Wednesday, February 4, 2009
Dipp cell to keep vigil on FDI in real estate projects
Dipp cell to keep vigil on FDI in real estate projects
The Economic Times, February 4, 2009, Page 7
Move To Ensure Funds Are Not Diverted To Projects Not Meeting FDI Norms
Rajat Guha NEW DELHI
THE department of industrial policy and promotion (Dipp) will set up a monitoring cell to track foreign direct investment inflows into real estate companies to ensure the funds are not diverted to projects for which foreign investment clearance has not been taken, said a senior official with the department.
Real estate companies need to take government permission to induct foreign capital through joint ventures or special purpose vehicles. The proposed cell will ensure that cleared funds are not diverted to other projects in violation of the FDI policy.
The department has observed that many Indian companies divert foreign funds into projects not cleared for foreign investment.
If real estate companies are allowed to retain their non-FDI projects while bringing in foreign funds, it would actually mean they are being exempted from Press Note 2 of 2005 guidelines that lays down the minimum capital and area norms for projects eligible for accepting foreign capital. There is also a three-year lockin period for such ventures. This would be a violation of the FDI policy.
The foreign investment promotion board (FIPB), the government body that clears foreign investment, is of the view that foreign investments should be monitored after they have been approved. The modalities of the monitoring mechanism are being worked out by Dipp.
“The Dipp may ask realty companies to submit bi-yearly financial reports so that fund flow could be scrutinised. The process would continue so long as the project is not completed,” an FIPB official said.
The FIPB had rejected an application from Vatika, a Delhi-based real estate company, seeking to retain projects that do not comply with FDI guidelines for the real estate sector.
US-based Wachovia Corp has invested in Vatika through its subsidiary WDC Ventures. According to the Vatika proposal, funds from WDC Ventures would be exclusively used for developing projects within the parameters of FDI rules. However, Vatika had some projects before accepting FDI which it wanted to retain.
India received $4.5 billion FDI in housing and real estate sector from April 2000 to October 2008. Of this, about $1.8 billion was received during April-October 2008 alone, according to data available with Dipp.
Realty cos need to take govt nod to induct foreign capital through joint ventures or special purpose vehicles
Dipp has observed many companies divert foreign funds into projects not cleared for foreign investment
FIPB feels foreign investments should be monitored after they get clearance
Realtors may cut price by additional 20% to woo buyers
Realtors may cut price by additional 20% to woo buyers
The Economic Times, February 4, 2009, Page 12
Rajesh Unnikrishnan & Supriya Verma Mishra MUMBAI
REAL estate developers are likely to cut home prices by an additional 20% in a bid to lure purchasers and customers who might otherwise shift to other financial commitments as the current fiscal year draws to a close in March. With banks also starting to cut home loan rates, people close to the development say the first quarter of the next fiscal year could see a substantial jump in home sales. Property rates across the country have fallen by about 15-20% with the decline in the economic situation. According to analysts, the impact from the ongoing financial crunch and the mounting pressure from various other circles, could likely peak by the end of March. That’s when many developers will be forced to sell unsold stock at a much cheaper price, said one executive with a leading developer. Currently, a lot of real estate developers are rushing to clean up their highly leveraged balance sheets. “In their last attempt to save diminishing margins, we could see some developers make their moves in the last quarter of FY09.
The Economic Times, February 4, 2009, Page 12
Rajesh Unnikrishnan & Supriya Verma Mishra MUMBAI
REAL estate developers are likely to cut home prices by an additional 20% in a bid to lure purchasers and customers who might otherwise shift to other financial commitments as the current fiscal year draws to a close in March. With banks also starting to cut home loan rates, people close to the development say the first quarter of the next fiscal year could see a substantial jump in home sales. Property rates across the country have fallen by about 15-20% with the decline in the economic situation. According to analysts, the impact from the ongoing financial crunch and the mounting pressure from various other circles, could likely peak by the end of March. That’s when many developers will be forced to sell unsold stock at a much cheaper price, said one executive with a leading developer. Currently, a lot of real estate developers are rushing to clean up their highly leveraged balance sheets. “In their last attempt to save diminishing margins, we could see some developers make their moves in the last quarter of FY09.
DLF dream deal sours, seeks help
DLF dream deal sours, seeks help
Hindustan Times, February 04, 2009, Page 1
DLF, India’s largest real estate company, wants the Delhi Development Authority (DDA) to bail out its ambitious Rs 3,000-crore International Convention Centre project, the country’s largest, in Dwarka in south-west Delhi.
The alternative: it will pull out of the deal.
DLF, the sole bidder, had won the project, spread over 14 hectares, in 2007 with a Rs 901.08-crore bid. DDA had set a 32-month deadline for the centre’s completion, which was envisaged as a rival to Singapore’s Suntec Convention Centre, widely rated as the world’s best.
Now, facing a funds crunch as a result of the economic slowdown, DLF has written to DDA to relax the terms and conditions. “DLF has requested us to renegotiate or return its money,” said a senior DDA official who did not want to be named.
“We’re still talking to DDA to renegotiate the contract. No final decision has been taken as yet,” said Rajeev Talwar, group executive director, DLF.
According to the terms of the original contract, DLF was to complete the project on its own. “But now, because it is facing a liquidity crunch, it wants to form a consortium to complete the project. This is against the terms of the contract,” said a DDA official.
The convention centre, with a 12,000-seat conference hall, would have been the largest in India — double the size of the Hyderabad International Convention Centre, which holds that distinction. It would also have housed two five-star hotels with 850 rooms.
But with DDA unwilling to renegotiate the contract, officials in the civic agency feel the project is all but doomed. Even DLF sources confirmed the project is unlikely to be completed in time for the Commonwealth Games, as was planned.
Hindustan Times, February 04, 2009, Page 1
DLF, India’s largest real estate company, wants the Delhi Development Authority (DDA) to bail out its ambitious Rs 3,000-crore International Convention Centre project, the country’s largest, in Dwarka in south-west Delhi.
The alternative: it will pull out of the deal.
DLF, the sole bidder, had won the project, spread over 14 hectares, in 2007 with a Rs 901.08-crore bid. DDA had set a 32-month deadline for the centre’s completion, which was envisaged as a rival to Singapore’s Suntec Convention Centre, widely rated as the world’s best.
Now, facing a funds crunch as a result of the economic slowdown, DLF has written to DDA to relax the terms and conditions. “DLF has requested us to renegotiate or return its money,” said a senior DDA official who did not want to be named.
“We’re still talking to DDA to renegotiate the contract. No final decision has been taken as yet,” said Rajeev Talwar, group executive director, DLF.
According to the terms of the original contract, DLF was to complete the project on its own. “But now, because it is facing a liquidity crunch, it wants to form a consortium to complete the project. This is against the terms of the contract,” said a DDA official.
The convention centre, with a 12,000-seat conference hall, would have been the largest in India — double the size of the Hyderabad International Convention Centre, which holds that distinction. It would also have housed two five-star hotels with 850 rooms.
But with DDA unwilling to renegotiate the contract, officials in the civic agency feel the project is all but doomed. Even DLF sources confirmed the project is unlikely to be completed in time for the Commonwealth Games, as was planned.
Sobha Developers set to restructure Rs 850-crore debt
Sobha Developers set to restructure Rs 850-crore debt
Business Standard, February 04, 2009, Page 7
RAGHUVIR BADRINATH Bangalore, 3 February
Sobha Developers, the Bangalore-based real estate developer, is in the process of restructuring 45 per cent of its debt burden. The company has about Rs 1,900 crore of debt on its balance sheet.
The company, which has aland bank of 3,000 acres primarily in south India, is in discussions with around 12 banks and financial institutions to restructure around Rs 850 crore of debt.
Company officials detail that these debts are all on projects that are either underway or nearing completion or against inventory backlog. The average rate of interest is around 13.72 per cent.
Sobha expects to complete the process of debt restructuring by the end of first quarter of financial year year starting April 1. The company, which is among the top real estate developers in south India, is opting for debt restructuring as demand for real estate has slowed and firms are faced with a threat to return debt.
Sobha’s debt is more than 1.6 times its equity. Still, the company has to repay about Rs 400 crore worth of debt in the current calender year.
Sobha Developers is understood to have identified nearly 200 acres to be sold in Bangalore and Chennai in an attempt to repay its debt. The developer has also identified nearly 150 acres in Bangalore and Pune, on which it plans to develop projects and sell stake to investors to raise funds.
“These measures are expected to be rake in Rs 500 crore, which will be used to settle debt,” a company official detailed.
In addition to raising Rs 500 crore, the company is looking to bring in a financial investor through preferential allotment. An industry source indicated that there might be a move in which the promoters may also be willing to offload a majority stake in the company, a move the firm has denied categorically. Promoters hold a little over 87 per cent.
Public information also indicate that the promoters have pledged a little over 20 per cent in overseas markets and majority of debt against those shares that have been repaid.
Business Standard, February 04, 2009, Page 7
RAGHUVIR BADRINATH Bangalore, 3 February
Sobha Developers, the Bangalore-based real estate developer, is in the process of restructuring 45 per cent of its debt burden. The company has about Rs 1,900 crore of debt on its balance sheet.
The company, which has aland bank of 3,000 acres primarily in south India, is in discussions with around 12 banks and financial institutions to restructure around Rs 850 crore of debt.
Company officials detail that these debts are all on projects that are either underway or nearing completion or against inventory backlog. The average rate of interest is around 13.72 per cent.
Sobha expects to complete the process of debt restructuring by the end of first quarter of financial year year starting April 1. The company, which is among the top real estate developers in south India, is opting for debt restructuring as demand for real estate has slowed and firms are faced with a threat to return debt.
Sobha’s debt is more than 1.6 times its equity. Still, the company has to repay about Rs 400 crore worth of debt in the current calender year.
Sobha Developers is understood to have identified nearly 200 acres to be sold in Bangalore and Chennai in an attempt to repay its debt. The developer has also identified nearly 150 acres in Bangalore and Pune, on which it plans to develop projects and sell stake to investors to raise funds.
“These measures are expected to be rake in Rs 500 crore, which will be used to settle debt,” a company official detailed.
In addition to raising Rs 500 crore, the company is looking to bring in a financial investor through preferential allotment. An industry source indicated that there might be a move in which the promoters may also be willing to offload a majority stake in the company, a move the firm has denied categorically. Promoters hold a little over 87 per cent.
Public information also indicate that the promoters have pledged a little over 20 per cent in overseas markets and majority of debt against those shares that have been repaid.
Omaxe for rescheduling over half of its debt
Omaxe for rescheduling over half of its debt
Business Standard, February 04, 2009, Page 7
BS REPORTER Mumbai, 3 February
New Delhi-based developer Omaxe said it was in talks with banks and other lenders to restructure more than half its debt in a bid to reduce cost and match payments with cash flows.
Omaxe CMD Rohtas Goel said the realty major was seeking to restructure as much as Rs 900 crore worth of debt and expects afavourable verdict in the next two weeks. It has Rs 1,513 crore of debt on its books. After the restructuring, the company expects cost of funds on outstanding loans to drop by as much as 150 bps. The realtor’s average cost of funds is around 14 per cent, he added.
Omaxe, which plans to launch its affordable housing project in Indore this month, said it needs to repay about Rs 85 crore of debt by March 31. In FY10, the company will need to repay Rs 300 crore. The firm, which has postponed implementation of several of its project by at least two years, has also witnessed 510 per cent defaults on customer advances.
Business Standard, February 04, 2009, Page 7
BS REPORTER Mumbai, 3 February
New Delhi-based developer Omaxe said it was in talks with banks and other lenders to restructure more than half its debt in a bid to reduce cost and match payments with cash flows.
Omaxe CMD Rohtas Goel said the realty major was seeking to restructure as much as Rs 900 crore worth of debt and expects afavourable verdict in the next two weeks. It has Rs 1,513 crore of debt on its books. After the restructuring, the company expects cost of funds on outstanding loans to drop by as much as 150 bps. The realtor’s average cost of funds is around 14 per cent, he added.
Omaxe, which plans to launch its affordable housing project in Indore this month, said it needs to repay about Rs 85 crore of debt by March 31. In FY10, the company will need to repay Rs 300 crore. The firm, which has postponed implementation of several of its project by at least two years, has also witnessed 510 per cent defaults on customer advances.
LIC Housing Finance cuts home loan rates by 100 bps
LIC Housing Finance cuts home loan rates by 100 bps
Business Standard, February 04, 2009, Section II, Page 3
BS REPORTER Mumbai, 3 February
LIC Housing Finance (LICHF) has slashed lending rates for new borrowers by 100 basis points across various loan categories. Home loans up to Rs 30 lakh, irrespective of the tenure, would now be cheaper by 100 bps at 8.75 per cent, while for loans above Rs 30 lakh, the rates are lower at 9.75 per cent as against 10.75 per cent earlier. The new rates are effective from February 1.
“Earlier, similar loans with atenure up to five years charged 9.25 per cent and loans with tenure between five and 20 years attracted 9.75 per cent. Now we have decided to aggregate the two schemes and charge same interest rate,” LIC Housing Director & CEO R R Nair said.
About 80 per cent of LICHF’s loans fall under the Rs 30-lakh category, with an average loan size at Rs 16 lakh.
After the meeting with standin Finance Minister Pranab Mukherjee, many public sector bank chiefs, including UCO Bank and Corporation Bank, had indicated a cut of 50-100 bps in lending rate.
State Bank of India has already decided to offer home loans at 8 per cent for a year, irrespective of tenure and amount.
Though the present move would not benefit the existing borrowers, it would review the decision on April 1.
“We have passed on the benefit of incremental reduction in costs to the new borrowers. We always take a quarterly review of the lending rates for the existing borrowers, as we take into account the average cost of funds which is next due in April,” Nair added.
On January 1, the company reduced lending rates for existing borrowers, which is presently in the range of 10.7511.25 per cent, by 75 bps.
During the December quarter, the firm posted a 26.70 per cent rise in net profit at Rs 134.33 crore and disbursed Rs 1,944 crore. The firm’s total borrowing in 2008-09 would go up to Rs 11,400 crore as compared to Rs 7,490 crore last year.
Nair said, “The repayment outgo has increased with rising costs, so our borrowings for FY09 have increased. We have already borrowed Rs 8,800 crore in FY09 and we would require another Rs 2,500 crore to support our annual disbursement target of Rs 10,000 crore.”
Business Standard, February 04, 2009, Section II, Page 3
BS REPORTER Mumbai, 3 February
LIC Housing Finance (LICHF) has slashed lending rates for new borrowers by 100 basis points across various loan categories. Home loans up to Rs 30 lakh, irrespective of the tenure, would now be cheaper by 100 bps at 8.75 per cent, while for loans above Rs 30 lakh, the rates are lower at 9.75 per cent as against 10.75 per cent earlier. The new rates are effective from February 1.
“Earlier, similar loans with atenure up to five years charged 9.25 per cent and loans with tenure between five and 20 years attracted 9.75 per cent. Now we have decided to aggregate the two schemes and charge same interest rate,” LIC Housing Director & CEO R R Nair said.
About 80 per cent of LICHF’s loans fall under the Rs 30-lakh category, with an average loan size at Rs 16 lakh.
After the meeting with standin Finance Minister Pranab Mukherjee, many public sector bank chiefs, including UCO Bank and Corporation Bank, had indicated a cut of 50-100 bps in lending rate.
State Bank of India has already decided to offer home loans at 8 per cent for a year, irrespective of tenure and amount.
Though the present move would not benefit the existing borrowers, it would review the decision on April 1.
“We have passed on the benefit of incremental reduction in costs to the new borrowers. We always take a quarterly review of the lending rates for the existing borrowers, as we take into account the average cost of funds which is next due in April,” Nair added.
On January 1, the company reduced lending rates for existing borrowers, which is presently in the range of 10.7511.25 per cent, by 75 bps.
During the December quarter, the firm posted a 26.70 per cent rise in net profit at Rs 134.33 crore and disbursed Rs 1,944 crore. The firm’s total borrowing in 2008-09 would go up to Rs 11,400 crore as compared to Rs 7,490 crore last year.
Nair said, “The repayment outgo has increased with rising costs, so our borrowings for FY09 have increased. We have already borrowed Rs 8,800 crore in FY09 and we would require another Rs 2,500 crore to support our annual disbursement target of Rs 10,000 crore.”
India may shed 1.5mn jobs by March-end: Pillai
India may shed 1.5mn jobs by March-end: Pillai
Hindustan Times – Business, February 04, 2009, Page 23
AS MANY as 1.5 million people could end up losing their jobs, as exports contracted for the third successive month plunging by 1.1 per cent in December amid the worst slowdown in the world economy in the last 80 years.
"If these projections continue... it's quite likely that you can expect another five lakh losses before March 31," commerce secretary G.K. Pillai told television channel NDTV About 1 million jobs have already been lost since August.
Exports for the month of December stood at $12.69 billion, latest trade data released on Monday showed. It had declined by 12.1 per cent and 9.9 per cent in October and November: respectively.
Exporters employ about 150 million people in India and the sector is India's biggest provider of jobs after agriculture.
Nervous exporters, smarting under severe earnings erosions last year, are struggling to ink new contracts as demand shrinks amid growing bankruptcies in the US, India's largest export market.
In recent months the government has taken a slew of fiscal measures, including sharp cuts in excise duties and increased plan spending, to help the economy tide over a recession in the world's developed countries.
Exports for January, the official data for which will come in early next month, is expected to fall further as orders from the US and European Union have shown no signs of picking up. This could hurt jobs further.
Hindustan Times – Business, February 04, 2009, Page 23
AS MANY as 1.5 million people could end up losing their jobs, as exports contracted for the third successive month plunging by 1.1 per cent in December amid the worst slowdown in the world economy in the last 80 years.
"If these projections continue... it's quite likely that you can expect another five lakh losses before March 31," commerce secretary G.K. Pillai told television channel NDTV About 1 million jobs have already been lost since August.
Exports for the month of December stood at $12.69 billion, latest trade data released on Monday showed. It had declined by 12.1 per cent and 9.9 per cent in October and November: respectively.
Exporters employ about 150 million people in India and the sector is India's biggest provider of jobs after agriculture.
Nervous exporters, smarting under severe earnings erosions last year, are struggling to ink new contracts as demand shrinks amid growing bankruptcies in the US, India's largest export market.
In recent months the government has taken a slew of fiscal measures, including sharp cuts in excise duties and increased plan spending, to help the economy tide over a recession in the world's developed countries.
Exports for January, the official data for which will come in early next month, is expected to fall further as orders from the US and European Union have shown no signs of picking up. This could hurt jobs further.
DLF stock hits record low
DLF stock hits record low
The Hindu Business Line, February 04, 2009, page 10
Our Bureau
Chennai, Feb. 3 The stock of DLF dropped to Rs 131.85 on the NSE, the lowest since its listing in July 2007. However, it closed a shade better at Rs 132.85 against the Rs 153 on the BSE on Monday. The stock has tumbled nearly 18 per cent in a week and 56 per cent in a month.
According to brokers, the stock has come under severe pressure on concern over its plans to raise funds. The company has plans to raise Rs 2,000 crore through debt. Besides, its December quarter performance was below street expectations, they said.
Most brokerages, including Kotak Securities, Religare, Macquarie, JM Financial and Edelweiss, have either come out with a sell or reduce recommendation on the stock after the company reported third quarter numbers.
The Hindu Business Line, February 04, 2009, page 10
Our Bureau
Chennai, Feb. 3 The stock of DLF dropped to Rs 131.85 on the NSE, the lowest since its listing in July 2007. However, it closed a shade better at Rs 132.85 against the Rs 153 on the BSE on Monday. The stock has tumbled nearly 18 per cent in a week and 56 per cent in a month.
According to brokers, the stock has come under severe pressure on concern over its plans to raise funds. The company has plans to raise Rs 2,000 crore through debt. Besides, its December quarter performance was below street expectations, they said.
Most brokerages, including Kotak Securities, Religare, Macquarie, JM Financial and Edelweiss, have either come out with a sell or reduce recommendation on the stock after the company reported third quarter numbers.
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