since then. Incidentally, global steel prices have seen a steeper fall to around $450-500/tonne from last year’s peak of $1,400. “While prices continue to fall marginally in the global market due to a dip in raw material prices, steel prices have almost stabilised in the domestic market on the back of a demand revival ,” said AS Firoz, a steel and natural resources consultant.
The Economic Times, March 27, 2009, Page 1
Big steel cos operating at full capacity after long lull
Pramugdha Mamgain & Subhash Narayan, NEW DELHI
INDIA’S largest steelmakers are operating at full capacity after a five-month lull that saw them cutting production, raising hopes of an imminent economic recovery.
SAIL, Tata Steel, JSW and Essar have all resumed normal production, a marked contrast from last October when most steel companies were forced to cut output by up to 40% due to a steep fall in demand.
The steel sector’s revival can be linked to an improvement in the economic scene since January, largely due to the fiscal and monetary moves taken by the Centre and RBI to spur demand. Demand in the rural sector has also risen in the last two months.
“Since steel has a high co-relation with the GDP, a pickup in production is a clear indication of an increase in manufacturing and industrial growth,” said HDFC Bank chief economist Abheek Barua.
Local steel prices fell by over 35% from the July 2008 peak of Rs 50,000/tonne to Rs 28,000-30,000/tonne earlier this month. Prices have more or less stabilised since then. Incidentally, global steel prices have seen a steeper fall to around $450-500/tonne from last year’s peak of $1,400. “While prices continue to fall marginally in the global market due to a dip in raw material prices, steel prices have almost stabilised in the domestic market on the back of a demand revival ,” said AS Firoz, a steel and natural resources consultant.
Irate buyers force DLF to slash Gurgaon project rates by 20%
Irate buyers force DLF to slash Gurgaon project rates by 20%
The Economic Times, March 27, 2009, Page 5
Sanjeev Choudhary NEW DELHI
THE COUNTRY’S largest property developer, DLF, has cut prices by up to a fifth at a housing project in its home market Gurgaon, buckling under pressure from customers who are angry that not a single brick has been laid nearly a year after the venture was announced. The latest move by DLF for its New Town Heights project is its third such in about a month and follows price cuts of up to 32% at its projects in Chennai and Bangalore.
The company has told buyers at its Gurgaon project that “in order to further strengthen the value proposition”, DLF is offering a 5% discount on the basic sale price, increasing the built-up area by 5% at no extra cost and offering a 10% “timely payment rebate” on the sale price.
Customers furious about the absence of progress on the project have been demanding their money back and many of them stopped paying their instalments.
In Chennai, too, DLF’s hand was forced by buyers of apartments at its Garden City project joining forces after they saw that work had not started even a year-and-ahalf after the announcement.
DLF’s price cuts in Chennai and Bangalore triggered expectations that other big real estate firms would follow suit to try and boost sagging demand, but there have been no significant reductions so far.
Several analysts have been saying a 30-35% decline in prices is essential to spur demand. As sales dried up, credit became expensive and private equity funds vanished, property companies ran into a severe cash crunch. Realty firms have also been under pressure from banks and the government to reduce prices.
Many builders have not been making formal price cut announcements but customers driving hard bargains are able to to wangle substantial discounts. DLF’s latest move is seen pressuring other developers to bring down prices in the National Capital Region, which has not seen many firms come forward to meaningfully cut prices.
DLF launched New Town Heights almost a year ago in sectors 86, 90 and 91 of Gurgaon at a basic price of Rs 2,250 per sq ft. The project comprised three- and fourbed room apartments ranging in size from 1,760 sq ft to 2,505 sq ft and priced at Rs 45-75 lakh. Almost 85% of the total 3,147 flats have been sold, said a DLF executive.
DLF is also telling its New Town Heights customers that they will be protected from falling property rates by the company passing on the benefits of any further price reductions to them. Furthermore, it has doubled penalty to Rs 10 per sq ft per month for delay in handing over the homes.
The company has promised to deliver the home three years from date of booking by the customer, but it appears unlikely that the deadline can be met for the earliest buyers at New Town Heights.
“We are a highly compliant organisation, and we would like to start construction only after we have received the final environment clearance, which is awaited,” DLF wrote to customers.
Another DLF sweetener for its New Town Heights customers is the change in the payment plan. Whereas so far buyers were required to make periodic payments, the new plan allows those who have paid at least 35% of the cost of apartment to make their payments only when the company meets construction milestones.
LOWLY HEIGHTS
DLF launched New Town Heights almost a year ago. But so far not a single brick has been laid
Customers have been demanding their money back and many stopped paying their instalments
DLF is offering a 5% discount on basic price, increasing built-up area by 5% at no extra cost and offering a 10% “timely payment rebate”
Co will pass on benefits of any further price cuts & has doubled penalty for delays to Rs 10/sq ft per month
Rahejas to sell 30k NCR flats for Rs 4-25 L
Rahejas to sell 30k NCR flats for Rs 4-25 L
The Economic Times, March 27, 2009, Page 5
New Delhi: Realty player Raheja Developers will build up to 30,000 apartments in the affordable housing category in the National Capital Region in the next two years, which will be offered at Rs 4-25 lakh.
“Though there has been some correction in the realty market, demand is still there, especially in the affordable housing segment. We have already received approvals for developing about 20,000 apartments in the NCR,” Raheja Developers managing director Navin M Raheja said here. The company has planned to develop up to 30,000 units in the NCR in the next two years, he added.
“We have decided to fix the prices of the apartments in the range of Rs 4 lakh to Rs 25 lakh, depending on the size,” Mr Raheja said, adding the minimum size of a unit would be 300 sq ft. He, however, declined to give details about the size of investment the company is looking to put in. “The launch of this affordable housing scheme will (take place) in the next two months ... We will not tie up with any partner,” Mr Raheja said. Construction would be completed in two years and deliveries would start in 2011.—PTI
The Economic Times, March 27, 2009, Page 5
New Delhi: Realty player Raheja Developers will build up to 30,000 apartments in the affordable housing category in the National Capital Region in the next two years, which will be offered at Rs 4-25 lakh.
“Though there has been some correction in the realty market, demand is still there, especially in the affordable housing segment. We have already received approvals for developing about 20,000 apartments in the NCR,” Raheja Developers managing director Navin M Raheja said here. The company has planned to develop up to 30,000 units in the NCR in the next two years, he added.
“We have decided to fix the prices of the apartments in the range of Rs 4 lakh to Rs 25 lakh, depending on the size,” Mr Raheja said, adding the minimum size of a unit would be 300 sq ft. He, however, declined to give details about the size of investment the company is looking to put in. “The launch of this affordable housing scheme will (take place) in the next two months ... We will not tie up with any partner,” Mr Raheja said. Construction would be completed in two years and deliveries would start in 2011.—PTI
Housing start-up index to indicate construction volume every quarter
Housing start-up index to indicate construction volume every quarter
The Financial Express, March 27, 2009, Page 5
Kakoly Chatterjee, New Delhi
While Residex, an index planned to benchmark the housing sector, would serve as an indicator of property prices, the housing start-up index (HSUI) planned by the Reserve Bank of India aims to indicate the volume of construction taking place in a particular location. The RBI expects to start publishing the data by March 2010. Once operational, the data is expected to be published every quarter.
HSUI is also meant to serve as a lead indicator of economy's growth as more houses would propel demand for input materials like cement and steel, labour requirements and credit demand. The demand for consumer durables would also increase apparently.
The index would cover metro cities and some tier I cities initially. It would then eventually cover the rest of the country.
Also, it is a barometer of housing demand in future. It would help probe factors responsible for increasing property prices. Industry experts believe that with the help of HSUI, property bubble could be detected in its early stages and be controlled subsequently.
“Data collection will start from the last eight quarters while the ground survey of the number of conversions taking place would be conducted every three to five years. This data will be processed through a co-efficient matrix that will make clear how many conversions are actually happening. This will of course vary in larger cities and small towns,” said RBI Technical Advisory Group chairman Amitabh Kundu.
According to the group, an advisory committee on HSUI at NBO may be set up to guide and oversee the entire process of compilation of housing permit data from concerned local bodies and the Directorate of Economics and Statistics of the state governments. The number of housing-starts (a case where the construction begins) during a period would indicate the demand and supply situation in the housing market, as reflected in conversion(a case where housing permits translate into real construction).
“Real estate is largely an unorganised market and a dearth of data makes any analysis or extrapolation really difficult. This data will help both the players and the consumers,” Shailesh Kanani, real estate analyst with Angel Broking said. This index would be useful for developers as it would help know areas of oversupply. They can hence refrain from construction activity in those areas. In case of an oversupply in a particular location, consumers before investing would wait till prices fall, he added.
HSUI would help bridge the demand and supply gap in a particular location as realty players would be aware of the demand in a location.
House that!
•The RBI expects to start publishing the data by March 2010. Once operational, the data is expected to be published every quarter
• HSUI is meant to serve as a lead indicator of economy's growth as more houses would propel demand for input materials like cement and steel, labour requirements and credit demand
• The index would cover metro cities and some tier I cities initially. It would eventually cover the rest of the country and also serve as a barometer of housing demand in the future
• An advisory committee on HSUI at NBO may be set up to guide and oversee the entire process of compilation of housing permit data from the concerned local bodies and the Directorate of Economics and Statistics of state governments
The Financial Express, March 27, 2009, Page 5
Kakoly Chatterjee, New Delhi
While Residex, an index planned to benchmark the housing sector, would serve as an indicator of property prices, the housing start-up index (HSUI) planned by the Reserve Bank of India aims to indicate the volume of construction taking place in a particular location. The RBI expects to start publishing the data by March 2010. Once operational, the data is expected to be published every quarter.
HSUI is also meant to serve as a lead indicator of economy's growth as more houses would propel demand for input materials like cement and steel, labour requirements and credit demand. The demand for consumer durables would also increase apparently.
The index would cover metro cities and some tier I cities initially. It would then eventually cover the rest of the country.
Also, it is a barometer of housing demand in future. It would help probe factors responsible for increasing property prices. Industry experts believe that with the help of HSUI, property bubble could be detected in its early stages and be controlled subsequently.
“Data collection will start from the last eight quarters while the ground survey of the number of conversions taking place would be conducted every three to five years. This data will be processed through a co-efficient matrix that will make clear how many conversions are actually happening. This will of course vary in larger cities and small towns,” said RBI Technical Advisory Group chairman Amitabh Kundu.
According to the group, an advisory committee on HSUI at NBO may be set up to guide and oversee the entire process of compilation of housing permit data from concerned local bodies and the Directorate of Economics and Statistics of the state governments. The number of housing-starts (a case where the construction begins) during a period would indicate the demand and supply situation in the housing market, as reflected in conversion(a case where housing permits translate into real construction).
“Real estate is largely an unorganised market and a dearth of data makes any analysis or extrapolation really difficult. This data will help both the players and the consumers,” Shailesh Kanani, real estate analyst with Angel Broking said. This index would be useful for developers as it would help know areas of oversupply. They can hence refrain from construction activity in those areas. In case of an oversupply in a particular location, consumers before investing would wait till prices fall, he added.
HSUI would help bridge the demand and supply gap in a particular location as realty players would be aware of the demand in a location.
House that!
•The RBI expects to start publishing the data by March 2010. Once operational, the data is expected to be published every quarter
• HSUI is meant to serve as a lead indicator of economy's growth as more houses would propel demand for input materials like cement and steel, labour requirements and credit demand
• The index would cover metro cities and some tier I cities initially. It would eventually cover the rest of the country and also serve as a barometer of housing demand in the future
• An advisory committee on HSUI at NBO may be set up to guide and oversee the entire process of compilation of housing permit data from the concerned local bodies and the Directorate of Economics and Statistics of state governments
SBI goes ‘green’ with its home loans
SBI goes ‘green’ with its home loans
The Hindu Business Line, March 27, 2009, Page 1
DWELLING ON ECO THEME.
K Ram Kumar
Mumbai, March 26 State Bank of India has introduced a new home loan product that will make other banks go green with envy.
By launching ‘Green Homes’, the country’s largest bank wants to support rated environment friendly residential projects by offering concessions - reduced margin, softer interest rate, and zero processing fee - on home loans to discerning buyers.
In case you are planning to buy a house with a loan from SBI in an environment friendly residential project, which has been rated by the Indian Green Building Council (IGBC), then the bank is willing to woo you with concessions.
The concessions: the upfront margin that you will have to stump up will be lower at 15 per cent of the loan amount instead of the normal 20 per cent; interest rate on the loan will be 25 basis points lower than the card rate; and no processing fee will be charged.
A ‘Green Building/ Home’, according to the IGBC, is one that uses less energy, water and natural resources, creates less waste and is healthier for the people living inside compared to a standard building. The council is a part of the Confederation of Indian Industry - Sohrabji Godrej Green Business Centre.
“As part of our endeavour to promote rated eco-friendly residential projects, we have announced easy loan terms for prospective home buyers. Our move will also encourage builders to come up with such projects,” said a senior SBI official.
The bank, which introduced the ‘Green Homes’ product a couple of months back, is currently supporting ‘green’ residential projects by Tata Housing and Mahindra’s.
“Today, home buyers are ready to shell out extra money towards amenities such as swimming pool, club house and joggers’ park. Frankly, these are only ‘theoretical’ benefits which a majority of the residents hardly use. In the case of eco-friendly homes, owners will actually realise tangible as well as intangible benefits.
Hence, buyers should shed their reluctance to pay that extra, which can be recouped in 2 to 3 years, for buying a house in an eco-friendly project as they stand to gain via savings in terms of energy and water,” the official said.
Owners of ‘green homes’ can hope to reap tangible benefits in the form of 20-30 per cent energy savings as the apartments are designed in such a manner that they can enjoy ample natural light throughout the day.
The construction material used in such homes ensures adequate thermal storage mass for retaining heat energy thereby keeping the interiors cool despite the heat outside.
Further, water savings, anywhere between 30 and 50 per cent, can be made on account of rain-water harvesting and recycling.
Thursday, March 26, 2009
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