Tuesday, June 30, 2009
GDP to grow 7% if monsoon doesn’t fail
GDP to grow 7% if monsoon doesn’t fail
The Times of India, June 30, 2009, Page 20
New Delhi: The chairman of PM's Economic Advisory Council, Suresh Tendulkar, said on Monday the economy would expand by at least 7% during the current financial year, provided the monsoon does not fail. He ruled out the need for pressing the panic button at the moment.
Talking to news persons on the sidelines of a function to observe the third Statistics Day here, Tendulkar said, "If the monsoon does not fail, the economy will grow by at least 7% (during 2009-10). Asked about the impact of delayed monsoon on agriculture and the economy, Tendulkar said, "it is too early to press the panic button." Rainfall, according to latest official estimates, is likely to be only 93% of the long-period average.
As regards inflation, Tendulkar said, it is likely to remain between 5-6% by the end of current financial year. "The Wholesale Price Index would still be under 5-6%, if monsoon are all right. If monsoon fails, it will be little more", he added. Tendulkar also expressed confidence that the economy, which has been reeling under the impact of the global financial meltdown, will recover by September.
Having grown by about 9% continuously for three years, the growth rate slipped to 6.7% during 2008-09 on account of meltdown. Noting that high interest rate was a matter of concern, Tendulkar said, it might not be possible for banks to lower lending rates in absence of reduction in deposit rates. He added that RBI's policy rate cuts was getting reflected on lending rates. AGENCIES
‘WPI unsatisfactory inflation indicator’
New Delhi: Wholesale Price Index (WPI), currently used to measure inflation, is an "unsatisfactory" indicator of price movement and is eroding the credibility of government data in the minds of people, said the PM's Economic Advisory Council chairman, Suresh Tendulkar
"It (WPI) is an unsatisfactory indicator of rate of change of prices of consumer goods with which our everyday experience of inflation is associated", he said while speaking at the third Statistics Day here on Monday. AGENCIES
Kelkar for GST on realty, construction & railways
Kelkar for GST on realty, construction & railways
The Financial Express, June 30, 2009, Page 1
Economy Bureau, New Delhi
As the Centre and states work out the modalities of the goods & services tax (GST), the Thirteenth Finance Commission has proposed to bring construction, real estate and railways under the GST net. Including these sectors under the GST ambit would help widen the tax base and prevent tax evasion, said Vijay Kelkar, the Commission’s chairman and the architect of GST in India, on Monday.
The Commission also offered a compensation mechanism to states for any revenue loss from GST implementation.
Addressing a Assocham conference, Kelkar said, “The construction sector is a significant contributor to the national economy. Housing expenditure dominates personal consumption expenditure. The present piece-meal taxation of this sector encourages perverse incentives.”
Admitting that the inclusion of these sectors does not figure in the ongoing discussions on GST, Kelkar cited the potential long-term benefits of their inclusion to the economy ‘either immediately or during a subsequent phase.’
“Raw material is charged Cenvat, the works contract is charged VAT and stamp duty is levied on the sale. With no provision of input tax credit in place, there is little incentive to record such transactions either at the construction stage or at the sale stage at their correct value. This leads to substantial loss of tax revenue and fuels the parallel economy,” he said.
Similarly, bringing railways under GST would bring it on a level field with road and air cargo transportation and help track the movement of goods across state. Kelkar said. “The railways themselves will benefit from this by availing of input tax credit on the significant purchases made by them,” he pointed out.
Tax experts echoed Kelkar’s views although they said this should be looked at in the long term.
“The present GST regime will be very basic where Cenvat and state VAT are merged. These services can be included in the long term, especially if we move from a dual GST to a state GST,” said Mahesh Purohit, director, Foundation for Public Economics & Policy Research.
The Commission is reviewing the planned structure of the tax to assess its impact on the Centre and states’ tax kitty. It will come out with a new basis for devolution of taxes between the two.
In a bid to placate the concerns of states on possible revenue losses under GST, Kelkar said, “It is possible that some states may want assurances that existing revenues will be protected when they implement GST. The Commission is willing to consider providing for compensation in order to advance the implementation of a ‘flawless’ GST.”
Urban mission to add 28 cities, seeks Rs 1.5 lakh crore funding
Urban mission to add 28 cities, seeks Rs 1.5 lakh crore funding
The Financial Express, June 30, 2009, Page 3
fe Bureau, New Delhi
The government is working on the expansion of Jawaharlal Nehru National Urban Renewal Mission (JNNURM) by including cities having a population of at least 5 lakh, thus expanding into 28 more cities, and is seeking to raise earmarked funds from Rs 1,00,000 crore to Rs 1,50,000 crore.
JNNURM is the flagship scheme of the ministry of urban development. It currently covers 65 cities, each having a population of at least 10 lakh people and Rs 1,00,000 crore are to be raised by the Centre, state governments and urban local bodies.
“We have already sanctioned schemes worth Rs 95,385 crore. Today, we have the problem of plentiful of demand. I am talking to the finance minister and it would be our endeavour to see that the amount under the mission is raised by Rs 50,000 crore,” urban development minister S Jaipal Reddy told reporters highlighting the key features of the 100-day agenda of his ministry. The new fund is planned to be raised equally by the union government and states.
“Twenty eight more cities would be included in the mission, taking the total number of covered cities to 93,” he added. The government is also looking at additional allocation under its Urban Infrastructure Development Scheme in Small and Medium Towns as the present funds of Rs 11,400 crore are “nearly exhausted”.
As per the memoranda of undertaking signed with the Centre, states that benefit from JNNURM have to undertake reforms, including the repeal of Urban Land Ceiling Act, rationalisation of stamp duty and tax system. While some states have already implemented these reforms, others including Punjab and Rajasthan have not. Warning the erring states and local bodies, Reddy said, “If the states or local bodies don’t undertake the necessary reforms, we will reduce the flow of funds to them.”
In order to create a better pricing mechanism and settle disputes in the housing sector, the government is also working on setting up a regulator. “We will work on the shape of this regulator for Delhi in the first 100 days. The regulator in Delhi would act as the model for other states,” Reddy said. For this, the government would take up the Real Estate Management (Regulation & Control) Bill for the National Capital Territory (NCT) of Delhi.
Concentrating on the economically weaker section of the society and lower income groups, the Delhi Development Authority would build 40,000 flats, for which “tender documents have already been made ready,” he said. About 10,000 flats would be built for the middle-income group and nearly 15,000 under-construction houses would be made available by 2011.
The government would make “focused efforts” to finalise the zonal development plans of Delhi, which would ensure private participation in land development as per the notified Delhi Master Plan 2021.
Aimed at improving the transport system in cities, the Centre has proposed 134 kms of metro line at the total cost of Rs 30,418 crore in Bangalore, Kolkata, Chennai and Mumbai, the minister said. The NCT of Delhi would be connected to Delhi Metro with Noida link getting commissioned in August this year and the Gurgaon line becoming operational in January 2010, he added. The government would also procure over 15,000 buses for the rapid bus transit system in 61 cities by December 2009, Reddy said.
Punjab yet to avail Rs 470-cr JNNURM funds
Punjab yet to avail Rs 470-cr JNNURM funds
The Financial Express, June 30, 2009, Page 16
Punjab has "failed miserably" to take benefit of the Centre's flagship Jawahar Lal Nehru National Urban Renewal Mission (JNNURM) scheme, as it is yet to avail Rs 470 crore against the seven-year allocation of Central assistance of Rs 538 crore, housing and urban poverty alleviation minister Kumari Selja alleged on Monday.
While neighbouring states of Haryana, Himachal Pradesh and even the Union Territory of Chandigarh have already availed their seven-year allocation commitment from the Centre, Punjab is "lagging behind", she told a press conference in Chandigarh.
"The Centre has no problem in releasing the funds, but it is entirely demand-based. If there is no demand from the state concerned, all we can do is to bring it to their notice, which we have been doing in Punjab's case," she said.
Terming JNNURM a great success, Selja said over 15 lakh houses are under construction for the urban poor under JNNURM, out of which one lakh have been built and about 4.5 lakh are being built. "There is a need to focus on urban housing programmes for the poor living in slums. The government proposes to introduce Rajiv Awas Yojana for slum dwellers and the urban poor on the lines of the Indira Awas Yojana for the rural poor. The schemes for affordable housing through partnership and the scheme for interest subsidy for urban housing would be dovetailed into the Rajiv Awas Yojana, which would extend support under JNNURM to states that are willing to assign property rights to people living in slum areas. This would help create a slum-free India in five years," she said.
Selja, who is also tourism minister, said both ministries under her have vast potential for employment generation and convergence between the two is under active consideration of the government. Selja said the thrust area for the government would be creation and improvement of tourism infrastructure, promotion and publicity of India as a preferred tourism destination overseas and promotion of domestic tourism.
She said the ministry is also planning to organise road shows in the north to woo private players for tourism development.
The Financial Express, June 30, 2009, Page 16
Punjab has "failed miserably" to take benefit of the Centre's flagship Jawahar Lal Nehru National Urban Renewal Mission (JNNURM) scheme, as it is yet to avail Rs 470 crore against the seven-year allocation of Central assistance of Rs 538 crore, housing and urban poverty alleviation minister Kumari Selja alleged on Monday.
While neighbouring states of Haryana, Himachal Pradesh and even the Union Territory of Chandigarh have already availed their seven-year allocation commitment from the Centre, Punjab is "lagging behind", she told a press conference in Chandigarh.
"The Centre has no problem in releasing the funds, but it is entirely demand-based. If there is no demand from the state concerned, all we can do is to bring it to their notice, which we have been doing in Punjab's case," she said.
Terming JNNURM a great success, Selja said over 15 lakh houses are under construction for the urban poor under JNNURM, out of which one lakh have been built and about 4.5 lakh are being built. "There is a need to focus on urban housing programmes for the poor living in slums. The government proposes to introduce Rajiv Awas Yojana for slum dwellers and the urban poor on the lines of the Indira Awas Yojana for the rural poor. The schemes for affordable housing through partnership and the scheme for interest subsidy for urban housing would be dovetailed into the Rajiv Awas Yojana, which would extend support under JNNURM to states that are willing to assign property rights to people living in slum areas. This would help create a slum-free India in five years," she said.
Selja, who is also tourism minister, said both ministries under her have vast potential for employment generation and convergence between the two is under active consideration of the government. Selja said the thrust area for the government would be creation and improvement of tourism infrastructure, promotion and publicity of India as a preferred tourism destination overseas and promotion of domestic tourism.
She said the ministry is also planning to organise road shows in the north to woo private players for tourism development.
Sobha mops up $130 m
Sobha mops up $130 m
The Economic Times, June 30, 2009, Page 6
Our Bureau BANGALORE
BANGALORE-based realty major Sobha Developers has attracted investor commitments for its $100-$130 million qualified institutional placement (QIP) issue. It is understood that the company has managed to raise the capital on day one itself from a dozen Indian and global institutional investors. The issue opened for subscription on Monday.
The QIP was priced at 209.40 per share. On BSE, the Sobha scrip was up 4.99% to close at Rs 214.70 on Monday.
Following the QIP issue of 30 million shares, promoter holding in Sobha may come down between 66% and 61%. Promoters currently hold 87% in Sobha.
Meltdown forces realty developers to shift focus on studio apartments
Meltdown forces realty developers to shift focus on studio apartments
The Financial Express, June 30, 2009, Page 16
Preeti Parashar, Chandigarh
As the demand for luxurious apartments declines in the northern region, real estate developers are now turning toward studio apartments, which have suddenly become popular.
While some developers have announced fresh projects for developing studio apartments, others have opted to convert the ongoing projects into one-room or two-room apartments. Market experts view this as a corrective measure being adopted by the developers to counter the slump in the realty market.
Delhi-based developer, Sandwoods Infratech Projects, after developing two luxury housing projects in Zirakpur (Punjab), has moved on to develop studio apartments priced between Rs 6.22-6.55 lakh in Baddi, the industrial hub of Himachal Pradesh. Taking care of the basic needs of the middle income group, the company is offering 360 one-room apartments in Baddi.
SK Bagolia, managing director of Sandwoods Infratech, told FE, "We are coming up with a five-storey Sandwoods Heights in Baddi and the apartments have been priced keeping in mind the needs of the service class as well as the skilled class. We have also launched another residential project in Shimla recently in the affordable housing segment.”
Another realtor, CHD Developers, is targeting tier-II and tier-III cities for further expansion. After launching projects in Vrindavan (UP), Rishikesh (Uttarakhand), Neemrana (Rajasthan) and Karnal (Haryana), the company is planning to develop a studio apartments project in Vrindavan and another group housing project at Haridwar. These plans are likely to be announced within the next few months.
Besides studio apartments, companies are also launching service apartments. For instance, Omaxe is set to announce limited service apartments in Omaxe Royal Residency on Pakhowal Road, Ludhiana. “These apartments, with an area of 650 square feet each, are likely to be launched in July. The apartments will be fully furnished and act as alternatives to good hotels,” said an Omaxe official.
Enquiries in Baddi revealed that many developers have applied for converting their present luxury housing projects to studio apartment projects. “Studio apartments are in demand here as companies rent them out to employees. We have dedicated two blocks of the total 23 in our residential project to studio apartments and have applied to develop more blocks in the same category. The rentals here for fully-furnished two-room sets range between Rs 10,000 and Rs 12,000 per month,” said SK Bajaj of Shakun Infrastructure Development, Baddi.
The Financial Express, June 30, 2009, Page 16
Preeti Parashar, Chandigarh
As the demand for luxurious apartments declines in the northern region, real estate developers are now turning toward studio apartments, which have suddenly become popular.
While some developers have announced fresh projects for developing studio apartments, others have opted to convert the ongoing projects into one-room or two-room apartments. Market experts view this as a corrective measure being adopted by the developers to counter the slump in the realty market.
Delhi-based developer, Sandwoods Infratech Projects, after developing two luxury housing projects in Zirakpur (Punjab), has moved on to develop studio apartments priced between Rs 6.22-6.55 lakh in Baddi, the industrial hub of Himachal Pradesh. Taking care of the basic needs of the middle income group, the company is offering 360 one-room apartments in Baddi.
SK Bagolia, managing director of Sandwoods Infratech, told FE, "We are coming up with a five-storey Sandwoods Heights in Baddi and the apartments have been priced keeping in mind the needs of the service class as well as the skilled class. We have also launched another residential project in Shimla recently in the affordable housing segment.”
Another realtor, CHD Developers, is targeting tier-II and tier-III cities for further expansion. After launching projects in Vrindavan (UP), Rishikesh (Uttarakhand), Neemrana (Rajasthan) and Karnal (Haryana), the company is planning to develop a studio apartments project in Vrindavan and another group housing project at Haridwar. These plans are likely to be announced within the next few months.
Besides studio apartments, companies are also launching service apartments. For instance, Omaxe is set to announce limited service apartments in Omaxe Royal Residency on Pakhowal Road, Ludhiana. “These apartments, with an area of 650 square feet each, are likely to be launched in July. The apartments will be fully furnished and act as alternatives to good hotels,” said an Omaxe official.
Enquiries in Baddi revealed that many developers have applied for converting their present luxury housing projects to studio apartment projects. “Studio apartments are in demand here as companies rent them out to employees. We have dedicated two blocks of the total 23 in our residential project to studio apartments and have applied to develop more blocks in the same category. The rentals here for fully-furnished two-room sets range between Rs 10,000 and Rs 12,000 per month,” said SK Bajaj of Shakun Infrastructure Development, Baddi.
Monday, June 29, 2009
Sensex surges 419 pts on positive cues
Sensex surges 419 pts on positive cues
The Financial Express, June 27, 2009, Page 1
Reuters, Mumbai
The Bombay Stock Exchange benchmark Sensex surged over 419 points on Friday on frantic buying as investors took cues from higher Asian and European peers and built positions after the market had fallen 7.2 per cent over the past two weeks.
The Sensex, which commenced the day higher, spurted by 419.02 or 2.92 per cent to settle at 14,764.64, after touching a high of 14,781.94 point.
The broad-based 50-share National Stock Exchange index Nifty spurted by 133.65 points to 4,375.50, after reaching the day's high of 4,383.75 points.
The rally was backed by heavyweight stocks of Reliance Industries, Reliance Comm, Reliance Infra, Infosys Technologies, DLF Ltd, Larsen and Toubro, BHEL, State Bank of India and ICICI Bank.
Marketmen said buying activity picked up at the fag-end after an international rating agency said the Indian stocks are fairly valued.
The Tokyo-based Nomura Holding said the Indian stocks are "fairly valued" after a 49 per cent advance this year and further gains depend on government policies to boost economic growth and pare a budget deficit.
"There is more brisk buying by funds to create fresh positions at the beginning of the July-month contract in the derivatives segment today," said NSE broker Rajiv Malik.
US dollar ends sharply cheaper against Rupee
The U.S. Dollar ended sharply cheaper against the Rupee at Rs.48.10/11 per dollar but the Pound Sterling turned higher at Rs.79.24/26 per pound at the close of the Interbank Foreign Exchange (Forex) market in Mumbai on Friday.
The Financial Express, June 27, 2009, Page 1
Reuters, Mumbai
The Bombay Stock Exchange benchmark Sensex surged over 419 points on Friday on frantic buying as investors took cues from higher Asian and European peers and built positions after the market had fallen 7.2 per cent over the past two weeks.
The Sensex, which commenced the day higher, spurted by 419.02 or 2.92 per cent to settle at 14,764.64, after touching a high of 14,781.94 point.
The broad-based 50-share National Stock Exchange index Nifty spurted by 133.65 points to 4,375.50, after reaching the day's high of 4,383.75 points.
The rally was backed by heavyweight stocks of Reliance Industries, Reliance Comm, Reliance Infra, Infosys Technologies, DLF Ltd, Larsen and Toubro, BHEL, State Bank of India and ICICI Bank.
Marketmen said buying activity picked up at the fag-end after an international rating agency said the Indian stocks are fairly valued.
The Tokyo-based Nomura Holding said the Indian stocks are "fairly valued" after a 49 per cent advance this year and further gains depend on government policies to boost economic growth and pare a budget deficit.
"There is more brisk buying by funds to create fresh positions at the beginning of the July-month contract in the derivatives segment today," said NSE broker Rajiv Malik.
US dollar ends sharply cheaper against Rupee
The U.S. Dollar ended sharply cheaper against the Rupee at Rs.48.10/11 per dollar but the Pound Sterling turned higher at Rs.79.24/26 per pound at the close of the Interbank Foreign Exchange (Forex) market in Mumbai on Friday.
Housing sector sees a silver lining, sales up 25%
Housing sector sees a silver lining, sales up 25%
The Economic Times, June 28, 2009, Page 1
Neha Dewan & Anand Rawani NEW DELHI
ACTIVITY levels are gaining traction in the near moribund housing market as a flurry of interest rate cuts, price drops and the building industry’s focus on affordable housing start to lure buyers back into the market.
A cross section of banks, property developers and real estate consultancies that SundayET spoke to confirmed that the rise in activity levels since the start of the year had picked up momentum in the last three months, with some in the sector saying that sales were up by as much as 25-30% since April, after witnessing a growth of 10-15% during the first quarter of 2009.
India’s property market started showing signs of serious trouble nearly a year ago with first the American sub-prime crisis and later the Lehman bankruptcy playing havoc. The overpriced projects by builders found few takers which was worsened with the IT industry facing a major setback. Builders were stuck with high-end apartments which had no takers. There was a severe drop in sales with people wanting to conserve resources. As a result, property prices too fell 30-45% since peak of 2007, according to industry estimates.
But today the scenario is different, with builders getting a mix of mid end and affordable housing into their portfolio. Raminder Grover, CEO – Homebay Residential, Jones Lang LaSalle Meghraj, says the revival in sales has been, conservatively speaking, to the tune of around 25% across the mid-to-high income segments, according to his company’s sales records.
Rohtas Goel, CMD of Delhi-based Omaxe too says there has been a 30% increase in sales thanks to factors such as a reversal in general economic sentiment after the elections and more options available in affordable housing.
Statistics too would appear to bear this out. India’s largest real estate developer DLF says it has sold almost 1,500 flats in various cities since April, notably some 400 flats in its mainstay market Gurgaon, 700 in Bangalore, 100 plots in Indore, 200 flats in Hyderabad and 50 in Cochin.
Rival Unitech has managed to sell more than 4,000 units in the last two and a half months in the National Capital Region, Chennai and Mumbai. Omaxe has also sold almost 500 apartments in its Omaxe Eternity project in Vrindavan.
Niranjan Hiranandani, MD of Hiranandani Developers says there had been a sale of 7,000 apartments across the industry, mainly in Mumbai suburbs, over the last 60 days.
Despite indications of improving demand, builders don’t seem to be in a hurry to raise prices. They are conscious that demand was up due to price cuts and the affordable housing strategy.
The Economic Times, June 28, 2009, Page 1
Neha Dewan & Anand Rawani NEW DELHI
ACTIVITY levels are gaining traction in the near moribund housing market as a flurry of interest rate cuts, price drops and the building industry’s focus on affordable housing start to lure buyers back into the market.
A cross section of banks, property developers and real estate consultancies that SundayET spoke to confirmed that the rise in activity levels since the start of the year had picked up momentum in the last three months, with some in the sector saying that sales were up by as much as 25-30% since April, after witnessing a growth of 10-15% during the first quarter of 2009.
India’s property market started showing signs of serious trouble nearly a year ago with first the American sub-prime crisis and later the Lehman bankruptcy playing havoc. The overpriced projects by builders found few takers which was worsened with the IT industry facing a major setback. Builders were stuck with high-end apartments which had no takers. There was a severe drop in sales with people wanting to conserve resources. As a result, property prices too fell 30-45% since peak of 2007, according to industry estimates.
But today the scenario is different, with builders getting a mix of mid end and affordable housing into their portfolio. Raminder Grover, CEO – Homebay Residential, Jones Lang LaSalle Meghraj, says the revival in sales has been, conservatively speaking, to the tune of around 25% across the mid-to-high income segments, according to his company’s sales records.
Rohtas Goel, CMD of Delhi-based Omaxe too says there has been a 30% increase in sales thanks to factors such as a reversal in general economic sentiment after the elections and more options available in affordable housing.
Statistics too would appear to bear this out. India’s largest real estate developer DLF says it has sold almost 1,500 flats in various cities since April, notably some 400 flats in its mainstay market Gurgaon, 700 in Bangalore, 100 plots in Indore, 200 flats in Hyderabad and 50 in Cochin.
Rival Unitech has managed to sell more than 4,000 units in the last two and a half months in the National Capital Region, Chennai and Mumbai. Omaxe has also sold almost 500 apartments in its Omaxe Eternity project in Vrindavan.
Niranjan Hiranandani, MD of Hiranandani Developers says there had been a sale of 7,000 apartments across the industry, mainly in Mumbai suburbs, over the last 60 days.
Despite indications of improving demand, builders don’t seem to be in a hurry to raise prices. They are conscious that demand was up due to price cuts and the affordable housing strategy.
Low-cost housing’s slow rise
Low-cost housing’s slow rise
The Hindu Business Line, June 28, 2009, Page 15
--------------------------------------------------------------------------------
A high-volume, low-profit proposition, and with land still costly, housing for the weaker sections is not making much headway.
--------------------------------------------------------------------------------
— N. Balaji
At the beginning of the Eleventh Plan, the Government estimated a shortage of about 25 million houses in urban area.
S. Shanker
While the affordable housing segment is in the limelight, generating some demand in an overall sluggish real-estate market, low-cost housing, essentially for the low-income group and economically weaker sections, appears to be making little headway.
The Government estimated a shortage of about 25 million houses in urban area at the beginning of the Eleventh Plan, of which 97 per cent is in the low-income group.
Mumbai has seen a few launches in the last two to three months, one of them being the Tata Housing project at Boisar, about 100 km from the city. The company received such a good response for its initial offer of 1,000 units that it raised the number to 1,300. The apartments, in the 283-465 sq.ft range, cost between Rs 3.9 lakh and Rs 6.7 lakh. Tata Housing has also tied up with Micro Housing Finance Corporation to provide easy finance to its customers.
LAND COST
Mr Brotin Banerjee, Managing Director and Chief Executive Officer, Tata Housing, feels land cost is a major issue and it should be understood that low-cost housing is high volume and lower profits, compared to high-end formats. When it comes to joint ventures, the philosophy of the landowner should be in harmony with that of the company, he says.
FUNDING, key ISSUE
Matheran Realty, among the first to launch low-cost homes in the price bracket of Rs 3-7 lakh in Karjat, which is also 100 km from Mumbai, says its buyers are finding it difficult to get finance. According to Mr Pravin Banavalikar, CEO, though his project has been pre-approved by 10 banks, only about 250 of over 1,800 applicants who sought loans have received sanctions. It has more to do with the eligibility criteria and loan ticket size, besides the high number of applicants, he says.
The Maharashtra Housing and Area Development Authority, which put up 3,863 flats in the affordable segment, received a tremendous response for its offering. But then, the number on sale was miniscule compared to the over four lakh applications it attracted.
Early this month, Housing Development and Infrastructure Ltd signed a joint venture agreement with the Mumbai Metropolitan Region Development Authority (MMRDA) to develop 525 acres in Virar. The company intends to build and hand over 13 million sq.ft to the MMRDA for rental housing and construct 39 million sq.ft for sale. The project would come under the affordable category and is scheduled for completion in six years.
PRO-POOR
In a recent development, DHFL Property Services Ltd, a 100 per cent subsidiary of housing finance company Dewan Housing Finance Corporation Ltd, tied up with developers to market affordable projects for low-wage earners. It will market a 2,400-unit project in Boisar. The apartments are of 380-500 sq.ft and priced at Rs 1,300 a sq.ft.
Mr B.K. Madhur, CEO, DHFL Property Services, says the company has always “focused on enabling access to home ownership for the lower and middle income groups across India through our mortgage finance company DHFL.”
The company intends to launch similar projects in other far-flung Mumbai suburbs such as Virar, Karjat and Badlapur, besides promoting such ventures in Ahmedabad, Chennai and Hyderabad in the coming months.
RISK FREE
Mr Ashutosh Limaye, Associate Director - Strategic Consulting, Jones Lang LaSalle Meghraj, says high land cost is a deterrent for developers to offer affordable homes. Otherwise, low-cost housing, especially in the metros, is virtually a risk-free proposition. Importantly, even in affordable housing, a developer would have certain minimum profit expectations and if the cost of land does not make these expectations feasible, there is no incentive for the developer to venture into the low-budget home segment.
Buyers of affordable housing can avail themselves of bank funding. But then, the affordable housing segment also brings in certain unique limitations with it.
In the case of mid-to-high-end housing, most buyers can readily produce proof of income, whereas only about 50 per cent of buyers in the affordable housing segment would be able to do so.
Nevertheless, due to the high rate of demand, this would not prevent a healthy absorption rate if such projects are launched.
The Hindu Business Line, June 28, 2009, Page 15
--------------------------------------------------------------------------------
A high-volume, low-profit proposition, and with land still costly, housing for the weaker sections is not making much headway.
--------------------------------------------------------------------------------
— N. Balaji
At the beginning of the Eleventh Plan, the Government estimated a shortage of about 25 million houses in urban area.
S. Shanker
While the affordable housing segment is in the limelight, generating some demand in an overall sluggish real-estate market, low-cost housing, essentially for the low-income group and economically weaker sections, appears to be making little headway.
The Government estimated a shortage of about 25 million houses in urban area at the beginning of the Eleventh Plan, of which 97 per cent is in the low-income group.
Mumbai has seen a few launches in the last two to three months, one of them being the Tata Housing project at Boisar, about 100 km from the city. The company received such a good response for its initial offer of 1,000 units that it raised the number to 1,300. The apartments, in the 283-465 sq.ft range, cost between Rs 3.9 lakh and Rs 6.7 lakh. Tata Housing has also tied up with Micro Housing Finance Corporation to provide easy finance to its customers.
LAND COST
Mr Brotin Banerjee, Managing Director and Chief Executive Officer, Tata Housing, feels land cost is a major issue and it should be understood that low-cost housing is high volume and lower profits, compared to high-end formats. When it comes to joint ventures, the philosophy of the landowner should be in harmony with that of the company, he says.
FUNDING, key ISSUE
Matheran Realty, among the first to launch low-cost homes in the price bracket of Rs 3-7 lakh in Karjat, which is also 100 km from Mumbai, says its buyers are finding it difficult to get finance. According to Mr Pravin Banavalikar, CEO, though his project has been pre-approved by 10 banks, only about 250 of over 1,800 applicants who sought loans have received sanctions. It has more to do with the eligibility criteria and loan ticket size, besides the high number of applicants, he says.
The Maharashtra Housing and Area Development Authority, which put up 3,863 flats in the affordable segment, received a tremendous response for its offering. But then, the number on sale was miniscule compared to the over four lakh applications it attracted.
Early this month, Housing Development and Infrastructure Ltd signed a joint venture agreement with the Mumbai Metropolitan Region Development Authority (MMRDA) to develop 525 acres in Virar. The company intends to build and hand over 13 million sq.ft to the MMRDA for rental housing and construct 39 million sq.ft for sale. The project would come under the affordable category and is scheduled for completion in six years.
PRO-POOR
In a recent development, DHFL Property Services Ltd, a 100 per cent subsidiary of housing finance company Dewan Housing Finance Corporation Ltd, tied up with developers to market affordable projects for low-wage earners. It will market a 2,400-unit project in Boisar. The apartments are of 380-500 sq.ft and priced at Rs 1,300 a sq.ft.
Mr B.K. Madhur, CEO, DHFL Property Services, says the company has always “focused on enabling access to home ownership for the lower and middle income groups across India through our mortgage finance company DHFL.”
The company intends to launch similar projects in other far-flung Mumbai suburbs such as Virar, Karjat and Badlapur, besides promoting such ventures in Ahmedabad, Chennai and Hyderabad in the coming months.
RISK FREE
Mr Ashutosh Limaye, Associate Director - Strategic Consulting, Jones Lang LaSalle Meghraj, says high land cost is a deterrent for developers to offer affordable homes. Otherwise, low-cost housing, especially in the metros, is virtually a risk-free proposition. Importantly, even in affordable housing, a developer would have certain minimum profit expectations and if the cost of land does not make these expectations feasible, there is no incentive for the developer to venture into the low-budget home segment.
Buyers of affordable housing can avail themselves of bank funding. But then, the affordable housing segment also brings in certain unique limitations with it.
In the case of mid-to-high-end housing, most buyers can readily produce proof of income, whereas only about 50 per cent of buyers in the affordable housing segment would be able to do so.
Nevertheless, due to the high rate of demand, this would not prevent a healthy absorption rate if such projects are launched.
Going green makes economic sense too
Going green makes economic sense too
The Hindu Business Line, June 28, 2009, Page 15
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The cost of constructing a green building is around 8 per cent higher than that of a non-green one, but the breakeven period is as low as 2-3 years through savings on energy costs.
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Divya Trivedi
Betting big on the profitability of ‘green buildings’, the promoter of Kensville Golf Club, Savvy Infrastructure Ltd, is investing around Rs 400 crore in developing both commercial and residential projects over the next two years.
“As a philosophy, we have been using green materials for our buildings but now we have committed ourselves to going green in all our constructions. Currently, we are working on a commercial project worth Rs 300 crore — Shapath V — coming up on 20,000 sq.yards. It will be a mix of ownership and lease and will also house the Intercontinental Crowne Plaza Hotel,” Mr Sameer Sinha, Director, told Business Line.
The company is aiming for a LEED certification in Gold by the Indian Green Building Council for Shapath V, which is located in an upcoming business area of Ahmedabad.
The building will meet all the specifications of a ‘green building’ and will have a positive impact on the long-term return on investments for the company, he said.
The cost of constructing a green building is around 8 per cent higher than that of a non-green building, but the breakeven period is as low as 2-3 years through savings on energy costs, etc, said Mr Sinha. The average annual cost of ownership of a green house can be 30-40 per cent lower than a non-green one and it makes more sense economically due to its high marketability and rentals, he added.
“Certain parameters such as operational efficiency and human wellbeing index are taken into consideration, which are visible only when one starts using the building,” he said.
The Rs 600-crore Savvy has just begun construction on Solaris — a 400-apartment residential complex. The total size of the project is Rs 100 crore and it is expected to be ready in two years’ time, according to Mr Sinha. It will be the first ‘green’ residential building complex in the city.
Incentivising
Though developers in other cities have done a lot of work in the environmental-friendly green building space, Gujarat is still lagging behind with just 13 buildings lined up for certification this year.
Stamp duty exemptions and additional FSI are some of the incentives that Maharashtra and Andhra Pradesh provide for green buildings that need to be provided in Gujarat as well, said Mr Jaxay Shah, President, Confederation of Real Estate Developers Association of India, Gujarat.
The Hindu Business Line, June 28, 2009, Page 15
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The cost of constructing a green building is around 8 per cent higher than that of a non-green one, but the breakeven period is as low as 2-3 years through savings on energy costs.
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Divya Trivedi
Betting big on the profitability of ‘green buildings’, the promoter of Kensville Golf Club, Savvy Infrastructure Ltd, is investing around Rs 400 crore in developing both commercial and residential projects over the next two years.
“As a philosophy, we have been using green materials for our buildings but now we have committed ourselves to going green in all our constructions. Currently, we are working on a commercial project worth Rs 300 crore — Shapath V — coming up on 20,000 sq.yards. It will be a mix of ownership and lease and will also house the Intercontinental Crowne Plaza Hotel,” Mr Sameer Sinha, Director, told Business Line.
The company is aiming for a LEED certification in Gold by the Indian Green Building Council for Shapath V, which is located in an upcoming business area of Ahmedabad.
The building will meet all the specifications of a ‘green building’ and will have a positive impact on the long-term return on investments for the company, he said.
The cost of constructing a green building is around 8 per cent higher than that of a non-green building, but the breakeven period is as low as 2-3 years through savings on energy costs, etc, said Mr Sinha. The average annual cost of ownership of a green house can be 30-40 per cent lower than a non-green one and it makes more sense economically due to its high marketability and rentals, he added.
“Certain parameters such as operational efficiency and human wellbeing index are taken into consideration, which are visible only when one starts using the building,” he said.
The Rs 600-crore Savvy has just begun construction on Solaris — a 400-apartment residential complex. The total size of the project is Rs 100 crore and it is expected to be ready in two years’ time, according to Mr Sinha. It will be the first ‘green’ residential building complex in the city.
Incentivising
Though developers in other cities have done a lot of work in the environmental-friendly green building space, Gujarat is still lagging behind with just 13 buildings lined up for certification this year.
Stamp duty exemptions and additional FSI are some of the incentives that Maharashtra and Andhra Pradesh provide for green buildings that need to be provided in Gujarat as well, said Mr Jaxay Shah, President, Confederation of Real Estate Developers Association of India, Gujarat.
Housing Ministry bats for mortgage guarantee fund
Housing Ministry bats for mortgage guarantee fund
The Hindu Business Line, June 28, 2009, Page 5
Our Bureau, New Delhi
The Housing and Urban Poverty Alleviation Minister, Ms Kumari Selja, has pitched for creation of a ‘Housing Mortgage Guarantee Fund’, entailing a corpus of about Rs 15,000 crore. The fund could be conceptualised as part of the Rajiv Awas Yojana, sources said. While submitting a proposal in this regard to the Finance Minister for inclusion in the Budget, Ms Selja maintained that an initial allocation of Rs 225 crore could be adequate to set up the fund.
HUDCO restructure
The Minister has also sought restructuring of HUDCO (Housing And Urban Development Corporation Ltd).
The Ministry has urged the Government to restructure HUDCO and permit it to float tax-free bonds to raise funds for housing institutions, sources said.
The Hindu Business Line, June 28, 2009, Page 5
Our Bureau, New Delhi
The Housing and Urban Poverty Alleviation Minister, Ms Kumari Selja, has pitched for creation of a ‘Housing Mortgage Guarantee Fund’, entailing a corpus of about Rs 15,000 crore. The fund could be conceptualised as part of the Rajiv Awas Yojana, sources said. While submitting a proposal in this regard to the Finance Minister for inclusion in the Budget, Ms Selja maintained that an initial allocation of Rs 225 crore could be adequate to set up the fund.
HUDCO restructure
The Minister has also sought restructuring of HUDCO (Housing And Urban Development Corporation Ltd).
The Ministry has urged the Government to restructure HUDCO and permit it to float tax-free bonds to raise funds for housing institutions, sources said.
Apex court bench set to replace green tribunal
Apex court bench set to replace green tribunal
The Financial Express, June, 27, 2009
Sandip Das, New Delhi
To avoid a confrontation with the judiciary, the government has decided to replace the proposed National Environment Tribunal with a green bench to be formed by Supreme Court judges.
The national green bench will be the highest judicial body to deal with environment related court cases, especially those where industrial plans are often ranged against civil society concerns. All civil disputes relating to mandatory environmental and forest clearances required for new industrial projects will be settled by this bench.
“The whole idea behind setting up the green bench is to form a specialised tribunal of judges with the ultimate authority resting with the Supreme Court.” Jairam Ramesh (pictured), Union minister for environment and forest, said on Friday.
Setting up the bench means the government has jettisoned the National Environment Tribunal Bill 2007 that would have clipped the authority of the judiciary at several levels to deal with environment issues. The Cabinet note circulated by the ministry of environment & forests notes that the bench would also replace the National Environment Tribunal, which was never notified as well as the National Environment Appellate Authority.
Ramesh said his ministry has moved a Cabinet note to set up this specialised judicial body. He also clarified that the ministry is working out a proposal to reconcile the working of the new green bench with the various committees set up to assist the Supreme Court in various environment-related cases. About 50 disputes relating mostly to mining, hydel and coal-based power projects are lying with the Supreme Court, as they have run into environmental and forest clearance related obstacles.
Applauding ‘judicial activism’, which took the lead in environmental protection, the minister said he is looking forward to work closely with the courts to ensure that environmental laws in the country are adhered to. According to Ritwick Dutta, a Delhi-based lawyer specialising in environmental issues, the government did not notify setting up of the environment tribunal nor the appellate authority despite setting up the latter in 1997. No key officials have been appointed to the authority so far.
“The position of chairman to NEAA is vacant for last nine years and position of vice-chairman is vacant for the last four years,’ Dutta told FE.
More transparent
Making environmental and forest clearances of industrial projects transparent, the environment ministry has changed the Environment (Protection) Rules, 1986. It is now mandatory for project developers to make public the ministry's clearance letter. The compliance status of project promoters also needs to be put in the public domain. The ministry proposes to put the status of all the 250 pending industrial projects for environmental and forest clearances online, for getting response from the public. The mandatory Environmental Impact Assessment norms makes the maximum time for clearances to 210 days for environment and 150 days for forests.
Unitech to raise Rs 1.3k cr via private placement
Unitech to raise Rs 1.3k cr via private placement
The Economic Times, June 27, 2009, Page 6
New Delhi: The country’s second largest realty firm, Unitech Ltd, began the process of raising a little over Rs 1,300 crore through private placement of equity to fund projects and service debt on Friday, sources said. The company, which had raised Rs 1,621 crore in the second half of April at Rs 38.50 per share through the qualified institutional placement (QIP) route, on Friday launched the second round at Rs 81 per share and the process is expected to be completed today itself, sources said. The Unitech spokesperson could not be contacted for comments. Unitech’s shares rose by 0.37% to close at Rs 82.35 on the Bombay Stock Exchange on Friday. After the first round of QIP, the promoters stake had come down to 51% from about 64%. Unitech has also raised Rs 1,000 crore by outright sale of two hotels.
The Economic Times, June 27, 2009, Page 6
New Delhi: The country’s second largest realty firm, Unitech Ltd, began the process of raising a little over Rs 1,300 crore through private placement of equity to fund projects and service debt on Friday, sources said. The company, which had raised Rs 1,621 crore in the second half of April at Rs 38.50 per share through the qualified institutional placement (QIP) route, on Friday launched the second round at Rs 81 per share and the process is expected to be completed today itself, sources said. The Unitech spokesperson could not be contacted for comments. Unitech’s shares rose by 0.37% to close at Rs 82.35 on the Bombay Stock Exchange on Friday. After the first round of QIP, the promoters stake had come down to 51% from about 64%. Unitech has also raised Rs 1,000 crore by outright sale of two hotels.
Unitech's debt to come down to Rs 5,000 crore post-QIP
Unitech's debt to come down to Rs 5,000 crore post-QIP
The Economic Times, June 29, 2009, Page 7
PTI NEW DELHI
Realty major Unitech's net debt will come down to Rs 5,000 crore by the first week of July, following an infusion of Rs 2,800 crore into the company last week through a private placement of shares, sources said. At present, the gross debt of Unitech -- the country's second-largest realty firm -- is Rs 7,800 crore, they added.
Sources said that post-QIP, the company's debt-equity ratio would come down to 0.52:1, among the lowest in the industry, and the net worth would be about Rs 9,600 crore. With this equity raising, all the debt-related issues would get addressed and the focus now would be to build on the sales momentum created over the past three months, during which Unitech sold over 3,000 flats comprising 4.5 mil-lion square feet, they added.
Unitech has been raising funds from the beginning of this year to improve the cash flow of the company and reduce its huge debt, which surged to nearly Rs 11,000 crore by the end of 2008.
Since April, the company has raised nearly Rs 4,500 crore through two rounds of qualified institutional placement (QIP).
Soon, a two-bedroom flat for Rs 25 lakh in Delhi
Soon, a two-bedroom flat for Rs 25 lakh in Delhi
Hindustan Times, June 27, 2009, Page 5
Here is some good news for Delhi residents who want to buy their dream home.
The National Building Construction Corporation Limited (NBCC), the largest public sector construction company, will launch its first housing scheme in the Capital early next year.
Up for grabs would be 2,500 flats, priced between Rs 25 lakh and Rs 60 lakh.
The NBCC has built several infrastructure projects across the country. One such project in the Capital is the Pitampura TV Tower.
It entered the real estate sector recently. The first residential housing project that it started was in Rajarhat, Kolkata, known as VIGYOR Towers.
In the Capital, the flats will come up on 30 acres of land adjoining the Ghitorni metro station on the Mehrauli-Gurgaon road. They will be ready by 2012.
Speaking to HT, Arup Roy Choudhury, chairman and managing director of NBCC said, “We have a land in Ghitorni, which we are planning to develop for residential housing. Details are being worked out for the housing project which will be launched early next year.”
This would be the PSU’s first housing project in Delhi.
“There is a huge shortage of housing in urban areas. We ventured into the sector to fill the huge demand-supply gap in the housing sector by providing affordable housing,” said Choudhury.
Earlier this year, the construction company had launched two housing schemes — in the mid and low-end category at Gurgaon in Haryana and Loni in Uttar Pradesh.
It is coming up with 4,000 flats in Gurgaon for employees of the Central government and public sector units.
The flats are priced between Rs 22 lakh and Rs 45 lakh.
Similarly, in Loni 2,000 flats are being developed in the mid segment category.
Fifty per cent of the flats will be reserved for government employees. The rest will be open to the public. These flats are priced between Rs 7 lakh and Rs 15 lakh.
Presently, there is a huge shortage of affordable housing in the Capital with the Delhi Development Authority — the sole development body in the city — failing to meet the housing requirement.
Focus on affordable housing, slums redevelopment: CREDAI
Focus on affordable housing, slums redevelopment: CREDAI
The Financial Express, June 29, 2009
R Ravichandran, Chennai
In a countdown to the forthcoming Union Budget, the Confederation of Real Estate Developers Association of India (CREDAI), the second biggest industry in India and the apex body of the organised real estate developers/builders in India with over 4,000 members, has, in a pre-Budget memorandum, put forth twin themes—affordable housing and slum redevelopment—to fuel the largest common Indian dream of owning a house.
The recommendations put forth by CREDAI are very much aligned to the announced objectives of the Central government on using infrastructure development to revive the economy. The real estate industry believes that it has the potential to play the role of the steam engine basis the fact that real estate sector alone can add to the GDP bottomline by 1-1.5% if efforts are made to reduce the shortage of urban housing while moving towards a slum free urban India.
The expectations are also derived from the prioritisation of affordable housing aforementioned in the Deepak Parekh Task Force Report constituted by the ministry of urban development and poverty alleviation, said Santosh Kumar Rungta, President, CREDAI.
He said the 11th Five-Year Plan has estimated the urban housing shortage of 24.7 million units with 99% of the shortage pertaining to economically weaker sections (EWS) and lower income groups (LIG). Home ownership is critical for this segment not only for economic reasons but also for the health of the nation from a social perspective in terms of stability, law and order and education and employment. In order to meet this target the government should come out with fiscal incentives to encourage affordable mass housing in the range between 300 sqft and 600 sq.ft and up to 1,000 sqft by providing subsidy in interest payable by home buyer
Around 80 million urban poor live in sub-standard or unsafe housing conditions under the abuse and continuous threat of displacement. From the slum dwellers perspective there is an additional tax burdens puts dampners. From a developer’s perspective in the context of slum redevelopment, arrangement for pre-sale financing is difficult because of the perceived risk factors, while from that of the government, land is scarce, and with the migrant population increasing every year, redevelopment is critical to the orderly development of cities. The improper utilisation of land is uneconomical from the government’s perspective.
The Financial Express, June 29, 2009
R Ravichandran, Chennai
In a countdown to the forthcoming Union Budget, the Confederation of Real Estate Developers Association of India (CREDAI), the second biggest industry in India and the apex body of the organised real estate developers/builders in India with over 4,000 members, has, in a pre-Budget memorandum, put forth twin themes—affordable housing and slum redevelopment—to fuel the largest common Indian dream of owning a house.
The recommendations put forth by CREDAI are very much aligned to the announced objectives of the Central government on using infrastructure development to revive the economy. The real estate industry believes that it has the potential to play the role of the steam engine basis the fact that real estate sector alone can add to the GDP bottomline by 1-1.5% if efforts are made to reduce the shortage of urban housing while moving towards a slum free urban India.
The expectations are also derived from the prioritisation of affordable housing aforementioned in the Deepak Parekh Task Force Report constituted by the ministry of urban development and poverty alleviation, said Santosh Kumar Rungta, President, CREDAI.
He said the 11th Five-Year Plan has estimated the urban housing shortage of 24.7 million units with 99% of the shortage pertaining to economically weaker sections (EWS) and lower income groups (LIG). Home ownership is critical for this segment not only for economic reasons but also for the health of the nation from a social perspective in terms of stability, law and order and education and employment. In order to meet this target the government should come out with fiscal incentives to encourage affordable mass housing in the range between 300 sqft and 600 sq.ft and up to 1,000 sqft by providing subsidy in interest payable by home buyer
Around 80 million urban poor live in sub-standard or unsafe housing conditions under the abuse and continuous threat of displacement. From the slum dwellers perspective there is an additional tax burdens puts dampners. From a developer’s perspective in the context of slum redevelopment, arrangement for pre-sale financing is difficult because of the perceived risk factors, while from that of the government, land is scarce, and with the migrant population increasing every year, redevelopment is critical to the orderly development of cities. The improper utilisation of land is uneconomical from the government’s perspective.
Work kickoff to set tax for foreign realty
Work kickoff to set tax for foreign realty
The Economic Times, June 29, 2009, Page 9
Souvik Sanyal NEW DELHI
THE Authority of Advance Rulings (AAR) has cleared the air on taxation of a foreign realtor that has a tie-up with an domestic entity by ordering that the duration of work must be calculated from the day the effective work on the project begins rather than from the date of signing the contract.
Calculating of the number of days of work is crucial for a foreign company as it determines the tax liability of its earnings.
Foreign firms are often signed up by Indian infrastructure developers to do a part of the construction work. Examples of such arrangements include the Dahej LNG project where Petronet LNG awarded contracts to a consortium of foreign companies.
The AAR ruling came in the case of Cal Dive Marine Construction (Mauritius) Ltd, which signed an agreement with Hindustan Oil Exploration Company (HOEC) for laying undersea pipelines in the Cauvery basin. The AAR was hearing the calculation of “the period of activity undertaken” by Cal Dive, a bone of contention between the I-T authorities and the company.
Cal Dive inked the pact with HOEC on December 4, 2007 for $59,174,200. As per the double taxation avoidance agreement between India and Mauritius, the construction project undertaken by the foreign company must continue for nine months so as to make its income taxable in India. While the revenue department contended that the duration of operations for Cal Dive should be calculated from the date of signing the contract, the company argued that the period of work was lesser than the ninemonth period. In a relief to Cal Dive, the AAR ruled that the date of calculation should be the date from when the work has begun.
Commenting on the AAR ruling, Ernst & Young tax partner Amitabh Singh said the decision will provide guidance on how to calculate the number of days for taxing foreign companies involved in construction in the country.
Friday, June 26, 2009
Sensex could touch 19000 this year
Sensex could touch 19000 this year
The Economic Times, June 26, 2009, Page 18
THE market is likely to consolidate at these levels for some time, but the Sensex could touch 19,000 and the Nifty 6,000 before the year ends, says Rakesh Jhunjhunwala, partner, Rare Enterprise. There are plenty of opportunities despite the sharp run-up in prices, Mr Jhunjhunwala said in an interview to Nikunj Dalmia of ET NOW. Excerpts:
Where do you think we stand as far as the markets are concerned?
We stand in a fluid state because markets (Nifty) have had a tremendous rise from 2,700-2,500 to 4,700, and then corrected back to 4,200-4,300. And there’s no question that the economic scenario worldwide is still not out of the woods. After such a big rise, markets need to consolidate. I don’t think we’re going to make any major move either way prior to the Budget unless things internationally take an ugly turn, or there’s a big upswing. We’ll get the real direction post-Budget and depending on how things develop internationally. So, I’d say fluid. I won’t rule out Nifty going to 5,200-5,300. At the same, I won’t rule our it coming back to 3700.
Let’s take the conversation slightly backwards. From March 9 is roughly when global markets bottomed out. How have things looked? Oversold to overbought ? Or do you think a 10% movement here or there perhaps, and we would stabilise over a long-term basis.
I am hopeful that we would stabilise at 10% upwards or downwards. Either we have a bear market, which will last long and will correct the rise from 2900 to 21000. It will take a lot of time, or this fall was just a long-term correction of the bull market. I think this year at some point, you’ll have the Nifty around 6,000 and the Sensex around 19,000, though the situation is fluid and it could go either way. Maybe a year later, you’ll move upward and go above 6,000. Or we could come back to a level of say 3,200-3,700, and then you spend 2-3 years consolidate and then the market moves.
You got to be cherry-picking now. Time has gone. Low-hanging fruits have been plucked. If you miss the March-April-May, you got to think, look back and then perhaps start cherrypicking...
I wouldn’t say that. There could still be a lot of cherry-picking opportunities.
Well, it’s not my work to advise people in individual investments. But generally, I feel there are a lot of opportunities in the markets. It’s not that there is no opportunity.
You have two sides Rakesh. It’s rare to find the combination of a perfect trader and a great investor. Let’s look at both the sides. What is the investor in you telling you and what is the trader inside you indicating?
Well, the investor inside me is telling me that markets are going to consolidate more than anything else. The market needs reason to break or to go up, right? More reasons, right? Or more external data which is favourable or critical. As an investor, I have no doubt about India’s long-term growth story and the growth rates. I have all my wealth in Indian equity. And I think it will remain that way.
Last time when we interacted, you had indicated that you pretty much have investments across the board. Is that still your mantra? Be diversified and you’ve got investments which are spread across sectors?
Yeah. I have largely not changed my investments. They are the same.
Things are foggy for real estateand IT. What’s your sense, not purely on stock prices, but on earnings and your assessment. Let’s start with real estate. We can endlessly argue on both the sides that demand could come back. Some would say demand could never come back. They are leveraged companies.
Well I would like to stay away from real estate.
Why is that?
It’s a long story. They can’t get those lands back to those prices and I don’t think they can have those kind of margins. They are not used to paying taxes. You sell to associate companies and there is profit. I can’t understand all this. So it is better to stay away. I don’t know where the real-estate people want to raise money. Everybody wants to raise money to buy distress assets. So a person who has distress assets is raising money to buy distress assets. I don’t know why...About technology, I think it’s going to be neither a very bullish sector, nor a bearish one. It’s one of the defensive sectors. But I think shortly the performance of these companies — and this is my assessment and I don’t have a very good assessment, it’s just my impression — will be better than what people are predicting.
What is the one investment you really feel proud of when you look back? That really could be called as your favourite stock pick. I just want to understand how did you pick it?
No. The best is still to come. If you are trying to identify which is your favourite investment, it is like you are trying to say who do I love better — my daughter or my son.
Rupee drops to near six-week low
Rupee drops to near six-week low
Business Standard, June 26, 2009, Section II, Page 3
MONEY MARKET ROUND-UP
AGENCIES Mumbai
The rupee dropped to near the lowest level in almost six weeks on speculation the nation’s importers increased purchases of foreign exchange to settle month-end payments.
The currency, which weakened 0.1 per cent to 48.605 a dollar at the close, headed for the first monthly decline since February as refiners may have stepped up dollar purchases to pay for shipments of crude oil, with the commodity poised for a fifth month of gains.
Offshore forwards contracts indicate bets the rupee will trade at 48.69 to the dollar in a month, compared with expectations for a rate of 48.65 yesterday.
Forwards are agreements in which assets are bought and sold at current prices for future delivery. Non-deliverable contracts are settled in dollars rather than the local currency.
A rally in commodity prices may boost India’s import bill. The UBS Bloomberg Constant Maturity Commodity Index of 26 raw Materials has advanced 22 per cent this year.
The rupee strengthened this morning on speculation overseas investors will boost purchases of emerging-market stocks amid signs a global recession is abating. The US yesterday reported an unexpected increase in durable goods orders for May, helping drive benchmark share indexes higher across most of the AsiaPacific region today.
The MSCI Asia Pacific Index rose 1 per cent after the Federal Reserve said the pace of economic contraction in the world’s biggest economy is slowing and South Korea raised its gross domestic product forecast. Bonds halt two-day gain
Bonds halt two-day gain
Five-year bonds halted a two-day advance on speculation investors will pare holdings to raise cash for purchases at a government debt auction tomorrow.
Yields on securities due 2014 climbed earlier as the country prepared to sell as much as Rs 15,000 crore ($3.1 billion) of bonds as part of its borrowing programme that is budgeted to raise a record Rs 3.62 lakh crore in the financial year ending March 31.
The government has increased the sale size at six consecutive auctions by 25 per cent.
The yield on the 6.07 per cent note due May 2014 climbed as high as 6.59 per cent before closing little changed at 6.53 per cent at the close in Mumbai, according to the central bank’s trading system. The price per 100-rupee face amount was 98.08.
The cost of five-year swaps, or derivative contracts used to guard against rate fluctuations, fell. The rate, a fixed payment made to receive floating rates, declined to 6.14 per cent from 6.19 per cent yesterday. Call rate ends lower
Call rate ends lower
Overnight money rates eased on Thursday as surplus funds in the banking system helped banks meet their reserve requirements comfortably. The one-day money ended at 3.00-3.10 per cent, below its previous close of 3.253.30 per cent.
Banks have to report their net liabilities to the central bank on alternate Fridays and keep 5 per cent of it with the central bank for the two weeks that follow.
Inflation rate stays in negative for the second week
Inflation rate stays in negative for the second week
The Hindu Business Line, June 26, 2009, Page 7
Wholesale Price Index for all commodities at 234.2.
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The inflation declined marginally by 1.14 per cent during the week ended June 13.
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Our Bureau, New Delhi
Wholesale price inflation continued in the negative for a second straight week. The annual WPI-based inflation declined by 1.14 per cent during the week ended June 13, easing marginally from the minus 1.61 per cent recorded in the previous week, according to a data released by the Ministry of Commerce and Industry here on Thursday.
Year-on-year inflation was recorded at 11.80 per cent during the corresponding week of the previous year.
The whole sale price index was 234.2 points for the week ended June 13 from 236.9 in the same week a year ago.
On a disaggregated basis, the Primary Articles group recorded a marginal decline in inflation during the latest reported week to 5.7 per cent from 5.8 per cent in the previous week.
Food items
In food articles, inflation fell to 8.65 per cent from 8.71 per cent in the week ended June 6, 2009 due to fall in inflation in cereals.
In non-food articles, inflation deepened to (-) 1.3 per cent from (-) 0.9 per cent in the earlier week. In the ‘minerals’ subgroup, inflation remained unchanged at 4.2 per cent for the third consecutive week.
In the fuel and power index, inflation eased fractionally from (-) 12.8 per cent in the week of June 6 to (-) 12.6 per cent in the current week.
Manufactured products
In manufactured products, inflation during the week ended June 13 accelerated by almost 80 basis points to 0.8 per cent, from 0 per cent in the previous week.
The increase is on account of textiles (cotton textiles), rubber and plastic products (tubes), chemicals and chemical products (drugs and medicines), and transport equipment and parts
Inflation in the food index, which has a cumulative weight of 25.43 per cent in the index, came down to 9.2 per cent from 9.4 per cent in the week ended June 6, 2009.
Inflation ruled higher in the sub-groups of pulses, eggs, meat and fish, condiments and spices in primary food articles, while the sub-group of sugar, khandsari and gur in manufactured food products continues to record rising double digit levels. However, inflation in edible oils has been negative since the beginning of 2009-10.
Falling wholesale prices are only a statistical feature and do not mean India is suffering from deflation, the RBI Governor, Mr D. Subbarao, said June 20.
For the week ended April 18, the final WPI for ‘All Commodities’ stood at 232.6 points as compared to the provisional estimate of 230.2 points and the annual rate of inflation based on final index, calculated on point to point basis, stood at 1.62 per cent as compared to the earlier estimate of 0.57 per cent.
We are seeing a huge demand for home loans
We are seeing a huge demand for home loans
Business Standard, June 26, 2009, Section II, Page 2
Q&A: R R Nair, Director and chief executive, LIC Housing Finance
Sudeep Jain / Mumbai
After weathering the December quarter, when the liquidity crunch was at its peak, LIC Housing Finance recorded a healthy 37 per cent growth in net profit for 2008-09. RR Nair, director and chief executive, tells Sudeep Jain that the company has revised its growth target for the year.
How is business in this quarter?
This quarter has been very good for us and we are seeing a huge demand for home loans. In the first two months of this financial year, we disbursed around Rs 2,000 crore fresh loans, which translates into 50 per cent year-on-year growth. Loan approvals have increased at a much higher pace. And this growth has been driven by retail, not project finance. After the election results, a number of projects that were struggling due to lack of funds have come back on track. Builders appear to have become more confident and the market looks good.
Are there any particular markets where you are seeing good growth?
Yes, NCR (national capital region), Mumbai and Bangalore. These markets were the most affected by the demand slump that we saw towards the end of last year. In my view, home prices have more or less bottomed out and in a few months, we may even see them go upwards.
What is your growth target for the current year?
Earlier, we had set a target of 25 per cent growth in incremental advances. But considering the way the demand has picked up in the past few months, we may see 30-40 per cent growth.
What is you liabilities mix at the moment?
NCDs (non-convertible debentures) account for 48 per cent of our liabilities while bank term loans account for 30 per cent. The rest is a mix between commercial paper, National Housing Bank refinance and foreign borrowing.
How are you doing on cost of funds?
The December quarter was very tough for everyone and our cost of funds had gone up to 12 per cent. Now, it has come down to around 9 per cent. The cost of incremental advances is even lower, somewhere around 8 per cent.
With the LIBOR (London Interbank Offered Rate) at record lows, are you looking at raising funds through the external commercial borrowing route?
The LIBOR is quite low and the spreads are high, but add-on costs, such as the cost of hedging against currency fluctuations, are still quite high. Right now, domestic availability of funds is good. It doesn’t make sense to look overseas for funds unless there is a price advantage.
What is the situation on the non-performing assets (NPAs) front?
We have been consistently reducing our NPAs for the last four years. In 2005, gross NPAs were 4.6 per cent. At the end of the previous financial year, they were 1.07 per cent. This year, they will be below 1 per cent.
Business Standard, June 26, 2009, Section II, Page 2
Q&A: R R Nair, Director and chief executive, LIC Housing Finance
Sudeep Jain / Mumbai
After weathering the December quarter, when the liquidity crunch was at its peak, LIC Housing Finance recorded a healthy 37 per cent growth in net profit for 2008-09. RR Nair, director and chief executive, tells Sudeep Jain that the company has revised its growth target for the year.
How is business in this quarter?
This quarter has been very good for us and we are seeing a huge demand for home loans. In the first two months of this financial year, we disbursed around Rs 2,000 crore fresh loans, which translates into 50 per cent year-on-year growth. Loan approvals have increased at a much higher pace. And this growth has been driven by retail, not project finance. After the election results, a number of projects that were struggling due to lack of funds have come back on track. Builders appear to have become more confident and the market looks good.
Are there any particular markets where you are seeing good growth?
Yes, NCR (national capital region), Mumbai and Bangalore. These markets were the most affected by the demand slump that we saw towards the end of last year. In my view, home prices have more or less bottomed out and in a few months, we may even see them go upwards.
What is your growth target for the current year?
Earlier, we had set a target of 25 per cent growth in incremental advances. But considering the way the demand has picked up in the past few months, we may see 30-40 per cent growth.
What is you liabilities mix at the moment?
NCDs (non-convertible debentures) account for 48 per cent of our liabilities while bank term loans account for 30 per cent. The rest is a mix between commercial paper, National Housing Bank refinance and foreign borrowing.
How are you doing on cost of funds?
The December quarter was very tough for everyone and our cost of funds had gone up to 12 per cent. Now, it has come down to around 9 per cent. The cost of incremental advances is even lower, somewhere around 8 per cent.
With the LIBOR (London Interbank Offered Rate) at record lows, are you looking at raising funds through the external commercial borrowing route?
The LIBOR is quite low and the spreads are high, but add-on costs, such as the cost of hedging against currency fluctuations, are still quite high. Right now, domestic availability of funds is good. It doesn’t make sense to look overseas for funds unless there is a price advantage.
What is the situation on the non-performing assets (NPAs) front?
We have been consistently reducing our NPAs for the last four years. In 2005, gross NPAs were 4.6 per cent. At the end of the previous financial year, they were 1.07 per cent. This year, they will be below 1 per cent.
How is your new financial services company, LIC Housing Finance Financial Services, doing?
LICHFL started operations in April and has five offices. We will have 30 offices by the end of the second quarter. Over the next three-four years, we plan to set up 300-400 offices. The company will employ about 30,000 people. The company will help us improve our distribution reach — hopefully, it will double our distribution capacity and our business over the next three-four years.
Unitech net slides 28% at Rs 1,197 cr
Unitech net slides 28% at Rs 1,197 cr
The Financial Express, Corporates & Markets, June 26, 2009, Page 1
fe Bureau, New Delhi
The country’s second largest real estate developer, Unitech Ltd, on Thursday reported a 28% dip in its net profit at Rs 1,197.71 crore for the financial year 2008-09. The company's total income fell by 22.5% at Rs 3,315.84 crore. Net profit during the previous fiscal stood at Rs 1,661.86 crore while total income was Rs 4,280.11 crore. Unitech did not separately give its earnings for the fourth quarter (January-March) period.
Struck with the liquidity crunch and slip in demand for its high-end and luxury projects, the developer has joined the league of real estate developers embarking upon the low-cost housing projects to generate more cash flows.
Its rival, the country's largest real estate developer, DLF, too posted a decline in its earnings in April with its net profit for the year fell by 41% at Rs 4,629 crore, from Rs 7,812 crore in 2007-08. Revenues also plummeted by 28% at Rs 10,541 crore as against Rs 14,684 crore during the previous year.
Sanjay Chandra, managing director of Unitech said, "During the quarter, while continuing to take measures to address the liquidity issues, the company successfully reoriented its product mix towards affordable housing. The company's new projects in the affordable housing segment received overwhelming response from customers".
However, the announcement that its immediate debt position was not under stress as it has managed to reschedule its repayments and good response to its low-cost, affordable housing projects saw the company's shares on the BSE closing up 5.19% at Rs 82.05.
Of its total reserves of over Rs 4,800 crore in the balance sheet, the company held Rs 644 crore as cash reserves. Also the company held debt to the tune of Rs 9,000 crore at the end of the financial year. The company also declared a dividend of 5% for the fiscal ended March 31, 2009.
The company had raised $550 million in the last two months through share and asset sales, and its debt position was comfortable after rescheduling most of its loan, Chandra had earlier stated.
The company, which is planning to become the largest residential real estate developer in the country, said: "Enthused by the overwhelming response for our new projects, we have set a target to launch 30 million sqft of space in the current fiscal. Of this, we expect to get bookings for about 20 million sqft."
The company said it was confident of generating sufficient cash flows from the sale of real estate products as well as non-core asset sales to meet its debt obligations and for the construction and other expenses for the current fiscal.
The earning per share for the year was Rs 7.37 on an equity base of Rs 324.68 crore. Total paid-up capital was represented by 162.34 crore equity shares of the face value of Rs 2 each.
Earlier this week, Unitech had informed the stock exchanges that the promoters had revoked over 5 crore shares pledged with lenders, bringing down the total pledged stake to 24.42%.
The promoters held a 64.52% stake in the company in March. The founders had pledged about 80.83 crore shares or 49.79% to lenders. Following the revocation, the total pledged stake of the promoters has come down to 24.42%, according to the company.
The Financial Express, Corporates & Markets, June 26, 2009, Page 1
fe Bureau, New Delhi
The country’s second largest real estate developer, Unitech Ltd, on Thursday reported a 28% dip in its net profit at Rs 1,197.71 crore for the financial year 2008-09. The company's total income fell by 22.5% at Rs 3,315.84 crore. Net profit during the previous fiscal stood at Rs 1,661.86 crore while total income was Rs 4,280.11 crore. Unitech did not separately give its earnings for the fourth quarter (January-March) period.
Struck with the liquidity crunch and slip in demand for its high-end and luxury projects, the developer has joined the league of real estate developers embarking upon the low-cost housing projects to generate more cash flows.
Its rival, the country's largest real estate developer, DLF, too posted a decline in its earnings in April with its net profit for the year fell by 41% at Rs 4,629 crore, from Rs 7,812 crore in 2007-08. Revenues also plummeted by 28% at Rs 10,541 crore as against Rs 14,684 crore during the previous year.
Sanjay Chandra, managing director of Unitech said, "During the quarter, while continuing to take measures to address the liquidity issues, the company successfully reoriented its product mix towards affordable housing. The company's new projects in the affordable housing segment received overwhelming response from customers".
However, the announcement that its immediate debt position was not under stress as it has managed to reschedule its repayments and good response to its low-cost, affordable housing projects saw the company's shares on the BSE closing up 5.19% at Rs 82.05.
Of its total reserves of over Rs 4,800 crore in the balance sheet, the company held Rs 644 crore as cash reserves. Also the company held debt to the tune of Rs 9,000 crore at the end of the financial year. The company also declared a dividend of 5% for the fiscal ended March 31, 2009.
The company had raised $550 million in the last two months through share and asset sales, and its debt position was comfortable after rescheduling most of its loan, Chandra had earlier stated.
The company, which is planning to become the largest residential real estate developer in the country, said: "Enthused by the overwhelming response for our new projects, we have set a target to launch 30 million sqft of space in the current fiscal. Of this, we expect to get bookings for about 20 million sqft."
The company said it was confident of generating sufficient cash flows from the sale of real estate products as well as non-core asset sales to meet its debt obligations and for the construction and other expenses for the current fiscal.
The earning per share for the year was Rs 7.37 on an equity base of Rs 324.68 crore. Total paid-up capital was represented by 162.34 crore equity shares of the face value of Rs 2 each.
Earlier this week, Unitech had informed the stock exchanges that the promoters had revoked over 5 crore shares pledged with lenders, bringing down the total pledged stake to 24.42%.
The promoters held a 64.52% stake in the company in March. The founders had pledged about 80.83 crore shares or 49.79% to lenders. Following the revocation, the total pledged stake of the promoters has come down to 24.42%, according to the company.
Unitech net jumps 105% to Rs 280 cr
Unitech net jumps 105% to Rs 280 cr
The Economic Times, June 26, 2009, Page 15
Our Bureau NEW DELHI
REAL estate company Unitech has posted a 105% jump in net profit at Rs 280 crore and a 48% rise in net sales at Rs 752 crore for the fourth quarter ended March ‘09 supplemented by other income of Rs 300 crore. This other income was generated from the company’s joint ventures in real estate and telecom sectors.
It includes interest accrued on the capital deployed in the real estate JV and the telecom venture Unitech Wireless, besides the services provided by Unitech to its telecom joint venture, Unitech head of corporate planning R Nagraju said.
The services to Unitech Wireless comprised providing manpower as Telenor had still not hired people. Unitech had also lent around Rs 900 crore as debt to Unitech Wireless, 64% owned by Norway’s Telenor. Following the infusion of equity by Telenor, Unitech Wireless has repaid Rs 400 crore to Unitech.
Unitech, which for months had been struggling to repay debt, now says it’s comfortably placed to honour its commitments to service debt, following fund raising through a qualified institutional placement(QIP) and increased sale of mid and low income homes.
Unitech has used Rs 700 crore of the total Rs 1,680 crore raised through the QIP to repay debt. Rest of the funds are being deployed in projects, Mr Nagraju said. He said Rs 1,000 crore would be due for repayment in the next nine months. The company claimed to have sold around 3,000 mid-income houses in the past four months and stated that if the demand continue like this, it will generate surplus cash this fiscal.
Small town, big return
Small town, big return
ET Realty, June 26, 2009, Page 1
Demand for houses in small towns have witnessed a spur in economic activities
Vivek Shukla
For three years, Sunil Negi, a banker, has been trying to fulfill his long cherished dream of purchasing a house of his own, either in Delhi or in Bhopal, the city of where his in-laws reside. But his budget of Rs 25 lakh was not enough to fulfill his dream. But he looked beyond these two cities to make his dream come true. Negi finally zeroed in on a property in Rudrapur, a small town in Uttarakhand. In the process, he has become one of the many buyers who are purchasing houses in smaller cities.
Rudrapur is among a host of towns like Almora, Bhiwadi, Neemrana, Ghaziabad, Haldwani, Meerut and Karnal that have started attracting buyers. Small cities closer to the big cities are responsible for revival in the realty market, albeit slowly. According to Sanjeev Shrivastava, director, Assotech group, their projects in Gwalior, Rudrapur and Bhubaneswar are getting huge response. Developers who are building projects in smaller cities are getting positive response.
"In places like Meerut, Rudrapur and Haldwani, a two bedroom apartment costs Rs 15 lakh to Rs 18 Lakh. It is within reach for working people," said Sanjay Shrivastava, a Delhi based journalist, who has recently booked a flat in Meerut. "The main reason for realty development at these places is that metro cities and many big cities have reached the saturation point," said Devinder Gupta, CMD, global realty consultancy Century 21 India
Experts say that in smaller places, land is still available at reasonable rates. Industries are coming up. There is overall development. Hence, one should not think twice to book flats in small towns. Those fetch good returns.
Sunil Jindal, CEO of SVP builders says, "It is high time that those who only search for their houses in metro cities should think of smaller towns. Even in Ghaziabad, one can buy good house at less than Rs 25 lakh. The very same flat you would not get less than Rs 50 lakh in Delhi." Interestingly, rather than the big players, the smaller ones are benefiting from the realty boom in smaller cities and towns, which have shown no sign of being affected by the slowdown that has otherwise gripped the realty sector.
ET Realty, June 26, 2009, Page 1
Demand for houses in small towns have witnessed a spur in economic activities
Vivek Shukla
For three years, Sunil Negi, a banker, has been trying to fulfill his long cherished dream of purchasing a house of his own, either in Delhi or in Bhopal, the city of where his in-laws reside. But his budget of Rs 25 lakh was not enough to fulfill his dream. But he looked beyond these two cities to make his dream come true. Negi finally zeroed in on a property in Rudrapur, a small town in Uttarakhand. In the process, he has become one of the many buyers who are purchasing houses in smaller cities.
Rudrapur is among a host of towns like Almora, Bhiwadi, Neemrana, Ghaziabad, Haldwani, Meerut and Karnal that have started attracting buyers. Small cities closer to the big cities are responsible for revival in the realty market, albeit slowly. According to Sanjeev Shrivastava, director, Assotech group, their projects in Gwalior, Rudrapur and Bhubaneswar are getting huge response. Developers who are building projects in smaller cities are getting positive response.
"In places like Meerut, Rudrapur and Haldwani, a two bedroom apartment costs Rs 15 lakh to Rs 18 Lakh. It is within reach for working people," said Sanjay Shrivastava, a Delhi based journalist, who has recently booked a flat in Meerut. "The main reason for realty development at these places is that metro cities and many big cities have reached the saturation point," said Devinder Gupta, CMD, global realty consultancy Century 21 India
Experts say that in smaller places, land is still available at reasonable rates. Industries are coming up. There is overall development. Hence, one should not think twice to book flats in small towns. Those fetch good returns.
Sunil Jindal, CEO of SVP builders says, "It is high time that those who only search for their houses in metro cities should think of smaller towns. Even in Ghaziabad, one can buy good house at less than Rs 25 lakh. The very same flat you would not get less than Rs 50 lakh in Delhi." Interestingly, rather than the big players, the smaller ones are benefiting from the realty boom in smaller cities and towns, which have shown no sign of being affected by the slowdown that has otherwise gripped the realty sector.
Ansal FY09 net dips 81% to Rs 32.54 cr
Ansal FY09 net dips 81% to Rs 32.54 cr
The Economic Times, June 26, 2009, Page 15
MUMBAI: Ansal Properties & Infrastructure on Thursday reported a decline of 81.24% in its consolidated net profit at Rs 32.54 crore for the year ended March 2009, over the previous year. The company had a net profit of Rs 173.52 crore for the year ended March 31, 2008, Ansal Properties & Infrastructure said in a filing to the Bombay Stock Exchange. Total sales of the company declined to Rs 740.97 crore for the year ended March 2009, from Rs 996.68 crore in the same period last year. The board of directors has proposed a dividend of 50 paise a piece for the year ended March 2009.—PTI
Thursday, June 25, 2009
Met confirms below normal rainfall fears
Met confirms below normal rainfall fears
The Economic Times, June 25, 2009, Page 1
Our Bureau NEW DELHI
FINALLY, the met department has changed its mind on the rains: this year’s south-west monsoon would be below normal for the country as a whole—for the first time in four years—and not normal as forecast earlier.
The silver lining is that there is little chance of a drought, with rains in July-August expected to make up for the initial deficit in the north-west, the main grain-growing regions of Punjab and Haryana. 
Still, the latest official prognosis of the rains, a lifeline to many a sector, spells grief for the economy trying to recover from the fallout of the slowdown. Analysts and industry captains voiced the same concern: poor rains could lower farm output, raise prices and dent rural demand and have a spiralling effect on corporate profitability and market sentiment.
An anxious industry is not pushing the panic button yet, preferring to watch the rains progress. “If the delay in monsoon is for some days, it may not be an issue of concern. However, if the agricultural season misses the monsoon by a considerable time frame, we may have a problem at hand. In both the cases, the government should be prepared to take corrective action in order to ensure that food prices are kept in check,” said Ficci president Harsh Pati Singhania.
The Centre too is keeping a close eye on the progress of the rains. It will meet state agriculture ministers on Thursday in the Capital.
Some states are taking proactive steps to make use of available water via irrigation. The Punjab government has, in this sweltering heat, banned the use of air conditioners in all government offices, boards and corporations with immediate effect till June 30, 2009. This is to ensure 8 hours of uninterrupted power supply in the farm sector for planting paddy.
“Quantitatively, monsoon season rainfall for the country as a whole is likely to be 93% of the long period average (LPA) with a model error of +/- 4%,” the India Meteorological Department’s (IMD) long-range forecast update for the 2009 south-west monsoon said on Wednesday.
Minister of state for science and technology Prithviraj Chavan confirmed the development. “South-west monsoon from June to September is likely to be below normal.”
Both the north-eastern and the peninsular regions of the country are likely to get below normal rains while the north-west would have deficient rains. Central India, which is yet to receive rains, is expected to have a normal monsoon.
The IMD, meanwhile, sought to underplay the role of El Nino in the poor monsoon progress thus far, going to the extent of vehemently denying that any “droughtlike” situation prevailed currently.
SBI cuts BPLR by 50 bps to 11.75%
SBI cuts BPLR by 50 bps to 11.75%
The Financial Express, June 25, 2009, page 1
BS Reporter / Mumbai
State Bank of India, the country’s largest lender, today announced a 50 basis point reduction in its benchmark prime lending rate (BPLR) to 11.75 per cent.
The rate cut would be effective from Monday, the bank said in a statement this evening. With the latest reduction, SBI has lowered its BPLR by 200 basis points since last November when the Reserve Bank of India signaled a soft interest rate regime. In contrast, players such as Punjab National Bank have lowered their BPLR by 300 basis points.
SBI’s move comes within a fortnight Finance Minister Pranab Mukherjee asked public sector banks to lower interest rates. Other players such as Union Bank of India and United Bank of India have also announced rate cuts. United Bank also announced today that it would reduce the BPLR by 25 basis points to 12 per cent with effect from July 1.
By staggering the rate cut decision to the end of the first quarter of the current financial year, banks would be able to show a healthy net interest margin for April-June, an executive with a private bank said.
While SBI had lowered deposit rates on four occasions during the first quarter of the current financial year, it had not reduced the BPLR fearing an adverse impact on the net interest margin (NIM). The BPLR was last lowered in January and since then SBI had been lowering lending rates on certain products such as home and auto loans and loans to small and medium enterprises.
The public sector players is seeing rigidity in its cost of funds as it had mopped up retail deposits by offering rates of 10.5 per a year for 1,000 days. While it is unable to reset interest rates on these deposits up to October 2011, its earnings from advances would drop immediately after the rate cut. As a result, SBI’s NIM fell by 14 basis points to 2.93 per cent at the end of March 2009, as against 3.07 per cent a year ago. During the fourth quarter, NIM fell by 22 basis points as the bank had raised around Rs 1,000 crore a day through retail deposits in the third quarter and the early part of the fourth quarter.
But bank executives said that the impact of the BPLR reduction on NIM would be 5-6 basis points. “The effect on NIM is limited as the bank has aggressively reduced its deposit rates,” said a senior SBI executive.
Land, food bills to be placed in Budget session
Land, food bills to be placed in Budget session
The Financial Express, June 25, 2009, Page 1
Economy Bureau, New Delhi
With only a few days to go for the Budget session of the Lok Sabha to begin, parliamentary affairs minister Pawan Kumar Bansal is scheduled to meet top officials of government departments and ministries on Thursday to draw up a list of bills to be introduced in the session.
The government’s top priority in the session, however, will be to re-introduce the amendment bills to the Land Acquisition Act of 1894 and the Rehabilitation & Resettlement Bill, Bansal said on Wednesday, speaking at the Idea Exchange programme of the Indian Express group.
Bansal also indicated that the Congress party’s election promise of a National Food Security Act will find a place in the session, although a decision is yet to be taken on introducing key financial sector bills. “Our flagship programmes will be given top priority. Road connectivity and telephone connectivity in the rural areas across the country will be on the agenda and the food security bill will also be considered,” he said.
When asked about financial sector reforms, including the insurance laws amendment bill, Bansal said, “The decision is entirely vested with the finance ministry, but we wish to bring reform in the insurance sector and reduce foreign direct investment caps. The hike in voting rights in banks, which was not passed by the 14 th Lok Sabha, will also be considered,” the minister said.
The UPA has promised to carry forward its agenda of financial sector reforms in insurance, pensions and banking this term. While the Insurance Laws (Amendment) Bill to raise the FDI cap in the sector to 49% was introduced in the Rajya Sabha — making it non-lapsable —the other seven bills will have to be introduced afresh in the Lok Sabha.
Although the bills on land acquisition & resettlement were passed by the 14 th Lok Sabha, they were ‘obstructed’ in the Rajya Sabha and have lapsed. The Resettlement & Rehabilitation and Land Acquisition Amendment Bills, aimed at preventing large-scale displacement of people during land acquisitions for projects like special economic zones, allow states to acquire 30% of land for private developers only after the developers had acquired 70% directly from farmers.
The Financial Express, June 25, 2009, Page 1
Economy Bureau, New Delhi
With only a few days to go for the Budget session of the Lok Sabha to begin, parliamentary affairs minister Pawan Kumar Bansal is scheduled to meet top officials of government departments and ministries on Thursday to draw up a list of bills to be introduced in the session.
The government’s top priority in the session, however, will be to re-introduce the amendment bills to the Land Acquisition Act of 1894 and the Rehabilitation & Resettlement Bill, Bansal said on Wednesday, speaking at the Idea Exchange programme of the Indian Express group.
Bansal also indicated that the Congress party’s election promise of a National Food Security Act will find a place in the session, although a decision is yet to be taken on introducing key financial sector bills. “Our flagship programmes will be given top priority. Road connectivity and telephone connectivity in the rural areas across the country will be on the agenda and the food security bill will also be considered,” he said.
When asked about financial sector reforms, including the insurance laws amendment bill, Bansal said, “The decision is entirely vested with the finance ministry, but we wish to bring reform in the insurance sector and reduce foreign direct investment caps. The hike in voting rights in banks, which was not passed by the 14 th Lok Sabha, will also be considered,” the minister said.
The UPA has promised to carry forward its agenda of financial sector reforms in insurance, pensions and banking this term. While the Insurance Laws (Amendment) Bill to raise the FDI cap in the sector to 49% was introduced in the Rajya Sabha — making it non-lapsable —the other seven bills will have to be introduced afresh in the Lok Sabha.
Although the bills on land acquisition & resettlement were passed by the 14 th Lok Sabha, they were ‘obstructed’ in the Rajya Sabha and have lapsed. The Resettlement & Rehabilitation and Land Acquisition Amendment Bills, aimed at preventing large-scale displacement of people during land acquisitions for projects like special economic zones, allow states to acquire 30% of land for private developers only after the developers had acquired 70% directly from farmers.
OECD upgrades India growth to 5.9% for ’09
OECD upgrades India growth to 5.9% for ’09
The Financial Express, June 25, 2009, page 2
Press Trust of India
Paris, New Delhi: The OECD, a club of rich nations, on Wednesday raised India’s growth forecast to 5.9% for the current year and urged the new government to restore fiscal discipline and move ahead with disinvestment.
“With the gradual recovery of the global economy and easier financial conditions, growth is projected to gradually regain momentum,” said Organisation for Economic Cooperation and Development (OECD), a group of 30 developed nations.
The OECD, in March, projected 4.3% economic expansion for India in 2009. “In India, growth is predicted to slow to 5.9% in 2009 before accelerating to 7.2% in 2010 (March forecast was 4.3% and 5.8%),” the OECD said in its latest Economic Outlook report.
Pointing out that combined fiscal deficit of the Centre and state governments would go up to 11% of the GDP during 2009, the report said, adding, “The new government will face the need to restore fiscal discipline, speed up structural reform and increase sales of public sector assets.
“Any further easing in policy should be achieved through lower interest rates, rather than discretionary fiscal expansion.”
The report further said the extent of the deterioration in the fiscal position prior to the slowdown has reduced the scope for “discretionary fiscal policy action”.
The fiscal deficit of the central government, according to the interim budget data, went up to over 6 per cent during 2008-09 against the original estimate of 2.5%. Taking into account expenses on off-budget items like oil and fertiliser bonds, the total fiscal deficit on the centre has been estimated at around 8%.
The OECD’s forecast is much more optimistic than World Bank, which on Monday projected the Indian economy to expand just 5.1%. Prime Minister Manmohan Singh had recently said that he expects the country’s economy to grow by 7% in the current fiscal year (2009-10). Meanwhile, the Reserve Bank of India estimates the GDP to expand at a rate of 6% this fiscal year.
Demand in residential market to turn positive: Crisil
Demand in residential market to turn positive: Crisil
The Financial Express, June 25, 2009, Page 4
fe Bureau, Mumbai
A recent 10-city Crisil Research report on the real estate market indicates that demand in the residential market is expected to turn positive in 2010 owing to improvement in affordability, steady economic growth and greater liquidity. However a decline in the currently over-priced capital values of all the three real estate segments—residential, commercial and retail—will persist through 2009. Further the commercial and retail markets will continue to witness erosion in lease rentals through the next two years.
The report provides comprehensive information and analysis of more than 400 areas across 88 micro markets in 10 cities—Ahmedabad, Bengaluru, Chandigarh, Chennai, Hyderabad, Kochi, Kolkata, Mumbai-MMR, NCR and Pune.
Crisil Research head Sudhir Nair said, “Accelerated growth of Indian economy, recovery of global economy, improved liquidity and expected fall in interest rates are key factors that will signal demand revival in the residential segment. This segment is likely to see a much faster revival due to strong underlying demand for housing and supply coming at attractive price points.” He added demand in the commercial and retail segment is likely to remain under stress for the next two years owing to excess supply and weak off-take.
Further, the report indicates that capital values for residential sector and lease rentals for commercial and retail properties have substantially corrected till March 2009 due to a slowdown in both the domestic and global economies, and also due to real estate becoming unaffordable. Cities such as Kochi, Chandigarh and Pune, which have greater investor presence as against end-users, witnessed a greater fall in capital values compared to other cities.
The situation is expected to continue through 2009 and 2010, particularly so for the commercial and retail segments. However, the report said demand for houses will improve in 2010, backed by lower home loan interest rates as well as better job security owing to higher growth in the economy. Hence, capital values are likely to stabilise in the first half of 2010, and increase during the second half of the year.
Real estate stocks: Hardly affordable
Real estate stocks: Hardly affordable
Business Standard, Money & Markets, Section II, Page 1
Shobhana Subramanian / Mumbai
The reality on the ground doesn’t seem to be in keeping with the sharp run-up in stock prices.
Crisil says capital values for residential real estate could fall another 8-10 per cent in 2009 before stabilising next year. This is somewhat in contrast to what developers have been indicating about property prices. In a study on the real estate market, Crisil says that even investors, looking fo
r capital appreciation, are likely to remain cautious until prices stabilise. Another key point that Crisil makes is that the so-called ‘affordable housing’ that developers are talking about are unlikely to get a strong response. That’s because many of these projects are coming up on the outskirts of cities, very distant from the business districts, and in locations where there are few amentities.
Affordable properties, it points out, are those that come up within city limits and are within the reach of 60 per cent of the population in that area, so that there is a meaningful demand. As for commercial property, Crisil expects lease rentals to fall even next year on the back of a 30-40 per cent fall from the peaks that they hit sometime in the first half of 2008. The news is not much better for the retail segment, where Crisil expects a 16-18 per cent fall in rentals this year and some fall next year too. IDFC SSKI points out that genuine buyers are returning to the market only in the residential segment.
Given this backdrop, the doubling of real estate stock prices in the past three months seems out of place. It is true that many property firms have been bailed out by banks with their loans having been restructured and a couple of them have managed to pick up equity money through placements.
However, at the end of the day, they need to be able to sell properties to generate cash flows. Of course, companies are attempting to stimulate demand by bringing down prices, but that means they need to sell larger volumes because the rate per sq ft is now down at least 30 per cent from peak levels. That doesn’t seem to be happening — even for bigger companies, the gap between the number of apartments sold and those actually delivered is large.
Also, while offering construction-linked payment plans as opposed to time-linked plans is fine, it only results in cash flows becoming back-ended.
Home prices to fall 10%: Study
Home prices to fall 10%: Study
Business Standard, June 25, 2009, page 4
BS Reporter / Mumbai
Home prices are likely to fall another 10 per cent in the second half of 2009, as demand remains subdued, says a research report from Crisil Research.
Faridabad in the NCR, Zirakpur and Derabassi in Mohali, High-Tech city in Hyderabad and Rajiv Gandhi Salai in Chennai may see a further drop due to oversupply of residential properties, the report says.
According to Crisil, home prices had fallen by 18 to 20 per cent in March 2009 from the highs seen in the first half of 2008, due to global slowdown, fears of job security and slowing growth in the domestic economy, the report said.
‘’However, despite this drop in capital values, home buyers have adopted a ‘wait and watch’ policy’,’’ the report added.
But property developers contested Crisil’s opinion, saying prices have already bottomed out. “We do not agree that prices will come down further. It becomes totally unviable to cut prices in the ongoing projects,’’ said Ravi Ramu, director, Puravankara Projects, a Bangalore-based developer.
Adds a Unitech spokesperson from Delhi: “Prices have bottomed out in most of the markets. We do not see prices going down further. We are getting enormous response in our recently launched projects, hence there is no need for further cuts,’’ the spokesperson said.
The report said cities such as Kochi, Chandigarh and Pune witnessed sharp decline in values and fall in transactions, as these cities had higher concentration of investors. Once values eroded, investors’ exodus started, it said.
Home prices had more than doubled in many cities such as Mumbai, Delhi and others in the past four years upto the first half of 2008, as incomes rose sharply, investors’ base expanded and credit flowed easily in property. But as growth slowed, demand for homes collapsed.
However, home prices are expected to stabilise in the first half of 2010 and go up marginally in the second half of the year, backed by lower home loan interest rates and better job security due to improvement in global and domestic economy, Crisil said.
“But prices will not increase the way they shot up in 2006 and 2007. Investors will not come back to the market unless they see prices going up in a sustained manner,’’ said Sudhir Nair, head of Crisil Research, in a teleconference today.
Oversupply
Though a total supply of 1,202 million sq ft of residential property is estimated during 2009-11, as against the demand of 506 million sq ft, Crisil expects all of that may not materialise. ‘’The planned supply is unlikely to materialise in full, due to the credit crunch and relatively sluggish demand; hence, a majority of these projects may get delayed by 1-2 years and a few projects that are still in the planning stage are likely to be shelved,’’ Crisil said.
Hence, Crisil said it expects actual supply of around 700 million sq ft, indicating oversupply of 28 per cent in the next three years.
Commercial spaces
According to Crisil, average lease rentals in the commercial spaces are expected to correct by about 38 per cent in 2009 from the peaks seen in the first six months of 2008, due to a weak demand from IT and ITeS firms and financial institutions. The areas catering to ITeS and banking, financial services and insurance, like Gurgaon in NCR, Central Mumbai and Hinjewadi in Pune, which saw a sharp drop in rentals between 2005 and 2008, are expected to see further decline of 47-59 per cent due to the slowdown in these sectors, the report said.
Crisil sees house market recovery in 2010
Crisil sees house market recovery in 2010
The Hindu Business Line, June 25, 2009, page 5
Our Bureau, Mumbai
Demand in the Indian residential market is expected to turn positive in 2010 due to improvement in affordability, steady economic growth and greater liquidity, says a Crisil research report on the real estate sector.
However, the decline in the currently overpriced capital values of all three real estate segments of residential, commercial and retail will persist through 2009. Commercial and retail markets will continue to see erosion of lease rentals in the next two years, it says.
The report is an analysis of over 400 areas across 88 micro-markets in Ahmedabad, Bangalore, Chandigarh, Chennai, Hyderabad, Kochi, Kolkata, Mumbai-MMR, National Capital Region and Pune.
Mr Sudhir Nair, Head, Crisil Research, said: “Accelerated growth of Indian economy, recovery of global economy, improved liquidity and expected fall in interest rates are key factors that will signal demand revival in the residential segment. This segment is likely to see a much faster revival due to a strong underlying demand for housing and supply coming at attractive price points.”
The demand in the commercial and retail segments is likely to remain under stress the next two years owing to excess supply and weak offtake, he added.
The report says capital values for residential sector and lease rentals for commercial and retail properties had substantially corrected till March due to a slowdown in both the domestic and global economies, and also due to real estate becoming unaffordable.
Kochi, Chandigarh and Pune, which have greater investor presence as against end-users, saw a greater fall in capital values compared to other cities. The situation is expected to continue through 2009 and 2010, particularly in the commercial and retail segments.
However, Crisil Research believes that demand for houses will improve in 2010, backed by lower home loan interest rates as well as better job security owing to higher growth in the economy.
Denotified SEZs to refund sops
Denotified SEZs to refund sops
The Economic Times, June 25, 2009, Page 9
Amiti Sen NEW DELHI
DEVELOPERS of denotified special economic zones (SEZs) will have to refund tax sops given by the government, according to new rules on the anvil, a government official said. The government has found it necessary to draw up rules for denotification of SEZs after some developers recently sought permission to close projects due to the economic slowdown and contraction in demand.
The new rules are likely to disallow denotification if a considerable amount of construction has happened in the zone or if units have come up there. Denotification would be voluntary.
A SEZ developer gets a number of tax sops, including exemption from customs duties and excise on goods used in the project and from payment of income tax. “All the sops enjoyed by the developer have to be necessarily paid back with interest before the denotification is allowed. This will be a prominent part of the rules,” the official said.
The rules will be kept flexible to deal with fresh issues raised by new cases, the official said, on the condition of anonymity. “Once the rules are framed by the government, they would act as a guide for the board of approval (BoA) for SEZs to deal with denotification applications. As and when the board feels the need, appropriate changes or additions could be made to the rules,” he added.
The BoA for SEZs, which is chaired by the commerce secretary and includes members from finance, revenue, home and agriculture departments, decides on all applications related to SEZs, including approval, notification as well as denotification.
There would also be no denotification if the developer does not want it. “There would be no coercion. If developers are law-abiding and have not broken any rules, then the government cannot denotify their zones,” the official added.
Earlier this month, real estate major DLF got inprincipal approval to denotify four of its IT/ITES SEZs. The government will formally denotify the zones once DLF pays back all the tax saved, pegged at Rs 6-7 crore, through exemption from customs, excise, service tax and income tax. The amount is being verified by the commerce department.
Raheja Universal has also applied for denotifying its IT/ITES SEZ in Navi Mumbai, and reducing by half the size of its second SEZ in the region.
“Once we have the denotification rules in place, it will be easier for the BoA to decide on cases of denotification as they will have set rules to follow. We would also be adhering to the law ministry’s view that if something can be legally notified, there should also be provisions for its denotification,” the official added.
As of March 31 2009, the government has formally approved 568 SEZs in the country, of which 311 have been notified and ready to start operations, with 90 already operative.
Commercial realty gets new lease of life
Commercial realty gets new lease of life
The Economic Times, June 25, 2009, Page 5
Ravi Teja Sharma NEW DELHI
AFTER months of inactivity, the commercial office space market is starting to stir. A number of larger leases are happening across the major cities. Last few months have seen demand for small office spaces in the 5,000-15,000 sqft range. But May onwards, lease deals of the larger kind have started to happen. In Gurgaon, new telecom player Telenor recently closed a deal for 50,000 sq ft on Golf Course Road. Samsung has signed up for 66,000 sq ft in Noida while KPMG has closed a deal for 100,000 sq ft in Mumbai’s Lower Parel area and Wipro has leased similar space in Powai. In Hyderabad, GE has closed a deal for 60,000 sq ft in Gachibowli. “A healthy commercial office sector is an indicator for jobs getting created which in-turn facilitates growth of other segments of real estate,” says Vivek Dahiya, CEO of property consultancy GenReal.
There are many other large companies like Reckitt Benckiser and HP which are in the market at the moment looking for large spaces to lease. In the south, First Source and Amazon.com have both leased 100,000 sq ft of space each on Chennai’s OMR. Barclays Shared Services has leased 100,000 sq ft in Chennai’s Guindy area. “The last 2 months have seen quite a bit of activity,” says Kaustuv Roy, executive director at Cushman & Wakefield.
Jones Lang LaSalle Meghraj (JLLM) has seen a lot of movement at the HCC 247 Park building in Mumbai’s Vikhroli. “We are about to lease close to 200,000 sq ft of space in the 1.8 million sq ft complex to one tenant,” says Sanjay Dutt, CEO Business at JLLM.
As sentiments have started to improve in the Indian market, companies are coming out of their shell. “Many Indian corporates have been struggling with high rentals. Now, they are securing real estate space at lower cost,” says Dutt, emphasising that JLLM has seen a surge in transactions in the first 6 months of this year having done 40 transactions, though at comparatively lower rentals.
Most of the deals that have happened in the last 1-2 months are of the relocation and consolidation variety, says Dahiya. But now deals for fresh expansion too are starting to emerge. “Companies seem to be leasing additional space for expansion, which is a positive trend,” says Roy. Dutt explains that the fall in demand since late last year and the consequent increase in supply had put pressure on rentals. But in many places, supply is still limited.
US home sales rise
US home sales rise
The Economic Times, June 25, 2009, Page 4
Reuters WASHINGTON
SALES of previously owned US homes rose for a second straight month in May but were weaker than expected, adding to growing fears of an anemic economic recovery from a deep recession.
The chief economist of the National Association of Realtors, which released the data on Tuesday, said sales in some areas appeared to be slowing and warned of the danger of a “delayed” housing market recovery. The Realtors’ group said sales climbed 2.4% last month to an annual rate of 4.77 million units. While that pace was below market forecasts it was the second straight month sales had risen, for the first back-to-back gain since September 2005.
Despite signs the market is stabilizing, the NAR said the median national home price fell 16.8% in May from a year earlier, the third-largest drop on record.
DLF, Unitech to restart Mumbai projects
DLF, Unitech to restart Mumbai projects
The Economic Times, June 25, 2009, Page 4
Sachin Dave MUMBAI
MUMBAI seems to be the next destination for India’s biggest realty companies, Unitech and DLF, to restart some of their projects which were put on the backburner. Both these companies have been in the midst of overcoming some serious liquidity problems that they were confronted with.
Unitech, which recently raised $325 million through the qualified institutional placement (QIP), has restarted three of its residential projects in Dadar and Chembur. For DLF, which had bought 17.5 acres from NTC in central Mumbai’s Lower Parel for Rs 702 crore in 2005, construction has commenced again. It was here where it initially planned a retail-cum-entertainment centre. Now, the plan is to have commercial establishments — largely offices — apart from the possibility of some residential apartments.
An official spokesperson for DLF said, “Yes, it is true that the work at NTC mill had stopped for some time, but that was because we had some FSI related formalities which are now in place.” Meanwhile, R Nagaraju, head, corporate planning, Unitech, said, “We have a number of slum redevelopment projects in Mumbai. We also have a focus on affordable housing and some projects will be announced by the end of 2009.”
Industry trackers point out that Unitech has commenced the pre-sale process for its three projects. The company also has land banks in other parts of central and western Mumbai like Lower Parel, Worli, Dadar, Ghatkopar and Malad. A company official said that the focus would now be on residential projects and prices would be lower than the prevailing market rates. It is learnt that Unitech is considering building a commercial project in Lower Parel where the asking price will be Rs 7,000 per square foot. This compares with the current price range of Rs 12,000 to Rs 18,000 per square foot.
Together, Unitech and DLF have a combined debt of over Rs 20,000 crore. While Unitech raised funds through the QIP route, DLF brought in $800 million through a share sale. Both companies have also been selling their land parcels and some property as well to raise liquidity.
The Economic Times, June 25, 2009, Page 4
Sachin Dave MUMBAI
MUMBAI seems to be the next destination for India’s biggest realty companies, Unitech and DLF, to restart some of their projects which were put on the backburner. Both these companies have been in the midst of overcoming some serious liquidity problems that they were confronted with.
Unitech, which recently raised $325 million through the qualified institutional placement (QIP), has restarted three of its residential projects in Dadar and Chembur. For DLF, which had bought 17.5 acres from NTC in central Mumbai’s Lower Parel for Rs 702 crore in 2005, construction has commenced again. It was here where it initially planned a retail-cum-entertainment centre. Now, the plan is to have commercial establishments — largely offices — apart from the possibility of some residential apartments.
An official spokesperson for DLF said, “Yes, it is true that the work at NTC mill had stopped for some time, but that was because we had some FSI related formalities which are now in place.” Meanwhile, R Nagaraju, head, corporate planning, Unitech, said, “We have a number of slum redevelopment projects in Mumbai. We also have a focus on affordable housing and some projects will be announced by the end of 2009.”
Industry trackers point out that Unitech has commenced the pre-sale process for its three projects. The company also has land banks in other parts of central and western Mumbai like Lower Parel, Worli, Dadar, Ghatkopar and Malad. A company official said that the focus would now be on residential projects and prices would be lower than the prevailing market rates. It is learnt that Unitech is considering building a commercial project in Lower Parel where the asking price will be Rs 7,000 per square foot. This compares with the current price range of Rs 12,000 to Rs 18,000 per square foot.
Together, Unitech and DLF have a combined debt of over Rs 20,000 crore. While Unitech raised funds through the QIP route, DLF brought in $800 million through a share sale. Both companies have also been selling their land parcels and some property as well to raise liquidity.
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