Friday, May 29, 2009
Realtors plan lock-in clauses to weed out speculators
Realtors plan lock-in clauses to weed out speculators
Business Standard, May 29, 2009, Page 1
Neeraj Thakur & Raghavendra Kamath / New Delhi/mumbai
Stung by recent experiences, many real estate companies such as Tata Housing, Omaxe, DLF and others are planning to impose lock-in periods of up to one year for their mass housing projects.
A lock-in clause means buyers cannot sell their properties within a certain period after booking the property or have to pay a penalty if they do so.
Realtors are doing these because investors or speculators often leveraged volume discounts on property purchases to re-sell them at prices lower than those available to individual buyers. This created problems for realtors when demand slowed, since it put pressure on them to take a hit on margins and lower prices still further.
In the boom years of 2006 and 2007, 30 to 50 per cent of such projects were sold on bulk discounts, especially in the national capital region.
Now, companies such as Tata Housing will not issue no-objection certificates to property buyers for the first six months after allotment and DLF, India's largest listed realtor, said it would not transfer the title of the property in the name of the buyer for a year after a property is booked.
Several other companies have imposed a steep transfer charge — Rs 100 to Rs 1,000 a square foot — if the first-time buyer sells the property within a specified period.
The lock-ins are expected to be introduced mostly for mid-income projects, that offer prices 20 to 30 per cent below the market and, therefore, attract more undercutting from bulk discount buyers.
''We are going to introduce such clauses in all our future affordable housing projects. We do not want short-term investors to compete with us later in the market, as the margins in affordable housing are very low," confirmed Rohtas Goel, chairman and managing director of Delhi-based developer Omaxe, which is launching 10 mid-income projects this year.
Margins on such housing projects are typically 20 to 25 per cent compared with 50 to 70 per cent for premium housing.
DLF Ltd, the country's largest developer, claims it is the first developer to introduce the clause for both premium and mid-income projects.
"Earlier, the same buyer used to buy five to six flats in our projects and sell it within a month in the market. We, as the largest developer, decided to discourage such speculation", said Rajeev Talwar, executive director, DLF.
The clause, however, has attracted criticism from analysts. "Developers want the best of both worlds. They want to delay registration and charge a transfer fee because once a property is registered it is binding on both developers and buyers," said Pranay Vakil, chairman, Knight Frank India, an international property consultant.
The legal fraternity is, however, divided on whether the move was legally tenable.
"It is a contractual obligation and not a statutory one. The statute does not say that a property cannot be sold in a certain period of time. Developers are merely putting pressure on buyers,'' said Vinod Sampat, a Mumbai-based advocate.
He added some Mumbai developers even charged Rs 1,000 a square foot as transfer charges though the state housing department has said the developer cannot charge a single paisa as transfer charges.
PH Parekh, a senior Supreme Court lawyer, said, however, that all legal documents signed by a person were binding, unless he decided to challenge it in court. "If a buyer decides to challenge the lock-in period, the decision of the court can go either way," Parekh said.
Business Standard, May 29, 2009, Page 1
Neeraj Thakur & Raghavendra Kamath / New Delhi/mumbai
Stung by recent experiences, many real estate companies such as Tata Housing, Omaxe, DLF and others are planning to impose lock-in periods of up to one year for their mass housing projects.
A lock-in clause means buyers cannot sell their properties within a certain period after booking the property or have to pay a penalty if they do so.
Realtors are doing these because investors or speculators often leveraged volume discounts on property purchases to re-sell them at prices lower than those available to individual buyers. This created problems for realtors when demand slowed, since it put pressure on them to take a hit on margins and lower prices still further.
In the boom years of 2006 and 2007, 30 to 50 per cent of such projects were sold on bulk discounts, especially in the national capital region.
Now, companies such as Tata Housing will not issue no-objection certificates to property buyers for the first six months after allotment and DLF, India's largest listed realtor, said it would not transfer the title of the property in the name of the buyer for a year after a property is booked.
Several other companies have imposed a steep transfer charge — Rs 100 to Rs 1,000 a square foot — if the first-time buyer sells the property within a specified period.
The lock-ins are expected to be introduced mostly for mid-income projects, that offer prices 20 to 30 per cent below the market and, therefore, attract more undercutting from bulk discount buyers.
''We are going to introduce such clauses in all our future affordable housing projects. We do not want short-term investors to compete with us later in the market, as the margins in affordable housing are very low," confirmed Rohtas Goel, chairman and managing director of Delhi-based developer Omaxe, which is launching 10 mid-income projects this year.
Margins on such housing projects are typically 20 to 25 per cent compared with 50 to 70 per cent for premium housing.
DLF Ltd, the country's largest developer, claims it is the first developer to introduce the clause for both premium and mid-income projects.
"Earlier, the same buyer used to buy five to six flats in our projects and sell it within a month in the market. We, as the largest developer, decided to discourage such speculation", said Rajeev Talwar, executive director, DLF.
The clause, however, has attracted criticism from analysts. "Developers want the best of both worlds. They want to delay registration and charge a transfer fee because once a property is registered it is binding on both developers and buyers," said Pranay Vakil, chairman, Knight Frank India, an international property consultant.
The legal fraternity is, however, divided on whether the move was legally tenable.
"It is a contractual obligation and not a statutory one. The statute does not say that a property cannot be sold in a certain period of time. Developers are merely putting pressure on buyers,'' said Vinod Sampat, a Mumbai-based advocate.
He added some Mumbai developers even charged Rs 1,000 a square foot as transfer charges though the state housing department has said the developer cannot charge a single paisa as transfer charges.
PH Parekh, a senior Supreme Court lawyer, said, however, that all legal documents signed by a person were binding, unless he decided to challenge it in court. "If a buyer decides to challenge the lock-in period, the decision of the court can go either way," Parekh said.
New SEZ rule allows builders to use non-functional areas
New SEZ rule allows builders to use non-functional areas
Business Standard, May 29, 2009, Page 2
Business Standard, May 29, 2009, Page 2
DLF promoters plan to sell another 5.5% stake
DLF promoters plan to sell another 5.5% stake
The Financial Express, May 29, 2009, Page 3
Kakoly Chatterjee, New Delhi
The KP Singh family, promoters of the country’s biggest real estate firm, DLF are planning to sell another 5.5% of their stake to raise around Rs 2,000 crore.
Earlier on May 13, the Singh family sold 9.9% stake to raise Rs 3,860 crore. If the second round of stake sale happens, the promoters stake will come down to around 73.1% from the current 78.6%. Its stake sale was 88.5% before the May sale.
“Institutions have started looking into the company (DLF Ltd) again,” a merchant banking source said. “The Singh family will go for a secondary qualified institutional placement (QIP) since the money will come to the promoters,” he said. Since they are majority owners of DLF Assets Limited (DAL), they can use these funds to offload the debt on its books.
However, when contacted, Rajiv Talwar, group executive director, DLF denied about the possibility of any further promoter stake sell.
Last month when the promoters of DLF sold 9.9% stake in open market transaction to raise Rs 3,860, it was primarily for paying off hedge fund, D E Shaw which wanted to exit DAL, another K P Singh promoted company. D E Shaw was to be paid Rs 2,000 crore and the rest was infused into DAL to pay off DLF. Currently DAL owes Rs 4,900 crore to DLF. The original plan to list DAL in the Singapore stock exchange had to be scrapped because of the market crash. DAL buys commercial property from DLF and collects lease rentals from it.
Sources said the funds raised from the second round of sale would be used to partly pay off the balance Rs 3,100 crore DAL owes to DLF. The transaction of 9.9% took place at just above Rs 230 per share, which is much lower than DLF’s IPO price of Rs 525 a share. The current transaction is expected to be around the same price. On the previous occasion HSBC, Fidelity, Euro Pacific Growth Fund and Copthall Mauritius Investment Ltd were the other major buyers who made bulk deals on the stock exchange.
Out of a net debt of Rs 13,958 crore that DLF has on its books, it plans to clear off Rs 3,591 crore in the current financial year (FY10). Exit from Delhi Convention centre has fetched them Rs 850 crore, exit from the Bidadi and Dankuni projects has brought to them Rs 336 crore.
The Financial Express, May 29, 2009, Page 3
Kakoly Chatterjee, New Delhi
The KP Singh family, promoters of the country’s biggest real estate firm, DLF are planning to sell another 5.5% of their stake to raise around Rs 2,000 crore.
Earlier on May 13, the Singh family sold 9.9% stake to raise Rs 3,860 crore. If the second round of stake sale happens, the promoters stake will come down to around 73.1% from the current 78.6%. Its stake sale was 88.5% before the May sale.
“Institutions have started looking into the company (DLF Ltd) again,” a merchant banking source said. “The Singh family will go for a secondary qualified institutional placement (QIP) since the money will come to the promoters,” he said. Since they are majority owners of DLF Assets Limited (DAL), they can use these funds to offload the debt on its books.
However, when contacted, Rajiv Talwar, group executive director, DLF denied about the possibility of any further promoter stake sell.
Last month when the promoters of DLF sold 9.9% stake in open market transaction to raise Rs 3,860, it was primarily for paying off hedge fund, D E Shaw which wanted to exit DAL, another K P Singh promoted company. D E Shaw was to be paid Rs 2,000 crore and the rest was infused into DAL to pay off DLF. Currently DAL owes Rs 4,900 crore to DLF. The original plan to list DAL in the Singapore stock exchange had to be scrapped because of the market crash. DAL buys commercial property from DLF and collects lease rentals from it.
Sources said the funds raised from the second round of sale would be used to partly pay off the balance Rs 3,100 crore DAL owes to DLF. The transaction of 9.9% took place at just above Rs 230 per share, which is much lower than DLF’s IPO price of Rs 525 a share. The current transaction is expected to be around the same price. On the previous occasion HSBC, Fidelity, Euro Pacific Growth Fund and Copthall Mauritius Investment Ltd were the other major buyers who made bulk deals on the stock exchange.
Out of a net debt of Rs 13,958 crore that DLF has on its books, it plans to clear off Rs 3,591 crore in the current financial year (FY10). Exit from Delhi Convention centre has fetched them Rs 850 crore, exit from the Bidadi and Dankuni projects has brought to them Rs 336 crore.
Real estate getting real
Real estate getting real
The Financial Express, May 29, 2009, Page 6
Anandita Singh Mankotia
The real estate sector made a killing during the boom period—some leading entrepreneurs even made it into the Fortune billionaires list. Now the big companies in the sector, troubled by the slowdown, are beginning to regret extending beyond their core competence. In the not so distant past, real estate companies in India were so confident about their own ability to make quick money that many began diversifying away from real estate to other sectors. For example, DLF felt that it was well poised to move into the retail business by partnering retailers—they called it a forward integration. DLF even bought into the wind energy business (going green being the new way forward to fuel our energy needs). They went into the hotels business, as they believed that it was only an extension of their realty business. After all, if they were competent enough to construct a hotel, they felt managing it wouldn’t be that difficult.
Funds were never really a problem during the boom. However, a year later, the realty players are in for a reality check. Almost all developers who unanimously clamoured for an infrastructure status to shore up their bottomlines seem to be now realising that their own plans and estimates were probably overly optimistic. DLF has said a strict no-no to any more retail tie-ups, its SEZ dream has gone sour, and the company posted the most dismal results ever in its history. Unitech believed, that having conquered the real estate business, it needed to look for greener pastures. Presumably inspired by big telecom deals like Hutchison-Vodafone, it felt it was well positioned to handle a foray into telecom. A year later, not only has it sold a majority stake in Unitech Wireless but has had to abandon its most hyped ‘luxury township’ project in favour of a more modest ‘affordable housing project’. It is even selling the corporate office that was supposed to act as its headquarters and house its staff. So, the big players are in a serious mess. The smaller ones are even worse off, actually facing an existential threat. Many bigger firms are resorting to sale of promoter stake in a last ditch attempt to salvage their floundering businesses.
The Financial Express, May 29, 2009, Page 6
Anandita Singh Mankotia
The real estate sector made a killing during the boom period—some leading entrepreneurs even made it into the Fortune billionaires list. Now the big companies in the sector, troubled by the slowdown, are beginning to regret extending beyond their core competence. In the not so distant past, real estate companies in India were so confident about their own ability to make quick money that many began diversifying away from real estate to other sectors. For example, DLF felt that it was well poised to move into the retail business by partnering retailers—they called it a forward integration. DLF even bought into the wind energy business (going green being the new way forward to fuel our energy needs). They went into the hotels business, as they believed that it was only an extension of their realty business. After all, if they were competent enough to construct a hotel, they felt managing it wouldn’t be that difficult.
Funds were never really a problem during the boom. However, a year later, the realty players are in for a reality check. Almost all developers who unanimously clamoured for an infrastructure status to shore up their bottomlines seem to be now realising that their own plans and estimates were probably overly optimistic. DLF has said a strict no-no to any more retail tie-ups, its SEZ dream has gone sour, and the company posted the most dismal results ever in its history. Unitech believed, that having conquered the real estate business, it needed to look for greener pastures. Presumably inspired by big telecom deals like Hutchison-Vodafone, it felt it was well positioned to handle a foray into telecom. A year later, not only has it sold a majority stake in Unitech Wireless but has had to abandon its most hyped ‘luxury township’ project in favour of a more modest ‘affordable housing project’. It is even selling the corporate office that was supposed to act as its headquarters and house its staff. So, the big players are in a serious mess. The smaller ones are even worse off, actually facing an existential threat. Many bigger firms are resorting to sale of promoter stake in a last ditch attempt to salvage their floundering businesses.
Moody’s caution on Indian economy
Moody’s caution on Indian economy
The Hindu Business Line, May 29, 2009, Page 10
Our Bureau, New Delhi
Moody’s Investor Service cautions India against various challenges in the macroeconomic management and a backlog of structural reforms, even as its ratings outlook for the Indian government’s foreign currency rating and local rating is stable.
In a new report released today, Moody’s Vice-President and Senior Analyst, Aninda Mitra, said India’s ratings are based on Moody’s assessment of the country’s moderate levels of economic and institutional strength that in turn are bolstered by a large, rapidly growing and well-diversified economic structure.
The key arguments advanced in the report deal with the constraint exerted on India’s economic potential by domestic imbalances and financial fragilities; the risk posed to economic performance by the confluence of potentially weak external liquidity and the persistence of government deficits. These shortcomings coupled with sectoral imbalances, low rural income and still-pervasive infrastructural bottlenecks constrain more rapid improvements, it said.
While economic liberalisation and de-licensing have facilitated a strong productivity response and led to greater competition, capacity building and growth in several industry sectors, fiscal policy predictability and credibility have worsened, the report said. “The stable outlook on the ratings has recently faced growing pressure, mainly due to substantial deterioration in the fiscal position amidst a rise in India’s dependence on foreign capital flows to drive its investment cycle”, it added.
Stating that a time of a sharp deceleration in private investment and falling capacity utilisation, the much higher level of fiscal deficit is not expected to result in price pressures or credit crowding, the report contends that with private sector resuming growth from latter part of 2009, the availability of domestic financing could be crowded out if the large fiscal easing is not unwound quickly.
It further said if the new government is able to re-commit itself to fiscal restraint in a credible manner or alter the financing mix of the deficit (to include greater reliance on disinvestment), such developments could better support “our views about the institutional framework underpinning macroeconomic management”.
Pointing out that large government borrowing needs have slowed the development of private bond markets for domestic corporations, the report said this has driven greater reliance on equity issue and foreign borrowings. “Consequently, disruptions in global or local capital markets affects private corporations’ fund raising capabilities much more than at comparable emerging market countries with more fiscal space”, it said.
While appreciating statutory and regulatory bodies for being effective and less heavy- handed than in earlier decades, the report highlights slow and cumbersome bureaucracy. It said the overall quality of governance in the context of policy implementation is poor and in particular, the provision of public goods and services has suffered.
The Hindu Business Line, May 29, 2009, Page 10
Our Bureau, New Delhi
Moody’s Investor Service cautions India against various challenges in the macroeconomic management and a backlog of structural reforms, even as its ratings outlook for the Indian government’s foreign currency rating and local rating is stable.
In a new report released today, Moody’s Vice-President and Senior Analyst, Aninda Mitra, said India’s ratings are based on Moody’s assessment of the country’s moderate levels of economic and institutional strength that in turn are bolstered by a large, rapidly growing and well-diversified economic structure.
The key arguments advanced in the report deal with the constraint exerted on India’s economic potential by domestic imbalances and financial fragilities; the risk posed to economic performance by the confluence of potentially weak external liquidity and the persistence of government deficits. These shortcomings coupled with sectoral imbalances, low rural income and still-pervasive infrastructural bottlenecks constrain more rapid improvements, it said.
While economic liberalisation and de-licensing have facilitated a strong productivity response and led to greater competition, capacity building and growth in several industry sectors, fiscal policy predictability and credibility have worsened, the report said. “The stable outlook on the ratings has recently faced growing pressure, mainly due to substantial deterioration in the fiscal position amidst a rise in India’s dependence on foreign capital flows to drive its investment cycle”, it added.
Stating that a time of a sharp deceleration in private investment and falling capacity utilisation, the much higher level of fiscal deficit is not expected to result in price pressures or credit crowding, the report contends that with private sector resuming growth from latter part of 2009, the availability of domestic financing could be crowded out if the large fiscal easing is not unwound quickly.
It further said if the new government is able to re-commit itself to fiscal restraint in a credible manner or alter the financing mix of the deficit (to include greater reliance on disinvestment), such developments could better support “our views about the institutional framework underpinning macroeconomic management”.
Pointing out that large government borrowing needs have slowed the development of private bond markets for domestic corporations, the report said this has driven greater reliance on equity issue and foreign borrowings. “Consequently, disruptions in global or local capital markets affects private corporations’ fund raising capabilities much more than at comparable emerging market countries with more fiscal space”, it said.
While appreciating statutory and regulatory bodies for being effective and less heavy- handed than in earlier decades, the report highlights slow and cumbersome bureaucracy. It said the overall quality of governance in the context of policy implementation is poor and in particular, the provision of public goods and services has suffered.
LIC Housing Fin hits year high on easing liquidity
LIC Housing Fin hits year high on easing liquidity
The Hindu Business Line, May 29, 2009, Page 12
‘Outlook on mortgage growth as asset quality has improved’.
Our Bureau, Kolkata
LIC Housing Finance on Thursday touched its 52-week high at Rs 520.70. It, however, closed at Rs 509.70, marking a 6.5 per cent gain. In the past week, the stock has gained over 17 per cent and its gain last month is around 55.5 per cent.
According to analysts, LIC Housing Finance was attracting investors’ attention in the past few weeks on easing of liquidity for small ticket borrowers and lowering of rates too.
According to Mr Amitbh Chakraborty, President (Equity) of Religare, expectations that the Government would continue to accord priority to 10 lakh or below housing finance to borrower for macro social and economic needs, have come true. “So a recovery of small housing finance stocks such as LIC Housing Finance and GIC Housing Finance were on the cards for some time.”
Incidentally, GIC Housing Finance also hit its 52-week high on Thursday at Rs 76.40. It finished at Rs 75.85, up over 19 per cent.
According to Edelweiss, LIC Housing Finance is delivering strong operating performance quarter after quarter on all key parameters such as loan growth (20 per cent plus), reduction of NPAs and margins.
“Moreover, the outlook on mortgage growth as asset quality has improved since January with change in macro environment and increased availability of capital.” Also, margins are expected to sustain due to sharp decline in wholesale funding cost, which will help LICHF sustain this strong performance.
Disbursements
LICHF is estimated to have improved its market share to 9 per cent plus in FY09 from around 6 per cent in FY08. Disbursements have also gone up 24 per cent. After muted disbursements over FY05-07, it has been gaining market share owing to internal restructuring.
As a result of better performance and relatively lower valuations, brokerages have recently upgraded rating for the stock. Emkay expects LICHF to report a 20 per cent CAGR in net operating revenues and earnings over FY09-11E.
Investors warm up to realty, once again
Investors warm up to realty, once again
The Economic Times, May 29, 2009, Page 17
FIs, MFs, HNIs Seen Flocking To Real Estate Funds
Shailesh Menon MUMBAI
AFTER a near 16-month hiatus, strategic investors are once again warming up to the real estate sector. A few foreign funds and local asset management companies have hit the road for raising money to be invested in real estate companies. Interestingly, even high net worth investors are flocking to these funds, say industry watchers.
Mutual funds raising funds towards realty investments include ASK Investment Holdings, Milestone Capital Advisors, Birla Sun Life Asset Management Company and the Singapore-based Morgan Stanley Investments. While ASK Investment Holdings has launched a Rs 500-crore PMS fund (that will invest into live realty projects through an investment vehicle) Milestone Capital and Birla Sunlife AMC are planning to raise Rs 600 crore and Rs 2,500 crore, respectively, for focused real estate investments. Almost all these funds are promising annualised returns in the range of 20-25%.
Both Morgan Stanley and Birla Sunlife are floating offshore real estate funds. According to market sources, Birla Sunlife will raise the money from West Asian and Latin American investors. Officials at Birla Sunlife refused to comment on the development. “Affluent investors who could not make much of the recent equity market rally are now trying to invest in real estate instruments. Even big-ticket funds are now raising money from investors. An HNI portfolio now will typically have 5% investments in real estate funds; overall real estate exposure would be in the range of 15-20%,” said Right Horizons Wealth Management CEO Anil Rego.
ASK Investment Holdings has launched a realtyfocused portfolio management scheme, with minimum investment pegged at Rs 25 lakh. The fund will make equity investments into live city-centric residential projects in seven cities. “The fund (with a fiveyear gestation period) has already received commitment for Rs 100 crore. We’re looking to invest the pool in cash-strapped projects; being an equity investment, we’ll have 26-49% equity participation in the invested projects,” said ASK Investment Holdings executive director Sunil Rohokale.
“We’ll invest only into properties which are completed and rented out, therefore eliminating development risk. The idea is to generate 20% annualised return over a period of four years,” said Milestone Capital CIO Ashish Joshi.
Sensex up 186 points
Shares extended their winning streak on Thursday with key indices finishing at eight-and-ahalf month highs, reports Our Bureau from Mumbai. Provisional data showed foreign funds to be aggressive buyers, net buying shares worth over Rs 1,800 crore. In a volatile session, the Sensex closed at 14296.01, up 186.37 points, over the previous close. The Nifty gained 61.05 points to close 4337.10. Metal, banking and capital goods shares were the star performers of the day while IT and pharmaceutical shares were under pressure.
The Economic Times, May 29, 2009, Page 17
FIs, MFs, HNIs Seen Flocking To Real Estate Funds
Shailesh Menon MUMBAI
AFTER a near 16-month hiatus, strategic investors are once again warming up to the real estate sector. A few foreign funds and local asset management companies have hit the road for raising money to be invested in real estate companies. Interestingly, even high net worth investors are flocking to these funds, say industry watchers.
Mutual funds raising funds towards realty investments include ASK Investment Holdings, Milestone Capital Advisors, Birla Sun Life Asset Management Company and the Singapore-based Morgan Stanley Investments. While ASK Investment Holdings has launched a Rs 500-crore PMS fund (that will invest into live realty projects through an investment vehicle) Milestone Capital and Birla Sunlife AMC are planning to raise Rs 600 crore and Rs 2,500 crore, respectively, for focused real estate investments. Almost all these funds are promising annualised returns in the range of 20-25%.
Both Morgan Stanley and Birla Sunlife are floating offshore real estate funds. According to market sources, Birla Sunlife will raise the money from West Asian and Latin American investors. Officials at Birla Sunlife refused to comment on the development. “Affluent investors who could not make much of the recent equity market rally are now trying to invest in real estate instruments. Even big-ticket funds are now raising money from investors. An HNI portfolio now will typically have 5% investments in real estate funds; overall real estate exposure would be in the range of 15-20%,” said Right Horizons Wealth Management CEO Anil Rego.
ASK Investment Holdings has launched a realtyfocused portfolio management scheme, with minimum investment pegged at Rs 25 lakh. The fund will make equity investments into live city-centric residential projects in seven cities. “The fund (with a fiveyear gestation period) has already received commitment for Rs 100 crore. We’re looking to invest the pool in cash-strapped projects; being an equity investment, we’ll have 26-49% equity participation in the invested projects,” said ASK Investment Holdings executive director Sunil Rohokale.
“We’ll invest only into properties which are completed and rented out, therefore eliminating development risk. The idea is to generate 20% annualised return over a period of four years,” said Milestone Capital CIO Ashish Joshi.
Sensex up 186 points
Shares extended their winning streak on Thursday with key indices finishing at eight-and-ahalf month highs, reports Our Bureau from Mumbai. Provisional data showed foreign funds to be aggressive buyers, net buying shares worth over Rs 1,800 crore. In a volatile session, the Sensex closed at 14296.01, up 186.37 points, over the previous close. The Nifty gained 61.05 points to close 4337.10. Metal, banking and capital goods shares were the star performers of the day while IT and pharmaceutical shares were under pressure.
Hope on the horizon
Hope on the horizon
ET Realty, May 29, 2009, Page 1
With the new government being formed, there is a ray of hope that the real estate sector just might be up and running this year end
Tanvi Rustagi
Hope is in the air and everyone wants a whiff of it, including the real estate sector. The Indian real estate sector has been through one of its worst blows in recent times. With UPA sweeping the majority in elections and the Indian citizen taking the front seat, it seems like this time hope will turn into reality.
But what does revival mean to the realty sector? Vijay Jindal, CMD, SVP Group explains, "Recovery will mean a stable market where buyers regain the confidence in the real estate sector. It would also mean that the developers get support from the government in completing their projects. Developers are waiting for the right environment to prevail for the sector and this can only happen if the government steps in and takes some positive initiatives."
Rohtas Goel, CMD, Omaxe states, "We expect the government to promote affordable housing and provide a helping hand to the rising need of the affordability factor for housing needs. We expect the government to hold special funds for building such corridors with easy clearance for the projects."
Due to a sweeping majority, there is much ado about what the UPA government will deliver. Bhim Yadav, CEO of Falcon Realty Services Pvt Ltd avers, "With the philosophy of the UPA government being of interest to the common man, everyone is hopeful that they will introduce suitable measures for the affordability of homes."
In the present scenario, the main challenge lies in providing housing solutions for all segments. Builders should focus in minimising their profits and building homes. The ratio between profit and development should be balanced because it is the buyers market now and speculative prices have no place. Navin M Raheja, chairman, Raheja Developers, Pvt. Ltd. says, "One of the most important issues for the government to address right now is financing. The reason is that banks have virtually stopped financing any real estate projects. Lending to the builders has also become extremely difficult as they are asking for additional security/guarantee for home loans. In fact, many of the banks are forcing their own payment schedule based only on the cost of construction, without factoring land cost, administration cost, marketing cost, approval cost, etc., thereby resulting into a deficient cash flow for the developers. The government should take steps to liberalise finance for the sector or allow external commercial borrowings for real estate and relax financing norms." But that's not all. Other hopes from the government include issues such as recognising integrated townships as infrastructural projects, single window clearance and rationalisation of property taxes, stamp duty and registration expenses across states with external development charges, rationalising license fees and other government levies.
However, before any kind of expectations, there are some who are caught in the middle of incomplete projects due to the deficient cash flow that the developers were facing. The completion of any project depends on the builder's capability. Past losses need to be borne by the developers as well as the investors, in order to complete the ongoing projects within time. Raminder Grover, CEO, Homebay Residential (subsidiary of Jones Lang LaSalle Meghraj) informs, "With market improvement and transaction numbers increasing in the market, more cash flow is available with the developers and hence, they should be able to complete their projects by the end of this year." With hope on the horizon for the real estate sector, everyone seems to be of the opinion that the sector just might be able to rise from the ashes by the end of this year. Brotin Banerjee, managing director and CEO, TATA Housing tells, "With the world's financial markets suffering extraordinary volatility and stress in the last three months, the financial crisis is now feeding through to many areas as people are avoiding high value purchases. Nevertheless, we are now witnessing the government, the Reserve Bank of India and commercial banks of both public and private genres, coming out with a series of fiscal and monetary measures to boost the sector, especially housing.
ET Realty, May 29, 2009, Page 1
With the new government being formed, there is a ray of hope that the real estate sector just might be up and running this year end
Tanvi Rustagi
Hope is in the air and everyone wants a whiff of it, including the real estate sector. The Indian real estate sector has been through one of its worst blows in recent times. With UPA sweeping the majority in elections and the Indian citizen taking the front seat, it seems like this time hope will turn into reality.
But what does revival mean to the realty sector? Vijay Jindal, CMD, SVP Group explains, "Recovery will mean a stable market where buyers regain the confidence in the real estate sector. It would also mean that the developers get support from the government in completing their projects. Developers are waiting for the right environment to prevail for the sector and this can only happen if the government steps in and takes some positive initiatives."
Rohtas Goel, CMD, Omaxe states, "We expect the government to promote affordable housing and provide a helping hand to the rising need of the affordability factor for housing needs. We expect the government to hold special funds for building such corridors with easy clearance for the projects."
Due to a sweeping majority, there is much ado about what the UPA government will deliver. Bhim Yadav, CEO of Falcon Realty Services Pvt Ltd avers, "With the philosophy of the UPA government being of interest to the common man, everyone is hopeful that they will introduce suitable measures for the affordability of homes."
In the present scenario, the main challenge lies in providing housing solutions for all segments. Builders should focus in minimising their profits and building homes. The ratio between profit and development should be balanced because it is the buyers market now and speculative prices have no place. Navin M Raheja, chairman, Raheja Developers, Pvt. Ltd. says, "One of the most important issues for the government to address right now is financing. The reason is that banks have virtually stopped financing any real estate projects. Lending to the builders has also become extremely difficult as they are asking for additional security/guarantee for home loans. In fact, many of the banks are forcing their own payment schedule based only on the cost of construction, without factoring land cost, administration cost, marketing cost, approval cost, etc., thereby resulting into a deficient cash flow for the developers. The government should take steps to liberalise finance for the sector or allow external commercial borrowings for real estate and relax financing norms." But that's not all. Other hopes from the government include issues such as recognising integrated townships as infrastructural projects, single window clearance and rationalisation of property taxes, stamp duty and registration expenses across states with external development charges, rationalising license fees and other government levies.
However, before any kind of expectations, there are some who are caught in the middle of incomplete projects due to the deficient cash flow that the developers were facing. The completion of any project depends on the builder's capability. Past losses need to be borne by the developers as well as the investors, in order to complete the ongoing projects within time. Raminder Grover, CEO, Homebay Residential (subsidiary of Jones Lang LaSalle Meghraj) informs, "With market improvement and transaction numbers increasing in the market, more cash flow is available with the developers and hence, they should be able to complete their projects by the end of this year." With hope on the horizon for the real estate sector, everyone seems to be of the opinion that the sector just might be able to rise from the ashes by the end of this year. Brotin Banerjee, managing director and CEO, TATA Housing tells, "With the world's financial markets suffering extraordinary volatility and stress in the last three months, the financial crisis is now feeding through to many areas as people are avoiding high value purchases. Nevertheless, we are now witnessing the government, the Reserve Bank of India and commercial banks of both public and private genres, coming out with a series of fiscal and monetary measures to boost the sector, especially housing.
Hope on the horizon
Hope on the horizon
ET Realty, May 29, 2009, Page 1
With the new government being formed, there is a ray of hope that the real estate sector just might be up and running this year end
Tanvi Rustagi
Hope is in the air and everyone wants a whiff of it, including the real estate sector. The Indian real estate sector has been through one of its worst blows in recent times. With UPA sweeping the majority in elections and the Indian citizen taking the front seat, it seems like this time hope will turn into reality.
But what does revival mean to the realty sector? Vijay Jindal, CMD, SVP Group explains, "Recovery will mean a stable market where buyers regain the confidence in the real estate sector. It would also mean that the developers get support from the government in completing their projects. Developers are waiting for the right environment to prevail for the sector and this can only happen if the government steps in and takes some positive initiatives."
Rohtas Goel, CMD, Omaxe states, "We expect the government to promote affordable housing and provide a helping hand to the rising need of the affordability factor for housing needs. We expect the government to hold special funds for building such corridors with easy clearance for the projects."
Due to a sweeping majority, there is much ado about what the UPA government will deliver. Bhim Yadav, CEO of Falcon Realty Services Pvt Ltd avers, "With the philosophy of the UPA government being of interest to the common man, everyone is hopeful that they will introduce suitable measures for the affordability of homes."
In the present scenario, the main challenge lies in providing housing solutions for all segments. Builders should focus in minimising their profits and building homes. The ratio between profit and development should be balanced because it is the buyers market now and speculative prices have no place. Navin M Raheja, chairman, Raheja Developers, Pvt. Ltd. says, "One of the most important issues for the government to address right now is financing. The reason is that banks have virtually stopped financing any real estate projects. Lending to the builders has also become extremely difficult as they are asking for additional security/guarantee for home loans. In fact, many of the banks are forcing their own payment schedule based only on the cost of construction, without factoring land cost, administration cost, marketing cost, approval cost, etc., thereby resulting into a deficient cash flow for the developers. The government should take steps to liberalise finance for the sector or allow external commercial borrowings for real estate and relax financing norms." But that's not all. Other hopes from the government include issues such as recognising integrated townships as infrastructural projects, single window clearance and rationalisation of property taxes, stamp duty and registration expenses across states with external development charges, rationalising license fees and other government levies.
However, before any kind of expectations, there are some who are caught in the middle of incomplete projects due to the deficient cash flow that the developers were facing. The completion of any project depends on the builder's capability. Past losses need to be borne by the developers as well as the investors, in order to complete the ongoing projects within time. Raminder Grover, CEO, Homebay Residential (subsidiary of Jones Lang LaSalle Meghraj) informs, "With market improvement and transaction numbers increasing in the market, more cash flow is available with the developers and hence, they should be able to complete their projects by the end of this year." With hope on the horizon for the real estate sector, everyone seems to be of the opinion that the sector just might be able to rise from the ashes by the end of this year. Brotin Banerjee, managing director and CEO, TATA Housing tells, "With the world's financial markets suffering extraordinary volatility and stress in the last three months, the financial crisis is now feeding through to many areas as people are avoiding high value purchases. Nevertheless, we are now witnessing the government, the Reserve Bank of India and commercial banks of both public and private genres, coming out with a series of fiscal and monetary measures to boost the sector, especially housing.
ET Realty, May 29, 2009, Page 1
With the new government being formed, there is a ray of hope that the real estate sector just might be up and running this year end
Tanvi Rustagi
Hope is in the air and everyone wants a whiff of it, including the real estate sector. The Indian real estate sector has been through one of its worst blows in recent times. With UPA sweeping the majority in elections and the Indian citizen taking the front seat, it seems like this time hope will turn into reality.
But what does revival mean to the realty sector? Vijay Jindal, CMD, SVP Group explains, "Recovery will mean a stable market where buyers regain the confidence in the real estate sector. It would also mean that the developers get support from the government in completing their projects. Developers are waiting for the right environment to prevail for the sector and this can only happen if the government steps in and takes some positive initiatives."
Rohtas Goel, CMD, Omaxe states, "We expect the government to promote affordable housing and provide a helping hand to the rising need of the affordability factor for housing needs. We expect the government to hold special funds for building such corridors with easy clearance for the projects."
Due to a sweeping majority, there is much ado about what the UPA government will deliver. Bhim Yadav, CEO of Falcon Realty Services Pvt Ltd avers, "With the philosophy of the UPA government being of interest to the common man, everyone is hopeful that they will introduce suitable measures for the affordability of homes."
In the present scenario, the main challenge lies in providing housing solutions for all segments. Builders should focus in minimising their profits and building homes. The ratio between profit and development should be balanced because it is the buyers market now and speculative prices have no place. Navin M Raheja, chairman, Raheja Developers, Pvt. Ltd. says, "One of the most important issues for the government to address right now is financing. The reason is that banks have virtually stopped financing any real estate projects. Lending to the builders has also become extremely difficult as they are asking for additional security/guarantee for home loans. In fact, many of the banks are forcing their own payment schedule based only on the cost of construction, without factoring land cost, administration cost, marketing cost, approval cost, etc., thereby resulting into a deficient cash flow for the developers. The government should take steps to liberalise finance for the sector or allow external commercial borrowings for real estate and relax financing norms." But that's not all. Other hopes from the government include issues such as recognising integrated townships as infrastructural projects, single window clearance and rationalisation of property taxes, stamp duty and registration expenses across states with external development charges, rationalising license fees and other government levies.
However, before any kind of expectations, there are some who are caught in the middle of incomplete projects due to the deficient cash flow that the developers were facing. The completion of any project depends on the builder's capability. Past losses need to be borne by the developers as well as the investors, in order to complete the ongoing projects within time. Raminder Grover, CEO, Homebay Residential (subsidiary of Jones Lang LaSalle Meghraj) informs, "With market improvement and transaction numbers increasing in the market, more cash flow is available with the developers and hence, they should be able to complete their projects by the end of this year." With hope on the horizon for the real estate sector, everyone seems to be of the opinion that the sector just might be able to rise from the ashes by the end of this year. Brotin Banerjee, managing director and CEO, TATA Housing tells, "With the world's financial markets suffering extraordinary volatility and stress in the last three months, the financial crisis is now feeding through to many areas as people are avoiding high value purchases. Nevertheless, we are now witnessing the government, the Reserve Bank of India and commercial banks of both public and private genres, coming out with a series of fiscal and monetary measures to boost the sector, especially housing.
Thursday, May 28, 2009
REFORMS, CORE TO TOP BUDGET
REFORMS, CORE TO TOP BUDGET
The Economic Times, May 28, 2009, Page 1
Armed with a decisive mandate, Team Manmohan is eager to rev up the economy. So even as the FM vowed to push for cheaper funds & higher infrastructure spending, Sebi said it was looking to ease fund-raising norms for core companies. It was enough to charge up the bulls on Dalal Street...
Our Bureau NEW DELHI
THE full Budget for 2009-10 to be presented in the first week of July would have welfare measures for the poor, concrete reform moves, higher infrastructure spending and steps to boost the economy, said finance minister Pranab Mukherjee on Wednesday. The Budget would also kickstart fiscal consolidation to be achieved over a three-year period.
Mr Mukherjee, in his first press conference after assuming office, said the government would present its vision and approach for the next five years in the Budget. Separately, the government will get commitments from banks to lower the cost of funds.
“Broadly, the election results have vin
dicated the strategy of inclusive growth. I have no hesitation in saying that along with reviving the momentum of growth and employment generation, our government will strengthen the various ‘inclusive’ elements in the coming Budget,” said Mr Mukherjee. The Congress party’s manifesto promises to expand the schemes on creating rural jobs, providing education and health insurance cover, besides legally guaranteeing food to the poor.
The minister said budget-making was underway in full swing and that it would be presented it in the first week of July.
The government has to continue with a higher spending this fiscal too in order to restore the higher economic growth rate in the past, the 73-year-old political veteran said.
“Let me say unambiguously that we are committed to restoring growth and employment and that would not have been possible without increased spending funded by incremental borrowing. This would need to be further continued in 2009-10, the current year,” Mr Mukherjee said.
The government, which earlier announced three economic stimuli, will provide sustained push to growth through the next round of economic reforms.
FM to push banks to make funds cheaper
“WE have a broad plan of action in mind. I will get additional inputs when I have my pre-Budget consultations with stakeholders. All this will be distilled into a concrete short-term and medium-term vision and strategy for India’s economic growth,” assured Mr Mukherjee.Finance secretary Ashok Chawla, who accompanied the minister, later explained to reporters that the slowdown in growth has “bottomed out” and a recovery was imminent. Four lead economic indicators suggest the economy was set to grow faster, he said. Besides, foreign institutional investments into the country have picked up, with the total inflow in the last 45-50 days touching about $4 billion, said Mr Chawla.
Mr Mukherjee also said the government was concerned about the cost and the speed at which finance can be accessed by businesses. He said he would meet bankers and get them “committed to a more benign plan of action”. The government will also give special attention to strengthening infrastructure investments. It will re-appraise infrastructure projects in the pipeline and make them more robust. The Centre would also calibrate policies to boost infrastructure spending so that the economy returns to the high-growth trajectory.
Despite the higher spending, the government is equally committed to fiscal consolidation over a period of, say, 2-3 years, the minister added. In the interim budget presented in February, the government had estimated that fiscal deficit for 2008-09 may touch 6% of gross domestic product (GDP) and it forecast a 5.5% fiscal deficit for this year. Economists said the combined fiscal deficit of the Centre and the states may have crossed 10% of national GDP last fiscal. “Prophets of doom have been unduly focusing on increased public spending and consequent increase in the fiscal and revenue deficits in the past. We are hopeful that an early return to our recent growth performance will help us come back to our preferred path of fiscal prudence,” said the minister. The government had originally set a fiscal deficit target of 2.5% for the last fiscal. Mr Mukherjee said the government will take advantage of its political stability and push long-pending reforms. These measures would cover both financial and non-financial sectors of the economy. One of the immediate steps would be to implement the law against money laundering, he said.
The Economic Times, May 28, 2009, Page 1
Armed with a decisive mandate, Team Manmohan is eager to rev up the economy. So even as the FM vowed to push for cheaper funds & higher infrastructure spending, Sebi said it was looking to ease fund-raising norms for core companies. It was enough to charge up the bulls on Dalal Street...
Our Bureau NEW DELHI
THE full Budget for 2009-10 to be presented in the first week of July would have welfare measures for the poor, concrete reform moves, higher infrastructure spending and steps to boost the economy, said finance minister Pranab Mukherjee on Wednesday. The Budget would also kickstart fiscal consolidation to be achieved over a three-year period.
Mr Mukherjee, in his first press conference after assuming office, said the government would present its vision and approach for the next five years in the Budget. Separately, the government will get commitments from banks to lower the cost of funds.
“Broadly, the election results have vin
dicated the strategy of inclusive growth. I have no hesitation in saying that along with reviving the momentum of growth and employment generation, our government will strengthen the various ‘inclusive’ elements in the coming Budget,” said Mr Mukherjee. The Congress party’s manifesto promises to expand the schemes on creating rural jobs, providing education and health insurance cover, besides legally guaranteeing food to the poor.The minister said budget-making was underway in full swing and that it would be presented it in the first week of July.
The government has to continue with a higher spending this fiscal too in order to restore the higher economic growth rate in the past, the 73-year-old political veteran said.
“Let me say unambiguously that we are committed to restoring growth and employment and that would not have been possible without increased spending funded by incremental borrowing. This would need to be further continued in 2009-10, the current year,” Mr Mukherjee said.
The government, which earlier announced three economic stimuli, will provide sustained push to growth through the next round of economic reforms.
FM to push banks to make funds cheaper
“WE have a broad plan of action in mind. I will get additional inputs when I have my pre-Budget consultations with stakeholders. All this will be distilled into a concrete short-term and medium-term vision and strategy for India’s economic growth,” assured Mr Mukherjee.Finance secretary Ashok Chawla, who accompanied the minister, later explained to reporters that the slowdown in growth has “bottomed out” and a recovery was imminent. Four lead economic indicators suggest the economy was set to grow faster, he said. Besides, foreign institutional investments into the country have picked up, with the total inflow in the last 45-50 days touching about $4 billion, said Mr Chawla.
Mr Mukherjee also said the government was concerned about the cost and the speed at which finance can be accessed by businesses. He said he would meet bankers and get them “committed to a more benign plan of action”. The government will also give special attention to strengthening infrastructure investments. It will re-appraise infrastructure projects in the pipeline and make them more robust. The Centre would also calibrate policies to boost infrastructure spending so that the economy returns to the high-growth trajectory.
Despite the higher spending, the government is equally committed to fiscal consolidation over a period of, say, 2-3 years, the minister added. In the interim budget presented in February, the government had estimated that fiscal deficit for 2008-09 may touch 6% of gross domestic product (GDP) and it forecast a 5.5% fiscal deficit for this year. Economists said the combined fiscal deficit of the Centre and the states may have crossed 10% of national GDP last fiscal. “Prophets of doom have been unduly focusing on increased public spending and consequent increase in the fiscal and revenue deficits in the past. We are hopeful that an early return to our recent growth performance will help us come back to our preferred path of fiscal prudence,” said the minister. The government had originally set a fiscal deficit target of 2.5% for the last fiscal. Mr Mukherjee said the government will take advantage of its political stability and push long-pending reforms. These measures would cover both financial and non-financial sectors of the economy. One of the immediate steps would be to implement the law against money laundering, he said.
Govt to push ahead with long-pending reforms
Govt to push ahead with long-pending reforms
The Hindu Business Line, May 28, 2009, page 1
Priority for lowering bank lending rates further.
Our Bureau, New Delhi
The Finance Minister, Mr Pranab Mukherjee, said on Wednesday that the next round of economic reforms will provide the next stimulus to economic growth. The stock markets seemed pleased by the announcement. The benchmark Sensex responded by ending the day with a gain of about 520 points.
In his first press conference after taking charge as the Union Finance Minister, Mr Mukherjee hinted that the Congress-led Government would now push long-pending reforms in the financial as well as real sectors of the economy.
Meeting with bankers
“Sustained stimulus to growth can be harnessed by the next round of economic reforms. We have a broad plan of action in mind. We need to seize the opportunity presented by the current circumstances for pushing long-pending reform measures in financial and real sectors..”, he said.
This was even as the Government was assessing the impact of three doses of economic stimulus announced in December 2008, January 2009 and in the interim Budget (February 2009).
The first step the Finance Minister proposes to take is to meet bankers and nudge them to further lower their lending rates, as signalled by the Reserve Bank of India through its monetary policy. “I want to get them (bankers) committed to a more benign plan of action,” he said.
He highlighted that industry and business have been hurt by the cost of finance and its availability. “While much has been done in the last eight months and international capital flows have resumed, the cost and the speed with which finance can be accessed remains a matter of concern”.
Mr Mukherjee said that he would try to complete the entire exercise of the passage of the Budget for 2009-10 by July 31. “For this, I need the cooperation of other political parties represented in the floor of both the Houses. As soon as the Parliament session starts, I will discuss with the leaders of political parties. If they agree to dispense with scrutiny by standing committees, then that would facilitate me to complete the exercise by July 31,” he said.
The Finance Minister also said that the Government proposes to bring into force the Prevention of Money Laundering Act Amendment passed by Parliament recently. This would make India’s anti-money laundering regime stronger, he noted.
Restoring growth
Mr Mukherjee said the Government was committed to restoring growth and employment. He noted that this would not have been possible without increased spending funded by incremental borrowing.
“This would need to be further continued in 2009-10. However, we are equally committed to the process of fiscal consolidation over a period of, say, two to three years,” he said.
He also maintained that the fiscal deficit projected for 2009-10 would not be breached. “I hope to stick to it (fiscal deficit of 5.5 per cent of GDP for 2009-10),” the Finance Minister said.
He expressed the hope that an early return to recent growth performance would help the country get back to its preferred path of fiscal prudence.
On infrastructure, Mr Mukherjee said the Government would have to focus on implementing and strengthening infrastructure investments.
“These concerns will be addressed with a view to impart further momentum for an early return to the high growth path of recent years. The pipeline of infrastructure projects will be re-appraised and made more robust. Where necessary, policy and procedures will be calibrated to give a boost to infrastructure spending,” he said.
The Hindu Business Line, May 28, 2009, page 1
Priority for lowering bank lending rates further.
Our Bureau, New Delhi
The Finance Minister, Mr Pranab Mukherjee, said on Wednesday that the next round of economic reforms will provide the next stimulus to economic growth. The stock markets seemed pleased by the announcement. The benchmark Sensex responded by ending the day with a gain of about 520 points.
In his first press conference after taking charge as the Union Finance Minister, Mr Mukherjee hinted that the Congress-led Government would now push long-pending reforms in the financial as well as real sectors of the economy.
Meeting with bankers
“Sustained stimulus to growth can be harnessed by the next round of economic reforms. We have a broad plan of action in mind. We need to seize the opportunity presented by the current circumstances for pushing long-pending reform measures in financial and real sectors..”, he said.
This was even as the Government was assessing the impact of three doses of economic stimulus announced in December 2008, January 2009 and in the interim Budget (February 2009).
The first step the Finance Minister proposes to take is to meet bankers and nudge them to further lower their lending rates, as signalled by the Reserve Bank of India through its monetary policy. “I want to get them (bankers) committed to a more benign plan of action,” he said.
He highlighted that industry and business have been hurt by the cost of finance and its availability. “While much has been done in the last eight months and international capital flows have resumed, the cost and the speed with which finance can be accessed remains a matter of concern”.
Mr Mukherjee said that he would try to complete the entire exercise of the passage of the Budget for 2009-10 by July 31. “For this, I need the cooperation of other political parties represented in the floor of both the Houses. As soon as the Parliament session starts, I will discuss with the leaders of political parties. If they agree to dispense with scrutiny by standing committees, then that would facilitate me to complete the exercise by July 31,” he said.
The Finance Minister also said that the Government proposes to bring into force the Prevention of Money Laundering Act Amendment passed by Parliament recently. This would make India’s anti-money laundering regime stronger, he noted.
Restoring growth
Mr Mukherjee said the Government was committed to restoring growth and employment. He noted that this would not have been possible without increased spending funded by incremental borrowing.
“This would need to be further continued in 2009-10. However, we are equally committed to the process of fiscal consolidation over a period of, say, two to three years,” he said.
He also maintained that the fiscal deficit projected for 2009-10 would not be breached. “I hope to stick to it (fiscal deficit of 5.5 per cent of GDP for 2009-10),” the Finance Minister said.
He expressed the hope that an early return to recent growth performance would help the country get back to its preferred path of fiscal prudence.
On infrastructure, Mr Mukherjee said the Government would have to focus on implementing and strengthening infrastructure investments.
“These concerns will be addressed with a view to impart further momentum for an early return to the high growth path of recent years. The pipeline of infrastructure projects will be re-appraised and made more robust. Where necessary, policy and procedures will be calibrated to give a boost to infrastructure spending,” he said.
FM-speak, US data lift Sensex 520 pts
FM-speak, US data lift Sensex 520 pts
Business Standard, May 28, 2009, Page 1
BS Reporter / Mumbai
Realty, banking stocks lead the rally
Finance Minister Pranab Mukherjee’s statement that he would get bankers committed to a "more benign plan of action", and improving consumer confidence in the US lifted market sentiments today.
The Bombay Stock Exchange (BSE) Sensitive Index, or Sensex, rose sharply, led by realty and banking stocks.
The markets opened in the green in the morning session on the back of the optimistic consumer confidence data from the US. On Tuesday, the Dow Jones Industrial Average and the S&P had closed higher by 2.4 per cent and 2.6 per cent, respectively. The Nasdaq soared 3.4 per cent.
Hang Seng was the top gainer in Asia, rising 5.26 per cent because of a stimulus package of $2.2 billion announced by the government. The other major indices were up between 1.37 and 3.10 per cent.
The Sensex rose
520.41, or 3.8 per cent, to 14,109.64, the biggest gain since May 18. The S&P CNX Nifty added 3.9 per cent to 4,276.05.
Sanjay Sinha, chief executive officer at DBS Chola Mutual Fund, said the markets were looking forward to the Budget and the first 100-day plan of action. If the policy moves lived up to the expectations, there would be huge inflow of money from foreign as well as domestic mutual funds, he said.
According to provisional data from the BSE, domestic institutional investors were net buyers of Rs 685.64 crore. Foreign institutional investors were net buyers of Rs 369.80 crore.
Market breadth indicated a strong trend as 82.58 per cent, or 2,346 stocks, advanced against declines of 16.16 per cent, or 459 stocks on BSE.
All the sectoral indices were up.
Price (Rs) % Chg*
TOP GAINERS
Reliance Infra 1288.2 14.72
Sterlite Ind 591.15 9.49
ONGC 1107.85 9.42
DLF 365.5 8.49
Grasim Ind 2247.3 7.27
Ranbaxy Labs 261.85 7.14
ICICI Bank 710.55 6.59
Jaiprakash Asso 190.3 6.58
SBI 1790.55 6.08
Tata Motors 343.55 5.55
TOP LOSERES
Bharti Airtel 768.9 -0.19
ITC 183.85 -0.19
ACC 709.05 -0.16
% Chg*
OTHER MARKETS
ASIA
Hang Seng 5.26
Nikkei 225 1.37
Straits Times 3.01
AMERICA
Nasdaq -0.60
Dow Jones -1.41
EUROPE
FTSE 100 0.10
# till 1200 hrs (IST)
“Another major reason for today's rally was also the short-covering that took place ahead of the May expiry,” said Alex Mathew, research head at Geojit BNP Paribas Securities.
Mathews said that there was a strong support for the Nifty 4,251 and 4,207 points while there was resistance at 4,319 and 4,362 levels.
Business Standard, May 28, 2009, Page 1
BS Reporter / Mumbai
Realty, banking stocks lead the rally
Finance Minister Pranab Mukherjee’s statement that he would get bankers committed to a "more benign plan of action", and improving consumer confidence in the US lifted market sentiments today.
The Bombay Stock Exchange (BSE) Sensitive Index, or Sensex, rose sharply, led by realty and banking stocks.
The markets opened in the green in the morning session on the back of the optimistic consumer confidence data from the US. On Tuesday, the Dow Jones Industrial Average and the S&P had closed higher by 2.4 per cent and 2.6 per cent, respectively. The Nasdaq soared 3.4 per cent.
Hang Seng was the top gainer in Asia, rising 5.26 per cent because of a stimulus package of $2.2 billion announced by the government. The other major indices were up between 1.37 and 3.10 per cent.
The Sensex rose
520.41, or 3.8 per cent, to 14,109.64, the biggest gain since May 18. The S&P CNX Nifty added 3.9 per cent to 4,276.05.Sanjay Sinha, chief executive officer at DBS Chola Mutual Fund, said the markets were looking forward to the Budget and the first 100-day plan of action. If the policy moves lived up to the expectations, there would be huge inflow of money from foreign as well as domestic mutual funds, he said.
According to provisional data from the BSE, domestic institutional investors were net buyers of Rs 685.64 crore. Foreign institutional investors were net buyers of Rs 369.80 crore.
Market breadth indicated a strong trend as 82.58 per cent, or 2,346 stocks, advanced against declines of 16.16 per cent, or 459 stocks on BSE.
All the sectoral indices were up.
Price (Rs) % Chg*
TOP GAINERS
Reliance Infra 1288.2 14.72
Sterlite Ind 591.15 9.49
ONGC 1107.85 9.42
DLF 365.5 8.49
Grasim Ind 2247.3 7.27
Ranbaxy Labs 261.85 7.14
ICICI Bank 710.55 6.59
Jaiprakash Asso 190.3 6.58
SBI 1790.55 6.08
Tata Motors 343.55 5.55
TOP LOSERES
Bharti Airtel 768.9 -0.19
ITC 183.85 -0.19
ACC 709.05 -0.16
% Chg*
OTHER MARKETS
ASIA
Hang Seng 5.26
Nikkei 225 1.37
Straits Times 3.01
AMERICA
Nasdaq -0.60
Dow Jones -1.41
EUROPE
FTSE 100 0.10
# till 1200 hrs (IST)
“Another major reason for today's rally was also the short-covering that took place ahead of the May expiry,” said Alex Mathew, research head at Geojit BNP Paribas Securities.
Mathews said that there was a strong support for the Nifty 4,251 and 4,207 points while there was resistance at 4,319 and 4,362 levels.
NBCC set to trigger price war
NBCC set to trigger price war
The Economic Times, May 28, 2009, Page 7
GOVT-OWNED DEVELOPER TO OFFER 30-50% CHEAPER FLATS
Anto Antony NEW DELHI
IN A move that could trigger deep cuts in housing prices across the metros, government-owned construction firm National Building Construction Corporation (NBCC) has decided to offer flats at prices much below the current market prices offered by private developers. The prices are expected to be 30-50% lower than the prevailing prices offered by commercial developers.
More than 40,000 flats will be constructed by NBCC in the national capital region in the next three years. While 50% of the flats will be reserved for government employees, the other half will be available for the general public.
”We will be building 40,000 flats over the next three years in the NCR itself. Due to the phenomenal response attracted by our pilot project in Gurgaon, we have decided to scale up our operations in the metros. We had only 800 flats for sale and received more than 20, 000 applications,” said NBCC CMD Arup Roy Chowdhury.
These 800 flats, priced at Rs 1,978 per sq ft in Gurgaon, cost around Rs 30 lakh each. With these flats hitting the markets, prices in the real estate sector are expected to fall further.
NBCC is also trying to bring clarity into the way in which super built-up area is calculated. “There is a lot of ambiguity regarding the way in which different developers calculate the super built-up area. This creates difficulties for home buyers. We will set a precedent here and will bring in transparency,” said Mr Roy.
Super built-up area refers to the entire carpet area along with the thickness of the external walls of the apartment or a commercial unit along with the balconies and other common areas like corridors, staircase, lift room, motor room, security room, meeting hall, gymnasium and an area reserved for indoor games.
“There is still room for correction in real estate prices and even after selling the flats at a discount to the prevailing market prices, we will be posting healthy profits. Our flats will offer all the amenities that the commercial developers are offering at the discounted price,” said Mr Roy.
The Economic Times, May 28, 2009, Page 7
GOVT-OWNED DEVELOPER TO OFFER 30-50% CHEAPER FLATS
Anto Antony NEW DELHI
IN A move that could trigger deep cuts in housing prices across the metros, government-owned construction firm National Building Construction Corporation (NBCC) has decided to offer flats at prices much below the current market prices offered by private developers. The prices are expected to be 30-50% lower than the prevailing prices offered by commercial developers.
More than 40,000 flats will be constructed by NBCC in the national capital region in the next three years. While 50% of the flats will be reserved for government employees, the other half will be available for the general public.
”We will be building 40,000 flats over the next three years in the NCR itself. Due to the phenomenal response attracted by our pilot project in Gurgaon, we have decided to scale up our operations in the metros. We had only 800 flats for sale and received more than 20, 000 applications,” said NBCC CMD Arup Roy Chowdhury.
These 800 flats, priced at Rs 1,978 per sq ft in Gurgaon, cost around Rs 30 lakh each. With these flats hitting the markets, prices in the real estate sector are expected to fall further.
NBCC is also trying to bring clarity into the way in which super built-up area is calculated. “There is a lot of ambiguity regarding the way in which different developers calculate the super built-up area. This creates difficulties for home buyers. We will set a precedent here and will bring in transparency,” said Mr Roy.
Super built-up area refers to the entire carpet area along with the thickness of the external walls of the apartment or a commercial unit along with the balconies and other common areas like corridors, staircase, lift room, motor room, security room, meeting hall, gymnasium and an area reserved for indoor games.
“There is still room for correction in real estate prices and even after selling the flats at a discount to the prevailing market prices, we will be posting healthy profits. Our flats will offer all the amenities that the commercial developers are offering at the discounted price,” said Mr Roy.
Tata Realty eyes Rs 10k-cr revenue
Tata Realty eyes Rs 10k-cr revenue
Business Standard, May 28, 2009, Page 3
Raghavendra Kamath / Mumbai
Tata Realty and Infrastructure (TRIL), a unit of Tata Sons, expects to earn Rs 10,000 crore in revenues from its housing and commercial projects in the next four years, a top company official said.
The company will have 60-70 per cent of its portfolio from the residential segment, with the rest coming from office and retail properties by 2013.
The company is planning to foray into the residential space this year with its projects in Mumbai and Gurgaon and plans to build a slew of housing projects in cities such as Bangalore, Kochi, Nagpur, Chennai and Gurgaon in the next couple of years, the official said.
TRIL has plans to develop 6-7 million square feet of new residential projects in 3-4 years, with 2 million square feet being planned in Mumbai, which will have three-four projects, while Bangalore will have two projects, he said.
At the same time, Tata Housing (THDC), the Tata Sons unit which recently announced its low-cost housing project ‘Shubh Griha’ in Mumbai, is planning to build around 4,000 homes across other cities in the next four years, targeting industrial workers and other low-wage earners.
But the TRIL official said there would not be any conflict of interest between TRIL and THDC.
“There will be no conflict. We will avoid the places where they (THDC) are launching projects,” said Suraj Kulkarni, head of business development, TRIL.
“We would come up in the affordable housing segment, which will be competitively priced,” he added. Unlike THDC, TRIL’s housing projects will be FDI-compliant and will be in the region of 0.5 million square feet and above, he said.
The real estate and infrastructure businesses of TRIL may be carved into separate entities in the future as investors might like to see two separate companies after the company raises a $1-billion infra fund, said another company official.
TRIL’s plans come at a time when top real estate developers — such as DLF, Unitech, HDIL and others — have lined up a slew of mid-income housing projects, which are over 60 million square feet in all, in the current financial year.
Business Standard, May 28, 2009, Page 3
Raghavendra Kamath / Mumbai
Tata Realty and Infrastructure (TRIL), a unit of Tata Sons, expects to earn Rs 10,000 crore in revenues from its housing and commercial projects in the next four years, a top company official said.
The company will have 60-70 per cent of its portfolio from the residential segment, with the rest coming from office and retail properties by 2013.
The company is planning to foray into the residential space this year with its projects in Mumbai and Gurgaon and plans to build a slew of housing projects in cities such as Bangalore, Kochi, Nagpur, Chennai and Gurgaon in the next couple of years, the official said.
TRIL has plans to develop 6-7 million square feet of new residential projects in 3-4 years, with 2 million square feet being planned in Mumbai, which will have three-four projects, while Bangalore will have two projects, he said.
At the same time, Tata Housing (THDC), the Tata Sons unit which recently announced its low-cost housing project ‘Shubh Griha’ in Mumbai, is planning to build around 4,000 homes across other cities in the next four years, targeting industrial workers and other low-wage earners.
But the TRIL official said there would not be any conflict of interest between TRIL and THDC.
“There will be no conflict. We will avoid the places where they (THDC) are launching projects,” said Suraj Kulkarni, head of business development, TRIL.
“We would come up in the affordable housing segment, which will be competitively priced,” he added. Unlike THDC, TRIL’s housing projects will be FDI-compliant and will be in the region of 0.5 million square feet and above, he said.
The real estate and infrastructure businesses of TRIL may be carved into separate entities in the future as investors might like to see two separate companies after the company raises a $1-billion infra fund, said another company official.
TRIL’s plans come at a time when top real estate developers — such as DLF, Unitech, HDIL and others — have lined up a slew of mid-income housing projects, which are over 60 million square feet in all, in the current financial year.
Realty back in vogue for PE funds
Realty back in vogue for PE funds
Business Standard, May 28, 2009, Section II, Page 13
2008 saw deals worth $8.4 billion in the real estate sector. This year, the number is comparatively lower, as the deals have just started to pick up. Only three deals worth $80 million have been closed so far
VANDANA, Mumbai
After being at the receiving end of investors' wrath, the real estate sector is back on the radar of private equity (PE) investors. Real estate consultants say PE funds are now finding good investment opportunities in the sector.
The high level of interest is quite clear in the recent wave of qualified institutional placements from real estate companies.
According to Grant Thornton's deal tracker, Orient Global. Sandstone Capital, HSBC and Och-Ziff Capital recently invested $325 million in Unitech. Standard Chartered Private Equity has pumped in an undisclosed sum in Man Infraconstruction. And TPG Capital and Fidelity have invested in the qualified institutional placement by Indiabulls.
While most action has been in listed companies, project level investments, too, are picking up. "Private equity funding in real estate has certainly revived. The difference being that funds are now looking at smaller projects that can ensure cash flows, rather than big projects. The deal size has also become smaller and is in the range of $20-50 million," said Amit Goenka, national director (capital transactions), Knight Frank.
Experts say valuations have become more reasonable in the sector, post the downturn. A part of the revival is driven by easing liquidity in the system and new sales.
"There's a lot of action in the Mumbai real estate market. Price discovery has happened and volumes seem to be coming back. There is an expectation that not much downside is left now. From investors' point of view, there is ample liquidity. Election results have given another hope to the sector. We are looking at several projects," said Shahzaad Dalal, VC & MD at IL&FS Investment managers.
Jai Mavani, executive di¬ector, KPMG, said, "The wait and-watch period is certainly 'over. PEs have become more :cautious and are not looking at risky projects. They are looking at structured equity deals, rather than plain vanilla structures."
According to Venture Intelligence, 2008 saw deals worth $8.4 billion in the sector. This year, the number is comparatively lower, as the deals have just started to pick up. Only three deals worth $80 million have been closed so far. In one of the largest deals so far this year, Sun Apollo Ventures acquired 15 per cent in Keystone Realtors for Rs 200 crore. IL&FS Realty Fund has picked up 15 per cent stake in Infrastructure Ventures India, a special purpose vehicle floated by Mumbai-based Akruti City, for Rs 200 crore.
Business Standard, May 28, 2009, Section II, Page 13
2008 saw deals worth $8.4 billion in the real estate sector. This year, the number is comparatively lower, as the deals have just started to pick up. Only three deals worth $80 million have been closed so far
VANDANA, Mumbai
After being at the receiving end of investors' wrath, the real estate sector is back on the radar of private equity (PE) investors. Real estate consultants say PE funds are now finding good investment opportunities in the sector.
The high level of interest is quite clear in the recent wave of qualified institutional placements from real estate companies.
According to Grant Thornton's deal tracker, Orient Global. Sandstone Capital, HSBC and Och-Ziff Capital recently invested $325 million in Unitech. Standard Chartered Private Equity has pumped in an undisclosed sum in Man Infraconstruction. And TPG Capital and Fidelity have invested in the qualified institutional placement by Indiabulls.
While most action has been in listed companies, project level investments, too, are picking up. "Private equity funding in real estate has certainly revived. The difference being that funds are now looking at smaller projects that can ensure cash flows, rather than big projects. The deal size has also become smaller and is in the range of $20-50 million," said Amit Goenka, national director (capital transactions), Knight Frank.
Experts say valuations have become more reasonable in the sector, post the downturn. A part of the revival is driven by easing liquidity in the system and new sales.
"There's a lot of action in the Mumbai real estate market. Price discovery has happened and volumes seem to be coming back. There is an expectation that not much downside is left now. From investors' point of view, there is ample liquidity. Election results have given another hope to the sector. We are looking at several projects," said Shahzaad Dalal, VC & MD at IL&FS Investment managers.
Jai Mavani, executive di¬ector, KPMG, said, "The wait and-watch period is certainly 'over. PEs have become more :cautious and are not looking at risky projects. They are looking at structured equity deals, rather than plain vanilla structures."
According to Venture Intelligence, 2008 saw deals worth $8.4 billion in the sector. This year, the number is comparatively lower, as the deals have just started to pick up. Only three deals worth $80 million have been closed so far. In one of the largest deals so far this year, Sun Apollo Ventures acquired 15 per cent in Keystone Realtors for Rs 200 crore. IL&FS Realty Fund has picked up 15 per cent stake in Infrastructure Ventures India, a special purpose vehicle floated by Mumbai-based Akruti City, for Rs 200 crore.
Tata Realty to raise $1 b
Tata Realty to raise $1 b
The Hindu Business Line, May 28, 2009, Page 2
Mr Sanjay Ubale , Our Bureau, Mumbai
Tata Realty and Infrastructure said it plans to raise a $1 billion (Rs 4,700 crore) infrastructure fund to support projects worth Rs 20,000 crore that will be executed over the next three years.
The company will invest Rs 11,000 crore in real estate, Rs 5,000 crore on road projects and Rs 4,000 crore on other infrastructure projects, said Mr Sanjay Ubale, Managing Director & CEO, at a news conference here on Wednesday.
Around 20 per cent of the company’s earlier offshore fund of $700 million has been deployed, he said.
TRIL is a wholly-owned subsidiary of Tata Sons.
Separately, the company will raise Rs 1,400 crore in debt, said company officials.
Some of the larger projects won by TRIL include three SEZs – one a 25-acre SEZ at Chennai for Rs 3,800 crore, the other two being IT SEZs in Ahmedabad and in Pune. A 7-lakh sq ft residential complex in Amritsar is under development, and a 35-acre residential and mixed-use project is being evaluated at Gurgaon.
Although the real estate market is still sluggish, this is not an inappropriate time for developing SEZ projects or malls, said Mr Ubale: “Real estate is cyclical and our projects will probably be ready as the markets pick up. In addition we do stand to benefit from lower commodity prices.”
Roads, metro and mono-rail and airport projects are also under consideration: TRIL has tie-ups with Mitsubishi for bidding for metro projects; with Grandi Stazioni of Italy for redevelopment of New Delhi Railway station; with Changi Airports for Amritsar and Udaipur airports; and with Atlantia spA of Italy for roads and highways.
A recent win has been the four-laning National Highway Authority project of a 110-km Pune-Solapur stretch at Rs 1,400 crore, in tie-up with the Italian company. The SPV, which will undertake the project, will be a 50:50 joint venture between TRIL and Atlantia, each putting in Rs 280 crore, with debt requirement for the project at Rs 970 crore.
The Hindu Business Line, May 28, 2009, Page 2
Mr Sanjay Ubale , Our Bureau, Mumbai
Tata Realty and Infrastructure said it plans to raise a $1 billion (Rs 4,700 crore) infrastructure fund to support projects worth Rs 20,000 crore that will be executed over the next three years.
The company will invest Rs 11,000 crore in real estate, Rs 5,000 crore on road projects and Rs 4,000 crore on other infrastructure projects, said Mr Sanjay Ubale, Managing Director & CEO, at a news conference here on Wednesday.
Around 20 per cent of the company’s earlier offshore fund of $700 million has been deployed, he said.
TRIL is a wholly-owned subsidiary of Tata Sons.
Separately, the company will raise Rs 1,400 crore in debt, said company officials.
Some of the larger projects won by TRIL include three SEZs – one a 25-acre SEZ at Chennai for Rs 3,800 crore, the other two being IT SEZs in Ahmedabad and in Pune. A 7-lakh sq ft residential complex in Amritsar is under development, and a 35-acre residential and mixed-use project is being evaluated at Gurgaon.
Although the real estate market is still sluggish, this is not an inappropriate time for developing SEZ projects or malls, said Mr Ubale: “Real estate is cyclical and our projects will probably be ready as the markets pick up. In addition we do stand to benefit from lower commodity prices.”
Roads, metro and mono-rail and airport projects are also under consideration: TRIL has tie-ups with Mitsubishi for bidding for metro projects; with Grandi Stazioni of Italy for redevelopment of New Delhi Railway station; with Changi Airports for Amritsar and Udaipur airports; and with Atlantia spA of Italy for roads and highways.
A recent win has been the four-laning National Highway Authority project of a 110-km Pune-Solapur stretch at Rs 1,400 crore, in tie-up with the Italian company. The SPV, which will undertake the project, will be a 50:50 joint venture between TRIL and Atlantia, each putting in Rs 280 crore, with debt requirement for the project at Rs 970 crore.
Time for a realty check
Time for a realty check
Business Line, Brand Line, May 28, 2009, Page 1
Hit by the slowdown, the realty sector sees some innovative thinking as marketing budgets are cut.
Anjana Chandramouly Swetha Kannan
If you thought buy-one-get-one free offers were limited to trousers, shoes and other small-ticket items, think again. You could get houses too for free, thanks to Orange Properties, which came out with a ‘buy-one-flat-get-one-free’ offer recently for its Orange Resorts in Devanahalli, in Bangalore.
Sales didn’t quite skyrocket and the advertising campaign across print and outdoor met with mixed response, but given the current market conditions perhaps that’s understandable.
With real estate being struck badly in the slowdown, real estate developers, who were once riding a high, have now tightened advertising and marketing expenses. They have also had to think out of the box even while operating on leaner budgets. They have been forced to rework their marketing strategies to woo consumers at a time when the propensity to buy is not very high. Marketing initiatives may be fewer but they are becoming more focussed, specific and project-based, using direct and candid communication. And pricing is obviously the key premise around which the initiatives revolve.
Sandeep Trivedi, National Head, Development Consulting, Cushman & Wakefield, a real estate services firm, analyses the scene. He says, “Developers have definitely reduced the cost expenditure on marketing and advertising initiatives. The conventional forms of advertising, such as hoardings, advertisements in newspaper/magazines, participation in property exhibitions and sponsoring events have come down drastically and given way to more direct marketing initiatives. These include one-to-one meetings with prospective clients, more business development and sales calls. Even in the event of print advertising, the media is focusing on the price component and are willing to provide large area units at discounted prices. Developers have also been conservative in launching new projects in the current scenario and are, instead, focusing on selling existing projects.”
Innovation is the need of the hour to capture attention. Sridhar G. Kulkarni, Head - Marketing (Karnataka and Andhra Pradesh), Shriram Properties, says its marketing efforts are focused on activities that have a direct connect and reach with potential customers. “Our response to the economic slowdown is to focus on marketing initiatives that would be productive. There have been more initiatives targeted at specific groups which are result-oriented.”
Beat the blues
The realty sector has been the worst affected due to the slowdown. And ironically it is this very theme - recession - that real estate developers hope to bank on while selling their properties. Price is the main appeal.
The ’buy one flat, get one free’ scheme for the Orange Resorts project was devised obviously to beat the recession as no one had ever thought of offering a flat free with the purchase of a flat, says Pericho Prabhu, Vice-President, Orange Properties, which has cut down ad spends by nearly 30 per cent. The rationale, he says, was “instead of giving discounts and slashing the prices like other builders, we offer a 700-sq-ft flat free on the purchase of any flat. The flats in the project start from 900 sq ft upwards and cost Rs 26 lakh and above. The booking amount was Rs 2 lakh along with a down payment of 15 per cent of the total cost of the flat. Once these were paid in total, we got into an agreement with the buyer for the 700-sq-ft free flat. But in the second flat, the customer has to bear the cost of the car park and other statutory charges such as power and water.”
Although realty is one of the worst hit sectors in the economy, recession is not all bad, says Bangalore-based property developer Value Designbuild. In fact, it thanks the ‘recession’ for softening borrowing rates and stamp duty. In its radio and print ad campaign – ‘Thank God It’s Recession!’ - to promote its residential complex in an upmarket neighbourhood, the builder urges people to hurry because “nothing lasts forever. Not even a recession.”
Says Koshy Varghese, Managing Director, Value Designbuild, “The dreaded word seems to be there every day. It seems as if recession is a ‘death sentence’ passed on our country. It is not so. We would like people to seize the moment and understand what the opportunity is. Many companies grew during recessionary periods. We hope to promote a general feeling of optimism rather than the continued negativity that prevails. We are focussing on the benefits of recession. We have had programmes on radio where we have called in for listeners’ comments on the positives they see in the recession and the best answers have got goodie bags from us.”
The campaign was also targeted at trying to get people out of a negative mindset “as we believe that every situation presents an opportunity and we just need to grab it and try and benefit from it.”
While many developers are still marketing through above-the-line initiatives, Sobha Developers has decided to look below. The company is now looking at events to promote its projects. The first such event, Sobha Home Mela, was organised in February this year in Bangalore with about 1,500 units on display across 18 projects including villas, row houses, luxury apartments, semi-luxury apartments and plots.
Walk-ins of about 1,800 during this mela encouraged the company to organise a three-day ‘Sobha Sunbeam Hungama’ in April to market its Sobha Sunbeam project in the Garden City, wherein the company offered a discount of about Rs 13 lakh over the February prices, and an on-the-spot booking offer of Rs 50,000. “In February, the company charged Rs 2, 970 per sq ft, which was slashed to Rs 2,254 per sq ft,” says Keshav Pandey, Executive Director - Sales, Marketing and Corporate Communications, Sobha Developers. About 78 units were on offer at the Hungama.
“More people would be willing to take up this offer as they would prefer to buy a ready-to-move-in apartment, as the project is nearing completion. Also, the apartment would be available at the ‘magic’ price of sub-Rs 50 lakh (Rs 49.77 lakh excluding registration and stamp duty charges),” Pandey said during the event.
As part of its branding exercise, Delhi-based DLF found a perfect match in the Indian Premier League. Apart from being the title sponsors of the event, the company ran ticker ads on TV during the matches. According to a DLF spokesperson, “With its tremendous visibility, DLF IPL has helped us become a household name across the world. The rationale behind the tickers was to highlight our projects in all the eight cities of India where DLF IPL was played last year.”
Newer target markets
Media and marketing activities apart, developers are now looking at newer markets to tap into, since the IT/BPO employees are not the favourites anymore. “We are targeting the middle-class community in the non-IT sphere which is actually a huge pie - PSUs, all working professionals such as bank employees, private sector employees and small and medium businessmen who have steady income to avail themselves of loans, and look at property as a long-term appreciating asset,” says Prabhu of Orange Properties.
For its Garrison property on Tumkur Road, near Bangalore, Sobha Developers has seen around 300-odd bookings from Army personnel. Targeting such a group or institution for its sales and offering exclusivity to them would bring in “concrete results”, says J.C. Sharma, Managing Director, Sobha Developers. “When the markets were booming, there were fewer enquiries, but higher sales. Now, enquiries are more, but don’t necessarily translate into sales. So we have to ensure aggressive marketing strategies to ensure conversion,” he adds.
“The current economic downturn and IT slowdown has definitely had a demand impact on the high-end residential sector. Till date developers had long ignored the middle income and lower income groups which account for the majority of the population, but fetch limited margins for developers. With the present market condition, added to dismal sectoral demand and their liquidity problems, developers have started exploring affordable housing projects,” says Trivedi of Cushman.
This is a growing trend with the launch of a few small-sized apartments (700 sq ft - 1,000 sq.ft.) from developers such as Golden Gate Properties, Shriram Properties, Puravankara and Nagarjuna Constructions. DLF too has increased focus on affordable housing to cater to mid-income segments.
Tata Housing has literally gone one step ahead to target the lower income groups with its Shubh Griha project that plans to offer “smart, value homes” to people across India. Shubh Griha will launch its property in the suburb of Boisar in Mumbai, followed by tier I and II cities across the country. The homes will be priced between Rs 3.9 lakh and Rs 6.7 lakh.
“We have a number of market activation plans. We plan to go out directly to our customers and communicate to them what we are offering and how it’s not just a price game but a lifestyle that we have to offer. We also have been advertising in publications relevant to the the low income bracket consumers to reach out to them with the right message,” says Brotin Banerjee, Managing Director and Chief Executive Officer of Tata Housing.
How successful have developers been with their recent marketing campaigns and newer target markets? Have they brought buyers back into the market? Though it cannot be denied that these initiatives have been successful in rekindling buyer interest in the real estate market, the real success of such ideas in terms of actual sales is still questionable. “The urban Indian consumer is intelligent. So while an ad can generate interest, it cannot guarantee a transaction. Customers should check the details of an offer before making an investment decision,” says Trivedi of Cushman & Wakefield.
Developers agree that the market remains challenging, but the good news is that the negativity could soon be a thing of the past. “There is no fear now that the market could collapse. The worst is over. We are now trying to tap the market,” says Sobha’s Sharma, adding that in the next two quarters things might fall back in place.
Varghese of Value Designbuild says some consumer confidence is returning to the market. “How much this has to do with pricing is debatable. However, what is encouraging is that enquiries are back in some form unlike the end of 2008 and early 2009. Frankly, there is nothing that can be done except for credit becoming easier to both the consumer and the developer. The developers must somehow be able to construct and complete the buildings. Responsible marketing coupled with some interest rate benefits and tax breaks can help revive consumer interest in housing.”
Business Line, Brand Line, May 28, 2009, Page 1
Hit by the slowdown, the realty sector sees some innovative thinking as marketing budgets are cut.
Anjana Chandramouly Swetha Kannan
If you thought buy-one-get-one free offers were limited to trousers, shoes and other small-ticket items, think again. You could get houses too for free, thanks to Orange Properties, which came out with a ‘buy-one-flat-get-one-free’ offer recently for its Orange Resorts in Devanahalli, in Bangalore.
Sales didn’t quite skyrocket and the advertising campaign across print and outdoor met with mixed response, but given the current market conditions perhaps that’s understandable.
With real estate being struck badly in the slowdown, real estate developers, who were once riding a high, have now tightened advertising and marketing expenses. They have also had to think out of the box even while operating on leaner budgets. They have been forced to rework their marketing strategies to woo consumers at a time when the propensity to buy is not very high. Marketing initiatives may be fewer but they are becoming more focussed, specific and project-based, using direct and candid communication. And pricing is obviously the key premise around which the initiatives revolve.
Sandeep Trivedi, National Head, Development Consulting, Cushman & Wakefield, a real estate services firm, analyses the scene. He says, “Developers have definitely reduced the cost expenditure on marketing and advertising initiatives. The conventional forms of advertising, such as hoardings, advertisements in newspaper/magazines, participation in property exhibitions and sponsoring events have come down drastically and given way to more direct marketing initiatives. These include one-to-one meetings with prospective clients, more business development and sales calls. Even in the event of print advertising, the media is focusing on the price component and are willing to provide large area units at discounted prices. Developers have also been conservative in launching new projects in the current scenario and are, instead, focusing on selling existing projects.”
Innovation is the need of the hour to capture attention. Sridhar G. Kulkarni, Head - Marketing (Karnataka and Andhra Pradesh), Shriram Properties, says its marketing efforts are focused on activities that have a direct connect and reach with potential customers. “Our response to the economic slowdown is to focus on marketing initiatives that would be productive. There have been more initiatives targeted at specific groups which are result-oriented.”
Beat the blues
The realty sector has been the worst affected due to the slowdown. And ironically it is this very theme - recession - that real estate developers hope to bank on while selling their properties. Price is the main appeal.
The ’buy one flat, get one free’ scheme for the Orange Resorts project was devised obviously to beat the recession as no one had ever thought of offering a flat free with the purchase of a flat, says Pericho Prabhu, Vice-President, Orange Properties, which has cut down ad spends by nearly 30 per cent. The rationale, he says, was “instead of giving discounts and slashing the prices like other builders, we offer a 700-sq-ft flat free on the purchase of any flat. The flats in the project start from 900 sq ft upwards and cost Rs 26 lakh and above. The booking amount was Rs 2 lakh along with a down payment of 15 per cent of the total cost of the flat. Once these were paid in total, we got into an agreement with the buyer for the 700-sq-ft free flat. But in the second flat, the customer has to bear the cost of the car park and other statutory charges such as power and water.”
Although realty is one of the worst hit sectors in the economy, recession is not all bad, says Bangalore-based property developer Value Designbuild. In fact, it thanks the ‘recession’ for softening borrowing rates and stamp duty. In its radio and print ad campaign – ‘Thank God It’s Recession!’ - to promote its residential complex in an upmarket neighbourhood, the builder urges people to hurry because “nothing lasts forever. Not even a recession.”
Says Koshy Varghese, Managing Director, Value Designbuild, “The dreaded word seems to be there every day. It seems as if recession is a ‘death sentence’ passed on our country. It is not so. We would like people to seize the moment and understand what the opportunity is. Many companies grew during recessionary periods. We hope to promote a general feeling of optimism rather than the continued negativity that prevails. We are focussing on the benefits of recession. We have had programmes on radio where we have called in for listeners’ comments on the positives they see in the recession and the best answers have got goodie bags from us.”
The campaign was also targeted at trying to get people out of a negative mindset “as we believe that every situation presents an opportunity and we just need to grab it and try and benefit from it.”
While many developers are still marketing through above-the-line initiatives, Sobha Developers has decided to look below. The company is now looking at events to promote its projects. The first such event, Sobha Home Mela, was organised in February this year in Bangalore with about 1,500 units on display across 18 projects including villas, row houses, luxury apartments, semi-luxury apartments and plots.
Walk-ins of about 1,800 during this mela encouraged the company to organise a three-day ‘Sobha Sunbeam Hungama’ in April to market its Sobha Sunbeam project in the Garden City, wherein the company offered a discount of about Rs 13 lakh over the February prices, and an on-the-spot booking offer of Rs 50,000. “In February, the company charged Rs 2, 970 per sq ft, which was slashed to Rs 2,254 per sq ft,” says Keshav Pandey, Executive Director - Sales, Marketing and Corporate Communications, Sobha Developers. About 78 units were on offer at the Hungama.
“More people would be willing to take up this offer as they would prefer to buy a ready-to-move-in apartment, as the project is nearing completion. Also, the apartment would be available at the ‘magic’ price of sub-Rs 50 lakh (Rs 49.77 lakh excluding registration and stamp duty charges),” Pandey said during the event.
As part of its branding exercise, Delhi-based DLF found a perfect match in the Indian Premier League. Apart from being the title sponsors of the event, the company ran ticker ads on TV during the matches. According to a DLF spokesperson, “With its tremendous visibility, DLF IPL has helped us become a household name across the world. The rationale behind the tickers was to highlight our projects in all the eight cities of India where DLF IPL was played last year.”
Newer target markets
Media and marketing activities apart, developers are now looking at newer markets to tap into, since the IT/BPO employees are not the favourites anymore. “We are targeting the middle-class community in the non-IT sphere which is actually a huge pie - PSUs, all working professionals such as bank employees, private sector employees and small and medium businessmen who have steady income to avail themselves of loans, and look at property as a long-term appreciating asset,” says Prabhu of Orange Properties.
For its Garrison property on Tumkur Road, near Bangalore, Sobha Developers has seen around 300-odd bookings from Army personnel. Targeting such a group or institution for its sales and offering exclusivity to them would bring in “concrete results”, says J.C. Sharma, Managing Director, Sobha Developers. “When the markets were booming, there were fewer enquiries, but higher sales. Now, enquiries are more, but don’t necessarily translate into sales. So we have to ensure aggressive marketing strategies to ensure conversion,” he adds.
“The current economic downturn and IT slowdown has definitely had a demand impact on the high-end residential sector. Till date developers had long ignored the middle income and lower income groups which account for the majority of the population, but fetch limited margins for developers. With the present market condition, added to dismal sectoral demand and their liquidity problems, developers have started exploring affordable housing projects,” says Trivedi of Cushman.
This is a growing trend with the launch of a few small-sized apartments (700 sq ft - 1,000 sq.ft.) from developers such as Golden Gate Properties, Shriram Properties, Puravankara and Nagarjuna Constructions. DLF too has increased focus on affordable housing to cater to mid-income segments.
Tata Housing has literally gone one step ahead to target the lower income groups with its Shubh Griha project that plans to offer “smart, value homes” to people across India. Shubh Griha will launch its property in the suburb of Boisar in Mumbai, followed by tier I and II cities across the country. The homes will be priced between Rs 3.9 lakh and Rs 6.7 lakh.
“We have a number of market activation plans. We plan to go out directly to our customers and communicate to them what we are offering and how it’s not just a price game but a lifestyle that we have to offer. We also have been advertising in publications relevant to the the low income bracket consumers to reach out to them with the right message,” says Brotin Banerjee, Managing Director and Chief Executive Officer of Tata Housing.
How successful have developers been with their recent marketing campaigns and newer target markets? Have they brought buyers back into the market? Though it cannot be denied that these initiatives have been successful in rekindling buyer interest in the real estate market, the real success of such ideas in terms of actual sales is still questionable. “The urban Indian consumer is intelligent. So while an ad can generate interest, it cannot guarantee a transaction. Customers should check the details of an offer before making an investment decision,” says Trivedi of Cushman & Wakefield.
Developers agree that the market remains challenging, but the good news is that the negativity could soon be a thing of the past. “There is no fear now that the market could collapse. The worst is over. We are now trying to tap the market,” says Sobha’s Sharma, adding that in the next two quarters things might fall back in place.
Varghese of Value Designbuild says some consumer confidence is returning to the market. “How much this has to do with pricing is debatable. However, what is encouraging is that enquiries are back in some form unlike the end of 2008 and early 2009. Frankly, there is nothing that can be done except for credit becoming easier to both the consumer and the developer. The developers must somehow be able to construct and complete the buildings. Responsible marketing coupled with some interest rate benefits and tax breaks can help revive consumer interest in housing.”
Wednesday, May 27, 2009
State-run banks to cut rates by 100-150 bps
State-run banks to cut rates by 100-150 bps
The Economic Times, May 27, 2009, Page 1
Anand Rawani & Anto Antony, ET Bureau
NEW DELHI: Government-owned banks plan to cut lending rates by 100-150 basis points — one basis point is one hundredth of a percentage point — within the next fortnight, after a finance ministry directive to lower interest rates in line with falling cost of funds. The rate cut is expected before June 12, when the finance minister is scheduled to meet the chiefs of public sector banks.
Punjab National Bank (PNB), which already has the lowest lending rates in the country, will not cut rates but will provide the benchmark for other public sector banks.
Officials at State Bank of India (SBI), Bank of Maharashtra, Uco Bank, Corporation Bank and Bank of Rajasthan confirmed the development. Corporation Bank chairman JM Garg said as the cost of funds is falling, lending rates will be cut accordingly. “...the trends in interest rates have been moving downward. We have to cut the interest rates further,” said Mr Garg.
And banks like Uco might go for a sharp rate cut, which could be in the range of 100-150 basis points. According to Uco Bank chairman and managing director SK Goel, the prime lending rate (against which rates to individual borrowers are benchmarked, depending on their creditworthiness in relation to those who qualify for prime rates) will be cut to 8% from 12% over the next six months, if conditions remain favourable. “We have been cutting interest rates and expect further cuts in the coming weeks,” Mr Goel told ET.
SBI — the country’s largest lender — is also expected to bring down its PLR, currently at 12.25%, in the next couple of weeks. But according to SBI officials, the quantum of reduction could be anywhere between 25-75 basis points, as the fall in the cost of funds is not high for the bank. SBI has cut its deposit rates across all maturities by 50 basis points with effect from May 18 to bring down the cost of funds.
Finance minister Pranab Mukherjee will be meeting chiefs of PSBs in the second week of June to ensure that the cut in policy rates is transmitted and credit flow remains robust. The additional secretary in the finance ministry in charge of banking is expected to conduct video conferences on a weekly basis with PSBs to monitor lending rates and credit growth.
Finance ministry officials said they are not putting any undue pressure on banks to bring down interest rates and have only asked them to transmit the fall in the cost of funds, if they have headroom.
"The credit flow from the public sector banks is strong and they are also trying to bring down the lending rates. Many banks like Punjab National Bank have already made sincere attempts to bring down the lending rates and others have informed us that they will look at cutting lending rates by another 100-150 bps.
Fresh loan offtake from September till April-end is almost 50% above the loan offtake for the corresponding period last year. When the finance minister meets the chiefs of public sector banks towards the end of the second week of June, bringing down rates will be on top of the agenda," a finance ministry official told ET.
The lending rates of most of the public sector banks will fall, over the next couple of weeks, to align with the rates of PNB, which has the lowest lending rates in the country. The bank currently has a PLR of 11% which is 100-150 basis points lower than its peers.
PNB chairman and managing director KC Chakrabarty told ET: "We were most aggressive on bringing down lending rates and is currently offering one of the lowest rates in the country. There is no room for us to cut rates below the current levels before June 12."
Strong liquidity should spur banks to cut lending rates: Rakesh Mohan
Strong liquidity should spur banks to cut lending rates: Rakesh Mohan
The Hindu Business Line, May 27, 2009, Page 6
Our Bureau, Mumbai
Continued robust profitability and strong liquidity should encourage banks to cut lending rates, according to Dr Rakesh Mohan, Deputy Governor, the Reserve Bank of India.
Pointing out that banks’ would need to focus on lending to agriculture, MSMEs, and other priority sector areas, the Deputy Governor said that once the corporate bond market develops further, large corporates will disintermediate from the banking system.
Underscoring the strength of the Indian banking system, Dr Mohan, who was speaking at the 62nd annual general meeting of the Indian Banks’ Association said, “There is no problem in the Indian banks. The Indian banking system has negligible exposure to toxic assets or the sub-prime crisis. There has been no relaxation in lending norms…. Banks’ risk-adjusted capital adequacy ratio is above normal. NPAs are low. Despite the adverse macro-economic environment, banks have posted robust profits. Liquidity is strong. Therefore, banks will be in a position to cut lending rates.”
Stress tests conducted recently by the RBI on the banking system shows that even if NPAs were to increase by 100 to 200 per cent, overall, banks’ capital adequacy ratio would be ‘reasonable’.
The Deputy Governor underscored the fact that the fisc is under stress on account of a host of factors – subsidies on oil, fertiliser and food; pay commission payouts, debt waiver, stimulus packages, large increase in market borrowing. The combined (Centre and States) fiscal deficit, according to Dr Mohan, is very high by international standards.
Due to the large borrowing needs of the Government (for FY 2009-10, the net budget borrowing estimate is Rs 3,08,647 crore), Dr Mohan said. He holds the view that the RBI should continue to manage the debt management function so that the Government borrowing is managed smoothly.
When advanced economies loosened their monetary policy, the emerging markets, including India received copious forex inflows. But once the reversal happened, it had a huge impact on equity markets because foreign inflows are a relatively higher proportion of floating stock. But as domestic investment was met by domestic savings this did not have much of an impact.
In 2009, it is estimated that there will be a reverse flow of capital to the tune of $200 billion from the emerging markets to the advanced economies.
As the sources of funds for corporates from overseas borrowing and equity reduced, there was high pressure on banks and this resulted in credit crunch. FDI, however, was not impacted as much as expected.
Dr Mohan felt that there was a need for financial development and deepening. Credit to the SME sector was not up to the mark. “Banks have to be active in doing proper risk assessment. There is huge amount of non-farm rural activity that is taking place which has no access to bank credit.”
FM seeks balance between growth and fiscal deficit
FM seeks balance between growth and fiscal deficit
Business Standard, May 27, 2009, Page 1
Saubhadro Chatterji / New Delhi
Finance Minister Pranab Mukherjee said here today that he would like to strike a balance between the imperatives for achieving higher growth and ensuring prudent fiscal management.
“We require growth and for that we require money. If all government resources are not adequate, you have to borrow. Naturally, the fiscal deficit would increase. Therefore, we have to strike a balance between these two competing requirements — of growth and prudent fiscal management. And it will be my effort to strike this balance,” Mukherjee said in an exclusive interview with Business Standard.
Dwelling on a wide range of economic policy issues, just about six weeks before he presents the regular Budget for 2009-10, Mukherjee said he was yet to complete the analysis of the impact of the series of fiscal stimulus packages that were announced in December 2008, January 2009 and finally in his Interim Budget a month later. A considered view on the need for fresh fiscal stimulii will be taken only after assessing the impact of those measures on the economy.
Mukherjee added that all steps needed to restore the Indian economy to a higher growth trajectory would be taken. He admitted that global developments had slowed the Indian economy and their adverse impact was still visible, with the likelihood of the last financial year clocking a growth rate of 6.5 to 7 per cent, against an average annual growth rate of 8.9 per cent in the previous four years.
The finance minister, who will present his fourth regular budget in his long political career (he had presented three budgets from 1982-83 to 1984-85 as finance minister in the Indira Gandhi government), declined to answer any budget-related questions, but offered a laconic reply, "All I will say is wait", when asked if he would like to move ahead with reforms in insurance, banking and pensions.
Mukherjee admitted that the role of the public sector was important and the inherent strength of the state-owned banks and insurance companies had helped the Indian economy weather the adverse impact of the global financial sector turmoil. Endorsing the public-private partnership model for developing infrastructure projects, he said this was the "most important mechanism" to achieve targets in the infrastructure sector. On the question of the government's policy on special economic zones, which enjoy several tax concessions, Mukherjee said those schemes had brought substantial benefits specially for exports but a few areas in these schemes could be rectified.
Asked if he was in favour of extending the national rural employment guarantee scheme (NREGS) to cover the urban poor, Mukherjee said there was no doubt that this scheme had helped create jobs for poor people in villages. He was open to examining ways to modify such schemes to ensure that the poor unemployed people in urban areas also got some benefit.
Mukherjee gave a clear hint that his budget would also address the needs of the aam aadmi by expanding employment generation schemes and social security nets.
Asked what he meant by quoting Nobel laureate Amartya Sen in his interim budget speech on the need for growth with equity and a commitment towards security in a downturn, Mukherjee said, "All this will be spelt out in my budget."
Business Standard, May 27, 2009, Page 1
Saubhadro Chatterji / New Delhi
Finance Minister Pranab Mukherjee said here today that he would like to strike a balance between the imperatives for achieving higher growth and ensuring prudent fiscal management.
“We require growth and for that we require money. If all government resources are not adequate, you have to borrow. Naturally, the fiscal deficit would increase. Therefore, we have to strike a balance between these two competing requirements — of growth and prudent fiscal management. And it will be my effort to strike this balance,” Mukherjee said in an exclusive interview with Business Standard.
Dwelling on a wide range of economic policy issues, just about six weeks before he presents the regular Budget for 2009-10, Mukherjee said he was yet to complete the analysis of the impact of the series of fiscal stimulus packages that were announced in December 2008, January 2009 and finally in his Interim Budget a month later. A considered view on the need for fresh fiscal stimulii will be taken only after assessing the impact of those measures on the economy.
Mukherjee added that all steps needed to restore the Indian economy to a higher growth trajectory would be taken. He admitted that global developments had slowed the Indian economy and their adverse impact was still visible, with the likelihood of the last financial year clocking a growth rate of 6.5 to 7 per cent, against an average annual growth rate of 8.9 per cent in the previous four years.
The finance minister, who will present his fourth regular budget in his long political career (he had presented three budgets from 1982-83 to 1984-85 as finance minister in the Indira Gandhi government), declined to answer any budget-related questions, but offered a laconic reply, "All I will say is wait", when asked if he would like to move ahead with reforms in insurance, banking and pensions.
Mukherjee admitted that the role of the public sector was important and the inherent strength of the state-owned banks and insurance companies had helped the Indian economy weather the adverse impact of the global financial sector turmoil. Endorsing the public-private partnership model for developing infrastructure projects, he said this was the "most important mechanism" to achieve targets in the infrastructure sector. On the question of the government's policy on special economic zones, which enjoy several tax concessions, Mukherjee said those schemes had brought substantial benefits specially for exports but a few areas in these schemes could be rectified.
Asked if he was in favour of extending the national rural employment guarantee scheme (NREGS) to cover the urban poor, Mukherjee said there was no doubt that this scheme had helped create jobs for poor people in villages. He was open to examining ways to modify such schemes to ensure that the poor unemployed people in urban areas also got some benefit.
Mukherjee gave a clear hint that his budget would also address the needs of the aam aadmi by expanding employment generation schemes and social security nets.
Asked what he meant by quoting Nobel laureate Amartya Sen in his interim budget speech on the need for growth with equity and a commitment towards security in a downturn, Mukherjee said, "All this will be spelt out in my budget."
Growth, fiscal prudence my priorities: Pranab
Growth, fiscal prudence my priorities: Pranab
The Hindu Business Line, May 27, 2009, Page 15
Our Bureau, New Delhi
The upcoming full-fledged Budget of the new UPA Government will focus on promoting economic growth even while taking steps to return to fiscal prudence, the Union Finance Minister, Mr Pranab Mukherjee, indicated here on Tuesday. “I have both priorities — growth as well as fiscal prudence,” he told a TV channel in an interview. Highlighting that the current need was a stimulus to growth, the Finance Minister at the same time maintained that the Government cannot indulge in fiscal profligacy.
Noting that the stimulus packages rolled out by the earlier UPA Government had started to take effect, he stressed the need for faster pace of investment in infrastructure to boost growth. “I do believe that massive investments in infrastructure will bring us back to the growth path,” he added. Asked if the forthcoming Budget would provide fresh fiscal stimulus to arrest the slowdown in the economy, he said, “You will have to wait till the Budget is presented.”
He also declined to comment on issues such as auction of 3G spectrum and disinvestment. A separate ministry for disinvestment is not under consideration, the Minister noted. The country’s GDP growth for 2008-09 may be slightly lower than 7 per cent. “Growth will be close to Central Statistical Organisation’s projection,” he said.
For 2008-09, the CSO advance estimate had pegged growth at 7.1 per cent.
Housing projects are back with a vengeance
Housing projects are back with a vengeance
Business Standard, May 27, 2009, Page 1
Raghavendra Kamath / Mumbai
DLF, Unitech, HDIL & Puravankara line up 60 million square feet of new launches.
Top real estate developers are trying their best to make up for lost time. Buoyed by encouraging response from home-buyers for their marked-down properties, companies such as DLF, Unitech, HDIL and others have lined up housing projects of over 60 million square feet — all in the current financial year.
This is more than double the sales bookings in the past financial year.
Presentations by these companies to analysts show that Unitech is leading with 27 million square feet of new launches. DLF’s tally is 15 million square feet, roughly the same as last year’s. Puravankara and HDIL follow with 6 to 9 million and 8 million square feet respectively.
Mid-income housing is the flavour of the year and accounts for around 90 per cent of the projects. After a prolonged lull in the property market in 2008, which saw sales declining 70 per cent from their peak, the big developers moved into the mid-income segment and cut prices 20 to 30 per cent to generate liquidity.
With their apartments selling quicker than expected, liquidity constraints easing with debt roll-overs, the stock market rally and improved bank credit, realtors are now planning more such launches.
“We have sold 2,500 units in three to four projects in the last one-and-a-half months. The company has decided to go aggressive with new launches because we are quite confident of selling quickly,” said a spokesperson of Unitech, the country’s second largest developer.
DLF will launch 8 to 9 million sq ft of city-centre projects in Chennai, Kochi, Delhi and Gurgaon and around 5 to 8 million sq ft of mid-income housing projects in the National Capital Region (Delhi’s suburbs) and southern cities, DLF Vice-Chairman Rajiv Singh told analysts recently.
“We have met with good response for our projects wherever we have launched. If the product is good and price is right, it will sell irrespective of market conditions,” said Rajeev Talwar, group executive director , DLF.
The company sold 1,356 apartments at its Shivaji Marg (better known as Najafgarh Road) project within a day in early April as the price was nearly 25 per cent lower than the existing market price.
Aditi Vijayakar, executive director-residential, Cushman & Wakefield, said most developers were making good sales as they have cut prices. “The new projects are certainly attractive for home buyers,” he said.
Unitech added the cut in prices was inevitable since it’s clearly a buyers’ market. So a lot of marketing and sales efforts went into selling space. The efforts, he said, were worth its because the company was selling more flats now that what it sold even during the peak of 2007.
Unitech has cut its home prices by roughly 25 per cent and reduced ticket sizes. Currently, the average size of apartment is 700 to 800 sq ft against 1,500 sq ft a couple of years ago.
Analysts, however, said developers had taken huge hits on their margins. Mid-income apartments have a margin of 25 to 30 per cent versus 50 to 70 per cent in premium housing. For instance, DLF’s EBITDA (earnings before interest, tax, depreciation and amortisation) margins have been falling continuously.
“The days of 70 per cent margins are over. They have to be happy with 20 to 25 per cent margins now since liquidity is the bigger issue than profits today,” said an analyst from a Mumbai-based brokerage.
Apart from sales in the mid-income housing category, several other factors have also given developers confidence to move ahead, the primary being relief from immediate debt payments.
All the top developers have rolled over their short term liabilities by 12 to 18 months after the Reserve Bank of India (RBI) allowed commercial banks to restructure their debt.
Unitech has cut debt by Rs 2,000 crore and DLF, the country’s biggest developer, has repaid Rs 1,700 crore of loans in the past year. Between them the top three realtors — DLF, Unitech and HDIL — have restructured as much as Rs 4,100 crore worth of loans with commercial banks and mutual funds.
Developers have also benefited from the recent surge in the stock market, which has given many of them the opportunity to tap institutional investors to reduce debt and investing in new projects. After Unitech raised Rs 1,625 crore from a qualified institutional placement (QIP) in April, DLF’s promoters sold 9.9 per cent in the company for Rs 3,860 crore and Indiabulls Real Estate raised Rs 2,656 crore through a QIP. Now, smaller realtors such as Sobha, Puravankara and Parsvnath have lined up QIPs to raise money.
QIPs become chosen option
QIPs become chosen option
The Hindu Business Line, May 27, 2009, Page 10
Our Bureau, Mumbai
PTC India’s issue subscribed within 4 hours.
Qualified institutional placements (QIPs) are becoming popular means to raise funds for public listed companies.
Successful QIPs by some fund-starved real estate companies that took the lead have encouraged others like PTC India to tap this route. Unitech Ltd, DLF and Indiabulls Real Estate have raised more than Rs 8,000 crore through QIPs since mid April 2008.QIP guidelines were issued in May 2006 and the first QIP placement happened in September 2006. Since then 49 QIPs have hit the market (until December 2008), most of them in 2006 and 2007. Only four companies raised money through QIPs in 2008, according to a January 2009 report by SMC Capitals.
PTC India (earlier known as Power Trading Corporation) has successfully raised Rs 500 crore ($105 million) through a QIP offering at Rs 75 a share. It has been the only non-real estate company that did a QIP this year.
“The entire issue was fully subscribed within four hours of opening of the books on May 25, and was finally subscribed 2.4 times,” Kotak Mahindra Capital Company, the book running lead managers to the issue, said.
“The deal witnessed overwhelming response from both domestic and foreign investors with select mutual funds and long FIIs acting as cornerstone investors.”
The PTC board approved an offer of 6.66 crore shares at Rs 75 a piece aggregating to Rs 500 crore to qualified institutional buyers (QIBs).
PTC stock closed 4 per cent lower at Rs 86.20 on Tuesday.
This issue represents 22.67 per cent of PTC’s post issue share capital.
Unitech Ltd was the first listed company to raise funds through QIP this calendar year. It raised Rs 1,621 crore ($325 million) through a QIP in April. Earlier this month DLF raised Rs 3,860 crore by placing 9.9 per cent of the promoters’ stake before QIBs. Last week India Bulls Real Estate raised Rs 2,656 crore through the QIP route.
Some QIPS are in the pipeline too. Parsvnath has announced plans to raise Rs 2,500 crore and HDIL $600 million (over Rs 2,800 crore) through QIPs.
“QIPs have become popular of late as a convenient way of raising money for the listed companies compared to some other routes like rights issue where the process is much more time consuming and complicated,” an expert familiar with the subject said.
The Hindu Business Line, May 27, 2009, Page 10
Our Bureau, Mumbai
PTC India’s issue subscribed within 4 hours.
Qualified institutional placements (QIPs) are becoming popular means to raise funds for public listed companies.
Successful QIPs by some fund-starved real estate companies that took the lead have encouraged others like PTC India to tap this route. Unitech Ltd, DLF and Indiabulls Real Estate have raised more than Rs 8,000 crore through QIPs since mid April 2008.QIP guidelines were issued in May 2006 and the first QIP placement happened in September 2006. Since then 49 QIPs have hit the market (until December 2008), most of them in 2006 and 2007. Only four companies raised money through QIPs in 2008, according to a January 2009 report by SMC Capitals.
PTC India (earlier known as Power Trading Corporation) has successfully raised Rs 500 crore ($105 million) through a QIP offering at Rs 75 a share. It has been the only non-real estate company that did a QIP this year.
“The entire issue was fully subscribed within four hours of opening of the books on May 25, and was finally subscribed 2.4 times,” Kotak Mahindra Capital Company, the book running lead managers to the issue, said.
“The deal witnessed overwhelming response from both domestic and foreign investors with select mutual funds and long FIIs acting as cornerstone investors.”
The PTC board approved an offer of 6.66 crore shares at Rs 75 a piece aggregating to Rs 500 crore to qualified institutional buyers (QIBs).
PTC stock closed 4 per cent lower at Rs 86.20 on Tuesday.
This issue represents 22.67 per cent of PTC’s post issue share capital.
Unitech Ltd was the first listed company to raise funds through QIP this calendar year. It raised Rs 1,621 crore ($325 million) through a QIP in April. Earlier this month DLF raised Rs 3,860 crore by placing 9.9 per cent of the promoters’ stake before QIBs. Last week India Bulls Real Estate raised Rs 2,656 crore through the QIP route.
Some QIPS are in the pipeline too. Parsvnath has announced plans to raise Rs 2,500 crore and HDIL $600 million (over Rs 2,800 crore) through QIPs.
“QIPs have become popular of late as a convenient way of raising money for the listed companies compared to some other routes like rights issue where the process is much more time consuming and complicated,” an expert familiar with the subject said.
MF interest building in real estate companies
MF interest building in real estate companies
The Hindu Business Line, May 27, 2009, Page 10
Positive sentiment after realtors raised funds: Analysts.
Sharvari Patwa, Mumbai
There are signs of renewed mutual funds interest in real estate companies.
Mutual funds’ exposure to this sector tripled in April, though it still constitutes a small proportion of their total equity investments.
The funds’ investments in real estate companies stood at Rs 308 crore at the end of April against Rs 98 crore in March, said a research report by broking firm Bonanza Portfolio.
The absolute numbers are small, but point to a trend as the exposure in the earlier months of the year was minimal, said fund managers.
The BSE realty index rose 37 per cent in April compared with 10 per cent in March.
The fund-raising plans of debt-ridden real estate companies have brought in a wave of positive sentiments for these stocks, said analysts. Investor appetite has been stirred after the Qualified Institutional Placements (QIP) by companies such as Unitech and DLF, as they signal that the real estate companies have enough liquidity to sustain themselves in the downturn, Mr Sameer Narayan, Head of Equities, Fortis Mutual Fund, said.
“With the recent fund-raising by Unitech through a QIP and with Indiabulls Real Estate proposing another and similar plans by several developers, we believe the risk appetite for this sector may be returning,” said a research report from Enam Securities.
Unitech Ltd, the country’s second-biggest real estate developer, has raised over Rs 1,600 crore from selling new shares to QIPs to repay a part of its debt of over Rs 8,900 crore.
Earlier, realty stocks had distressed valuations. But now with the debt overhang decreasing, the stocks are starting to look attractive, said Mr Ajay Argal, Equity Co-head, Birla Sun Life Mutual Fund.
Though the situation has not improved dramatically for the real estate companies, there is some stability in the sector, he added.
In April, many real estate companies brought down prices and there was visible increase in demand, which has led to an optimistic outlook for the sector, said Mr Sanjay Sinha, Chief Executive Officer, DBS Cholamandalam Mutual Fund.
According to fund managers, the increase in exposure to real estate stocks is not across the board but selective.
According to a research report by Sharekhan, top additions to the holdings of the portfolio of equity (mutual) funds include Unitech Ltd, IRB Infrastructure Developers and Indiabulls Real Estate.
Some analysts said the easing of liquidity crunch in these companies does not justify the steep price increase of these stocks.
Share prices of DLF, Unitech Ltd, Parsvnath Developers, IndiaBulls Real Estate have gone up by 26 per cent to 38 per cent in April. These stocks are catching investor fancy in the current market upturn as they are high beta stocks, which gain more than the Sensex in a rally, said Mr Shailesh Kanani, an analyst with Angel Broking.
In April, the Sensex rose by 17 per cent but the BSE-Realty Index gained 30 per cent.
Even as mutual fund houses increase their exposure to real estate stocks, their long-term call is one of guardedness “ as a lot of these companies are showing a keenness to issue debt paper, one will have to review them again in that case”, said a fund manager.
HDIL: Signs of revival in volume
HDIL: Signs of revival in volume
The Hindu Business Line, May 27, 2009, Page 10
Deep discounts help sales.
Vidya Bala
BL Research Bureau HDIL’s results for the quarter ended March 2009 belies the sharp re-rating enjoyed by the stock from Rs 140 to Rs 280 between January and now.
A 64 per cent decline in sales and 91 per cent decline in net profits in the fourth quarter of FY-09, compared to March 2008, does not come as a surprise, given the real estate slowdown and more specifically the decline in price of transferable developments rights (TDRs) compared with a year ago.
Debt restructuring, a pick up in sales volumes and plans to seek funds through qualified institutional placement – the new mantras (suggestive of a revival) that have buttressed the recent rally in realty stocks – are a feature of HDIL’s results as well.
Relief from high raw material costs did not provide much support to HDIL’s operating profit margins as a result of a steep drop in turnover. OPMs declined to 27 per cent, a 3 percentage point slide even with respect to the December quarter. Net profit margins too suffered what with interest costs rising manifold.
Improving sequentially
A comparison of the recent quarter numbers with that of the December quarter, however, offers a hint of revival. Sales was up by 14 per cent on a sequential basis though operating and net profits declined, suggesting that volumes could be reviving but perhaps only due to steep price discounts offered.
In the March quarter, the company launched residential projects in Kurla and Andheri at discounts of 20-30 per cent on the prevailing market prices. However, the recent units sold would not reflect in its revenues in the near future.
HDIL’s Mumbai airport slum rehabilitation project is also running on schedule. This could be crucial to its growth as slum rehabilitation continues to be HDIL’s primary business.
A more positive aspect of sales could be TDRs. The management has stated that it has seen a revival in TDR volumes even as prices appear to be at the same levels as the December quarter.
TDRs are allocated parcels of land received from the Government in return for Slum Rehabilitation Schemes (SRS) undertaken. These also typically carry higher Floor Space Index of up to 3 times, thereby improving volumes for the builder.
Of the ongoing projects of 64 million sq.ft, 80 per cent of the developable area fall under SRS/TDRs. TDRs can be used for development or can be sold by the company. Hence, a revival in TDR volumes may be crucial to quickly improve the company’s cash flow position.
HDIL suffered negative operating cash flows at the end of March quarter.
QIP
HDIL’s current debt stands at over Rs 4,000 crore. The qualified institutional placement of about Rs 2,800 crore, which was recently approved, can help reduce debt by 50 per cent. However, this placement combined with preferential allotment planned to be issued to promoters could result in capital expanding by a good 40-45 per cent if issues are priced at current market prices. Slow revival in revenues and expanded capital could mean earnings dilution in the near term.
Unitech sells hotel for Rs 200 crore
Unitech sells hotel for Rs 200 crore
Business Standard, May 27, 2009, Page 4
BS Reporter / New Delhi
Third sale in two months, more to follow.
Unitech Ltd, the country’s second-largest real estate developer, has sold its under-construction hotel on National Highway-8, Gurgaon, for Rs 200 crore to an individual, according to a company executive.
“We have signed a memorandum of understanding with the buyer and will receive the payment in two-three weeks,” he said.
“The hotel property will have 190 rooms and would be completed by the end of this year,” he added.
The company is also in an advanced stage of selling a service apartment property in Gurgaon for Rs 200 crore. “ We will close the deal for our service apartments in the coming weeks,” the executive added.
Unitech is selling its non-core business assets, including hotels and office space, to generate cash for debt repayment.
This is the third such sale by the Sanjay Chandra-managed company in two months. Unitech raised Rs 231 crore in April from the sale of its 199-room Marriott Courtyard hotel in Gurgaon, while its office space in Saket was recently sold for Rs 500 crore to another individual.
Unitech has about Rs 7,800 crore of debt on its books and plans to cut this by at least Rs 1,000 crore by the end of this fiscal. Most of the repayment is expected to come from additional capital infusion into the company by promoters and by asset sales.
The company aims to raise Rs 1,600 crore in the fiscal, ending March 31, from the sale of non-core assets, including the Saket office complex and four additional hotel properties located in Noida, Kolkata and Gurgaon. The developer had earlier indicated plans to raise at least Rs 900 crore by June from such asset sales.
Unitech’s promoters raised Rs 1,625 crore in April from the sale of shares to qualified institutional investors. The company’s board has also approved a plan to allow the promoters to infuse an additional Rs 1,000 crore through issue of warrants that are convertible into shares at a later date.
Business Standard, May 27, 2009, Page 4
BS Reporter / New Delhi
Third sale in two months, more to follow.
Unitech Ltd, the country’s second-largest real estate developer, has sold its under-construction hotel on National Highway-8, Gurgaon, for Rs 200 crore to an individual, according to a company executive.
“We have signed a memorandum of understanding with the buyer and will receive the payment in two-three weeks,” he said.
“The hotel property will have 190 rooms and would be completed by the end of this year,” he added.
The company is also in an advanced stage of selling a service apartment property in Gurgaon for Rs 200 crore. “ We will close the deal for our service apartments in the coming weeks,” the executive added.
Unitech is selling its non-core business assets, including hotels and office space, to generate cash for debt repayment.
This is the third such sale by the Sanjay Chandra-managed company in two months. Unitech raised Rs 231 crore in April from the sale of its 199-room Marriott Courtyard hotel in Gurgaon, while its office space in Saket was recently sold for Rs 500 crore to another individual.
Unitech has about Rs 7,800 crore of debt on its books and plans to cut this by at least Rs 1,000 crore by the end of this fiscal. Most of the repayment is expected to come from additional capital infusion into the company by promoters and by asset sales.
The company aims to raise Rs 1,600 crore in the fiscal, ending March 31, from the sale of non-core assets, including the Saket office complex and four additional hotel properties located in Noida, Kolkata and Gurgaon. The developer had earlier indicated plans to raise at least Rs 900 crore by June from such asset sales.
Unitech’s promoters raised Rs 1,625 crore in April from the sale of shares to qualified institutional investors. The company’s board has also approved a plan to allow the promoters to infuse an additional Rs 1,000 crore through issue of warrants that are convertible into shares at a later date.
Sobha ties up for PE funding
Sobha ties up for PE funding
The Hindu Business Line, May 27, 2009, Page 2
Bangalore
Sobha Developers has entered into an agreement with a private investor for joint development of projects. Mr J.C. Sharma, Managing Director, said that the company has entered into a term sheet with a private equity investor, Purna Partners, for an investment of Rs 225 crore “at the special purpose vehicle (SPV) level for development of certain projects in Bangalore and other cities.” The company received Rs 25 crore on Tuesday. Both the partners have to “mutually agree on the percentage of stake that the private investor would hold in these developments,” said Mr Sharma. “We are not averse to giving more than 51 per cent stake in these projects also,” he added. Each of these projects would be valued separately, said the company in its announcement. Sobha Developers has identified the land parcels for these projects, which could be residential, commercial or mix development, “but the number of projects will be decided by the investor,” he said. The company will use land parcels from its land bank, execute and market these projects too, he said. —
Our Bureau
The Hindu Business Line, May 27, 2009, Page 2
Bangalore
Sobha Developers has entered into an agreement with a private investor for joint development of projects. Mr J.C. Sharma, Managing Director, said that the company has entered into a term sheet with a private equity investor, Purna Partners, for an investment of Rs 225 crore “at the special purpose vehicle (SPV) level for development of certain projects in Bangalore and other cities.” The company received Rs 25 crore on Tuesday. Both the partners have to “mutually agree on the percentage of stake that the private investor would hold in these developments,” said Mr Sharma. “We are not averse to giving more than 51 per cent stake in these projects also,” he added. Each of these projects would be valued separately, said the company in its announcement. Sobha Developers has identified the land parcels for these projects, which could be residential, commercial or mix development, “but the number of projects will be decided by the investor,” he said. The company will use land parcels from its land bank, execute and market these projects too, he said. —
Our Bureau
Indian HNIs bitten by overseas realty bug
Indian HNIs bitten by overseas realty bug
The Economic Times, May 27, 2009, Page 3
Prices In US, UK, Australia, South Africa, Singapore Fall Up To 35%
Writankar Mukherjee KOLKATA
THE slump in global realty markets has thrown open opportunities for Indian high networth individuals (HNIs). The near 25-35% fall in property prices in Australia, the US, the UK, South Africa and markets closer home such as the Gulf and Singapore, has triggered a huge surge in demand from Indian buyers keen to invest in overseas property.
Realty brokers claim Mumbai and Delhi — which usually lead the pack in overseas property deals — are witnessing nearly 100% growth in such transactions since February with some 25 to 30 such transactions taking place every month. Brokers claim buyers in Surat, Bhubaneshwar, Jaipur, Ahmedabad, Vadodara, Kolkata and Amritsar are also showing interest.
“It’s really a good time to buy property overseas since prices in most of these markets are even cheaper than in some top Indian cities. The demand is more in Dubai, Malaysia, Singapore, Thailand, Australia and London,” CB Richard Ellis CMD (South Asia) Anshuman Magazine told ET.
There are plenty of projects in Dubai which are selling at a price band of Rs 2,500-5,000 per sqft. Land in the UK countryside such as Cheshire is being sold for Rs 1,100 per sqft, while that in Helsby at just Rs 370 per sqft. By comparison, prices in some major Indian realty hotspots are equally competitive—flats in Gurgaon are priced at Rs 3,000-5,000 per sqft, in Kolkata’s Rajarhat at Rs 2,800-3,500 per sqft and Navi Mumbai between Rs 1,800 and Rs 6,000 per sqft.
In the US, home prices have reportedly fallen in nine out of 10 cities. Brokers claim realty prices in cities like Fort Myers (Florida), Saginaw (Michigan), Akron (Ohio), San Francisco, Riverside and San Jose (California) have dropped by more than 40%. What’s more, nearly 40-odd islands are up for sale in Australia at three-year old prices—one can grab an island for A$1.3 million.
The ambassador of Ireland in India, Kenneth Thompson, said the global meltdown has reduced property prices in Ireland by 25%. “As a result, we are now seeing several Indian HNIs and NRIs buying property in Ireland, especially holiday homes in western parts of the country,” he said.
Even as a pure play investment option, foreign real estate is becoming attractive. “In fact, several of the buyers plan to give their flats on rent. Even now, the return on investment through rental earnings is around 10-12% in the US compared to a 2-5% return in India,” said Jones Lang Lasalle Meghraj associate director Mayank Saksena.
The Gulf and the UK are turning into investor havens due to their investor-friendly regulations. For instance, in UAE a foreigner does not need to pay tax on income on purchase and sale of property. Similarly, Qatar, too, is turning out to be a good option since it is a tax-free country.
“Even three years back, some of these markets had strict regulations for foreigners buying property. However, the liberalised policies in the backdrop of the global real estate slump is now a big trigger,” REBI head (East) Hemant Sikaria said. REBI has handled several overseas deals in Dubai and the Southeast Asia.
The Economic Times, May 27, 2009, Page 3
Prices In US, UK, Australia, South Africa, Singapore Fall Up To 35%
Writankar Mukherjee KOLKATA
THE slump in global realty markets has thrown open opportunities for Indian high networth individuals (HNIs). The near 25-35% fall in property prices in Australia, the US, the UK, South Africa and markets closer home such as the Gulf and Singapore, has triggered a huge surge in demand from Indian buyers keen to invest in overseas property.
Realty brokers claim Mumbai and Delhi — which usually lead the pack in overseas property deals — are witnessing nearly 100% growth in such transactions since February with some 25 to 30 such transactions taking place every month. Brokers claim buyers in Surat, Bhubaneshwar, Jaipur, Ahmedabad, Vadodara, Kolkata and Amritsar are also showing interest.
“It’s really a good time to buy property overseas since prices in most of these markets are even cheaper than in some top Indian cities. The demand is more in Dubai, Malaysia, Singapore, Thailand, Australia and London,” CB Richard Ellis CMD (South Asia) Anshuman Magazine told ET.
There are plenty of projects in Dubai which are selling at a price band of Rs 2,500-5,000 per sqft. Land in the UK countryside such as Cheshire is being sold for Rs 1,100 per sqft, while that in Helsby at just Rs 370 per sqft. By comparison, prices in some major Indian realty hotspots are equally competitive—flats in Gurgaon are priced at Rs 3,000-5,000 per sqft, in Kolkata’s Rajarhat at Rs 2,800-3,500 per sqft and Navi Mumbai between Rs 1,800 and Rs 6,000 per sqft.
In the US, home prices have reportedly fallen in nine out of 10 cities. Brokers claim realty prices in cities like Fort Myers (Florida), Saginaw (Michigan), Akron (Ohio), San Francisco, Riverside and San Jose (California) have dropped by more than 40%. What’s more, nearly 40-odd islands are up for sale in Australia at three-year old prices—one can grab an island for A$1.3 million.
The ambassador of Ireland in India, Kenneth Thompson, said the global meltdown has reduced property prices in Ireland by 25%. “As a result, we are now seeing several Indian HNIs and NRIs buying property in Ireland, especially holiday homes in western parts of the country,” he said.
Even as a pure play investment option, foreign real estate is becoming attractive. “In fact, several of the buyers plan to give their flats on rent. Even now, the return on investment through rental earnings is around 10-12% in the US compared to a 2-5% return in India,” said Jones Lang Lasalle Meghraj associate director Mayank Saksena.
The Gulf and the UK are turning into investor havens due to their investor-friendly regulations. For instance, in UAE a foreigner does not need to pay tax on income on purchase and sale of property. Similarly, Qatar, too, is turning out to be a good option since it is a tax-free country.
“Even three years back, some of these markets had strict regulations for foreigners buying property. However, the liberalised policies in the backdrop of the global real estate slump is now a big trigger,” REBI head (East) Hemant Sikaria said. REBI has handled several overseas deals in Dubai and the Southeast Asia.
Tuesday, May 26, 2009
Krugman: global economy on track
Krugman: global economy on track
The Financial Express, May 26, 2009, Page 11
Reuters, Abu Dhabi
The world economy has avoided “utter catastrophe” and industrialised countries could register growth this year, Nobel Prize-winning economist Paul Krugman said on Monday.
“I will not be surprised to see world trade stabilise, world industrial production stabilise and start to grow two months from now,” Krugman told a seminar.
“I would not be surprised to see flat to positive GDP growth in the United States, and maybe even in Europe, in the second half of the year.”
The Princeton professor and New York Times columnist has said he fears a decade-long slump like that experienced by Japan in the 1990s. He has criticised the US administration’s bailout plan to persuade investors to help rid banks of up to $1 trillion in toxic assets as amounting to subsidised purchases of bad assets.
Downturn to force major correction in realty retail: study
Downturn to force major correction in realty retail: study
The Financial Express, Corporates & Markets, May 26, 2009, Page 1
Sajan C Kumar, Chennai
Taking cue from the lingering downturn, the real estate market across the country is rapidly undergoing major correction in the commercial space sale. While prospective occupiers are waiting for prices to adjust further, worsening market conditions are taking toll on realtors, finds a study by the real estate services firm Jones Lang LaSalle.
The Asia Pacific Digest for the first quarter of 2009 predicts that retail sales in major regional markets are likely to weaken further in the next 12 months due to the deteriorating job market conditions and a slowdown in tourist numbers. The lack of interest in commercial space can be attributed to the difficult trading conditions faced by the retail industry, particularly those at the higher-end. They have become cautious towards expansions and instead started focusing on existing store operations.
According to the study, rentals fell in most prime retail locations in India's tier I cities in first quarter of 2009. Delhi rentals were down 16.7% over the previous quarter, and Mumbai down by 10.5%, with many retailers relocating from malls to high street locations.
The first quarter of 2009 was one of the most discouraging quarters for Delhi's retail realty market. The sluggishness in the last two quarters of 2008 continued in first quarter and resulted in hefty decline in demand for retail mall space. Declining footfalls coupled with fledgling sales volumes resulted in further squeeze in retailers' margins which further pressurised existing occupiers to not only vacate less-profitable micro-markets, but also put off expansion plans for a few months.
Jones Lang LaSalle in its outlook for Delhi's realty market foresees that the revenue-sharing model will continue to be the most-preferred lease model, though the occupiers will stress upon pure revenue sharing. The supply stream will continue to put pressure on existing rentals and it is expected that the rentals will further decline by the middle or end of the year.
In Mumbai, retailers were seen negotiating firmly with developers on their existing deals, shutting unviable outlets and cancelling pre-commitments in under-construction malls. The pressure on retailers to cut costs trickled down to mall developers as occupiers have started looking at available options to cut their operational costs. With rising vacancy levels and strong future supply in the pipeline, retailers have more options to choose from and have more leverage in negotiating with the developers, says study.
On outlook for Mumbai, the study says that considering the diminishing demand, huge supply pipeline, rising vacany levels and asset pricing is expected to see further correction in short term. Retailers are not only negotiating on reduced rentals but also on higher rent-free periods. There are high possibilities of project completion delays and more instances of projects being shelved.
Overall vacany levels in prime malls of Bangalore rose to 1% in first quarter of 2009 from 0.5% in Q4 of 2008. This can be attributed to dampening demand for mall space. The city witnessed negative absorption in Q1, 2009, which pushed its vacancy levels from 0% in Q4, 2008 to 1.7% in Q1, 2009. The study says though these figures seem small and insignificant, they indicate an emerging trend in the Bangalore's retail market.
On outlook for Bangalore, Jones Lang LaSalle says the future supply of malls expected between 2009 and 2011 stands at 6.5 million sq-ft. Owing to huge future supply, overall rental values are expected to decline further during the next two to three quarters.
In Kolkata, developers remained cautious and have started re-valuating their development plans. Some of the proposed malls have been shelved, while the usage of few others has been changed from retail to retail-cum-office or retail-cum-hospitality type, says the study. Average rentals in the city continued to fall, registering a decline of 9.1% over the quarter. Malls in prime area witnessed a rental correction of 23.1% and the outlook for the city foresees more downward trend in rentals as demand remains sluggish and future supply struggles for pre-leasing.
Subscribe to:
Posts (Atom)
Posts
