Friday, March 6, 2009
Inflation falls to '02 levels
Inflation falls to '02 levels
The Financial Express, March 6, 2009, Page 1
Economy Bureau, New Delhi
Inflation fell sharply by 33 basis points to a six-and-a-half-year low of 3.03% for the week ended February 21. The news came a day after the Reserve Bank of India announced a 50-basis-point cut in repo and reverse repo rates—the rates at which banks buy and sell rupees from the central bank.
Analysts said the drastic fall in inflation gives RBI space for bold rate cuts and to pressure banks to cut their lending rates. RBI figures show the prime lending rates of banks range between 12.75% and 13.25%. The figures also show that from mid-December to mid-February, the banks have lent only Rs 8,000 crore to industry, compared to Rs 89,000 crore in the same period last year.
The low inflation also gives headroom for the outgoing government to avoid new measures till a new Parliament is sworn-in in June. Union Bank of India announced a cut in rates while housing finance institution HDFC said it could make some changes once the financial year closed out in March.
But despite the low inflation number, stocks fell and rupee depreciated since the scale of RBI rate cut was below expectations. The 30-share BSE Sensex ended down 2.94% at 8,197.92 points and the 50-share NSE index ended down 2.59% at 2,576.70 points, the lowest in more than three years, as rate cuts failed to bolster investor confidence and foreign investors sold stocks on a gloomy outlook for the economy. The rupee closed lower at 51.655/665 to a dollar, from Wednesday’s close of 51.53/55. The current inflation rate is the same as recorded in the week ended October 19, 2002.
“We expect to see further monetary easing to the tune of 100 bps in the coming months,” said Citi India economist Rohini Malkani. Goldman Sachs said the RBI rates cut would bring down the prime lending rates, even as it projected another cut in the cash reserve ratio by the central bank.
Goldman Sachs said in a note that it did not foresee further reverse repo cuts until the end of the elections. “The administered savings rate at 3.5% may act as a constraint, as we believe it will be politically inexpedient for RBI to cut the administered rate during an election, and reducing the reverse repo below the savings rate would hurt bank profitability. For a more accommodative policy, we expect RBI to move towards more quantitative easing through open market operations. We also expect RBI to cut the CRR of banks by another 150 bps by mid-2009.”
The Financial Express, March 6, 2009, Page 1
Economy Bureau, New Delhi
Inflation fell sharply by 33 basis points to a six-and-a-half-year low of 3.03% for the week ended February 21. The news came a day after the Reserve Bank of India announced a 50-basis-point cut in repo and reverse repo rates—the rates at which banks buy and sell rupees from the central bank.
Analysts said the drastic fall in inflation gives RBI space for bold rate cuts and to pressure banks to cut their lending rates. RBI figures show the prime lending rates of banks range between 12.75% and 13.25%. The figures also show that from mid-December to mid-February, the banks have lent only Rs 8,000 crore to industry, compared to Rs 89,000 crore in the same period last year.
The low inflation also gives headroom for the outgoing government to avoid new measures till a new Parliament is sworn-in in June. Union Bank of India announced a cut in rates while housing finance institution HDFC said it could make some changes once the financial year closed out in March.
But despite the low inflation number, stocks fell and rupee depreciated since the scale of RBI rate cut was below expectations. The 30-share BSE Sensex ended down 2.94% at 8,197.92 points and the 50-share NSE index ended down 2.59% at 2,576.70 points, the lowest in more than three years, as rate cuts failed to bolster investor confidence and foreign investors sold stocks on a gloomy outlook for the economy. The rupee closed lower at 51.655/665 to a dollar, from Wednesday’s close of 51.53/55. The current inflation rate is the same as recorded in the week ended October 19, 2002.
“We expect to see further monetary easing to the tune of 100 bps in the coming months,” said Citi India economist Rohini Malkani. Goldman Sachs said the RBI rates cut would bring down the prime lending rates, even as it projected another cut in the cash reserve ratio by the central bank.
Goldman Sachs said in a note that it did not foresee further reverse repo cuts until the end of the elections. “The administered savings rate at 3.5% may act as a constraint, as we believe it will be politically inexpedient for RBI to cut the administered rate during an election, and reducing the reverse repo below the savings rate would hurt bank profitability. For a more accommodative policy, we expect RBI to move towards more quantitative easing through open market operations. We also expect RBI to cut the CRR of banks by another 150 bps by mid-2009.”
Economy to grow 6.7% this fiscal: Dun & Bradstreet
Economy to grow 6.7% this fiscal: Dun & Bradstreet
The Financial Express, March 6, 2009, Page 2
fe Bureau, New Delhi
Indian economy will grow 6.7% in fiscal year 2009-10, pushed by a healthy increase in consumption even as private investment will moderate, information services provider Dun & Bradstreet (D&B) has projected.
In its Economy Outlook 2009-10, D&B said the economy will pick up in the medium to long-term when the policy responses of the government and Reserve Bank of India will come into play and the external situation will stabilise.
“D&B believes that the strong fundamentals of the Indian economy are a key to early reversal. D&B expects GDP growth to bottom out during H1 FY’10, see a reversal by H2 FY’10 and average at 6.7% for FY’10,” it said in the report, released on Thursday.
The research firm expects the economy to grow at 6.8% in 2008-09, lower than the projection of 7.1% by Central Statistical Organisation and Prime Minister Economic Advisory Council. Giving reasons for the lower forecast, it said investment demand has come down in line with consumption as banks have turned risk-averse and cautious in lending.
The investment growth is likely to slow down to 35.5% this fiscal from 39.1% a year ago, D&B said, adding that in 2009-10 the growth in investment will level at 35% as the problems in lending will continue.
D&B said the aggregate consumption demand as measured by Private Final Consumption Expenditure (PFCE) will stabilise at 6.5% during FY’09 compared to 8.1% in the last fiscal. However, there will be a slight improvement in consumption to 6.7% in FY’10 as fiscal measures and lower interest rates begin to boost confidence and stimulate demand in the latter half of the year.
In its fight against inflation, RBI had adopted a tight monetary stance in 2008, slowing down the economic growth that averaged 7.4% against 9.3% in the previous year. The condition worsened in September when banks found borrowing difficult and hence reduced lending. To reverse the situation, the government and the central bank eased the credit condition through several measures taken since September 2008.
RBI has reduced mandatory cash reserve ratio to 5% from 9%, repo rate—at which it lends to banks—to 5% from 9% and reverse repo rate—at which it borrows from banks to 3.5% from 6%. In total, it injected liquidity of Rs 3,88,000 crore into the system. The government also raised expenditure on infrastructure and created a favourable lending environment for individuals, small industries and exporters.
Despite the measures, growth in bank lending is expected to moderate to 21.5% this financial year and 20% the next as banks will continue to be risk-averse and demand for loans from industry will be low due to production cuts and deferred investment plans, the report stated. However, benchmark prime lending rates will come down to 10.5-11% in FY’10, it added.
The industrial production growth, which has turned negative at -0.2 in October-December 2008, will pick up only in second half of 2009-10 and register an average increase of 5.3% during the year compared to expected rise of 3.5% this fiscal as demand will grow both domestically and internationally, D&B said.
The Financial Express, March 6, 2009, Page 2
fe Bureau, New Delhi
Indian economy will grow 6.7% in fiscal year 2009-10, pushed by a healthy increase in consumption even as private investment will moderate, information services provider Dun & Bradstreet (D&B) has projected.
In its Economy Outlook 2009-10, D&B said the economy will pick up in the medium to long-term when the policy responses of the government and Reserve Bank of India will come into play and the external situation will stabilise.
“D&B believes that the strong fundamentals of the Indian economy are a key to early reversal. D&B expects GDP growth to bottom out during H1 FY’10, see a reversal by H2 FY’10 and average at 6.7% for FY’10,” it said in the report, released on Thursday.
The research firm expects the economy to grow at 6.8% in 2008-09, lower than the projection of 7.1% by Central Statistical Organisation and Prime Minister Economic Advisory Council. Giving reasons for the lower forecast, it said investment demand has come down in line with consumption as banks have turned risk-averse and cautious in lending.
The investment growth is likely to slow down to 35.5% this fiscal from 39.1% a year ago, D&B said, adding that in 2009-10 the growth in investment will level at 35% as the problems in lending will continue.
D&B said the aggregate consumption demand as measured by Private Final Consumption Expenditure (PFCE) will stabilise at 6.5% during FY’09 compared to 8.1% in the last fiscal. However, there will be a slight improvement in consumption to 6.7% in FY’10 as fiscal measures and lower interest rates begin to boost confidence and stimulate demand in the latter half of the year.
In its fight against inflation, RBI had adopted a tight monetary stance in 2008, slowing down the economic growth that averaged 7.4% against 9.3% in the previous year. The condition worsened in September when banks found borrowing difficult and hence reduced lending. To reverse the situation, the government and the central bank eased the credit condition through several measures taken since September 2008.
RBI has reduced mandatory cash reserve ratio to 5% from 9%, repo rate—at which it lends to banks—to 5% from 9% and reverse repo rate—at which it borrows from banks to 3.5% from 6%. In total, it injected liquidity of Rs 3,88,000 crore into the system. The government also raised expenditure on infrastructure and created a favourable lending environment for individuals, small industries and exporters.
Despite the measures, growth in bank lending is expected to moderate to 21.5% this financial year and 20% the next as banks will continue to be risk-averse and demand for loans from industry will be low due to production cuts and deferred investment plans, the report stated. However, benchmark prime lending rates will come down to 10.5-11% in FY’10, it added.
The industrial production growth, which has turned negative at -0.2 in October-December 2008, will pick up only in second half of 2009-10 and register an average increase of 5.3% during the year compared to expected rise of 3.5% this fiscal as demand will grow both domestically and internationally, D&B said.
In Pune, lease a flat now, buy it later
In Pune, lease a flat now, buy it later
Business Standard, March 6, 2009, Page 4
BS Reporter / Pune
Shrinking sales of luxury residential apartments have led a prominent developer here to offer these on an 11-month lease, with the choice of purchase to be later exercised by the tenant, once the economic slump is over.
The rent paid by a tenant who later decides to buy will be deducted from the sale price, as a down payment. There will be no compulsion to buy, says Mont Vert Homes, whose idea it is.
Another interesting aspect is that someone who chooses to move on has the option of passing on the lease to a friend or relative, and the rent paid by the original occupier will, in that case, also be treated as part of the down payment if the purchase is later made by the next man.
The heavy slump in the real estate market here for exercised developers for around six months. The Promoters and Builders Association of Pune (PBAP) had recently announced a number of schemes to promote sales.
Says Mont Vert’s managing director, Jayant Kaneria: “By May-June this year, we will have a certain number of apartments ready to sell, which have not been booked so far. When people are finding it difficult to buy flats for fear of losing their job, we want them to give a sigh of relief. We are targeting families that earn up to Rs 50,000 a month and would buy an apartment once the economic slump is over."
“It is not mandatory for tenants to buy the apartment once the lease gets over. They can simply leave or transfer it to any friend or relative. In this case as well, the rent paid by the (original) tenant will be deducted from the final sell price,” Kaneria added.
SAIL: No major steel price correction in two months
SAIL: No major steel price correction in two months
Business Standard, March 6, 2009, Section II, Page 10
Press Trust Of India / New Delhi
State-owned steel major Steel Authority of India (SAIL) does not see any major correction in steel prices over the next two months even as the demand has started firming up from sectors such as automobile and construction, a top official of the company said.
"In one or two months, we don't see any major correction in steel prices," SAIL Chairman S K Roongta said today.
Admitting that sales volumes of steel producers have increased during last two months, he said it only indicated there could be some price stability, not major corrections.
Roongta said there has been a partial revival in demand for steel from sectors such as automobile and construction, resulting in better sales volumes.
After recording a negative growth in January, SAIL reported a nine per cent surge in sales volume at 11.7 lakh tonnes in February.
Asked if the company would be able to achieve the same level of growth in the first quarter of the next financial year, Roongta said that it was unlikely.
However, the company hopes to make best efforts to see it did not slip in the negative terrain in the first quarter of FY10, Roongta said.
As automobile industry reported a robust growth in the last two months, the SAIL chief said it should have a reflection on the demand for steel.
"We are seeing a gradual improvement in demand from the auto segment. It will be much improved from the third quarter, which was poor," he said.
On whether SAIL has negotiated lower coking coal prices under new contracts, Roongta said the details of commercial negotiations couldn't be divulged.
Along with major producers such as JSW and Tata Steel, SAIL is negotiating lower coking coal prices from international suppliers such as BHP Billiton.
From $96 per tonne in 2007-08, coking coal prices went up to $300 a tonne this fiscal, increasing the input costs of steel makers.
"... There was a substantial raise (in coking coal prices) in 2008-09 as compared to 2007-08, which has to come down in view of the market situation for steel at this moment," Roongta said.
Realty sector likely to be under scanner next
Realty sector likely to be under scanner next
The Hindu Business Line, March 6, 2009, Page 17
Our Bureau, Kolkata, March 5
Striking a note of caution for real estate developers, Mr D. Subrahmanyam, Executive Director of the Housing and Urban Development Corporation Ltd (HUDCO), said, after Information Technology, the real estate sector could next fall under the scanner of regulators in transparency matters.
HUDCO is a fully-owned enterprise of the Government of India engaged in financing housing projects and other urban developments. Addressing a seminar at the Realty Expo 2009, organised by the Confederation of Real Estate Developers Association of India (CREDAI), he said, “The next target of the national regulator after the Satyam scam may be the realty sector as it is known to contain elements indulging in unethical practices.” Speculation on real estate transactions by both buyers and sellers often result in pricing out of genuine buyers from the market, he observed.
The banks and financial institutions refrain from financing real estate projects as company balance sheets and other corporate papers often lack transparency, he said. “The asset agreement is considered a weak ownership document as a mortgage for financing documents,” he said, adding that some developers also deliberately avoid taking completion certificates.
Stability in future
On the strategies to be adopted in a period of slump, he said, “The developers should make a realistic study of demand and supply situation and affordability issues before investing in projects.” The sector also needed a grater degree of regulation, he pointed out.
Mr Harshvardhan Neotia, Chairman of the Ambuja Realty Group, said the current correction in real estate prices and costs is healthy for the industry as it gives leeway for the developers to become more vigilant and quality conscious. Mr Pradip Kumar Chopra, Chairman, PS group, said on the sidelines of the seminar that prices of housing units in Kolkata were down by nearly 25 per cent on an average.
Mr Jayanta Kumar Sinha, Chief General Manager of the State Bank of India, said there is good demand for houses from “genuine buyers” and that the situation would stabilise during the next financial year as cost of loans were being rationalised.
The Realty Expo 2009 is being held here at the Science City grounds from March 4-8.
Housing index to keep track of property rates
Housing index to keep track of property rates
The Times of India, March 6, 2009, Page 13
RBI to Set Up Panel For Its Launch & Monitoring
Mahendra Kumar Singh, TNN, NEW DELHI
Reserve Bank of India (RBI) is soon going to launch a housing start-up (HSU) index which will reflect the availability of housing stocks and real estate prices in cities across the country.
The HSU aims to measure changes in the level of activity in housing sector and to identify growth and recessionary tendencies in housing and related sectors of the economy.
The central bank is likely to set up a standing committee which will consist of officials from Central Statistical Organisation, Office of Registrar General and housing ministry to launch the index and monitor its progress.
"The number of housing starts during a period indicates the demand and supply situation in the housing market, as reflected in conversion of the building permits into actual starts," the RBI said in a statement.
The proposal has come after a technical advisory group (TAG) on the issue submitted its report based on pilot survey in five cities for the start-up index and recommended setting up of the standing committee.
The survey compared the number of building permits issued across five cities, including Delhi, Mumbai, Coimbatore, Villupuram and Saswad, with how many had actually translated to construction activity.
The TAG, which suggested field survey once in three years, argued that the present system of data collection by National Buildings Organisation (NBO) could be finetuned to get data on building permits on quarterly basis which would constitute the basic information for the index.
The base year of the index is 2003-04. The lack of reliable and accurate data on housing restricts experts and government's ability to make economic forecasts which could change with the launch of the index.
"Presently, the government is not aware of what is really happening in the housing sector, even though construction has strong forward and backward linkages with various sectors," said an official.
The HSU index is likely to become an important indicator to monitor the housing sector, considering the global economic downturn being partially linked to the development in the sector.
All major economies, including US, Canada and Japan, use similar indices to assess economic activity using demand and supply data on the housing sector.
As housing has forward and backward linkages, the proposed index will be useful in assessing demand and supply situations in other sectors, such as cement and steel.
An official said a rise in the index would indicate economic growth, potential rise in real estate prices and potential pressure on interest rates. Conversely, a fall in the housing index would mean a fall in real estate prices and interest rates would follow suit. It would also mean that GDP growth is slowing.
The Times of India, March 6, 2009, Page 13
RBI to Set Up Panel For Its Launch & Monitoring
Mahendra Kumar Singh, TNN, NEW DELHI
Reserve Bank of India (RBI) is soon going to launch a housing start-up (HSU) index which will reflect the availability of housing stocks and real estate prices in cities across the country.
The HSU aims to measure changes in the level of activity in housing sector and to identify growth and recessionary tendencies in housing and related sectors of the economy.
The central bank is likely to set up a standing committee which will consist of officials from Central Statistical Organisation, Office of Registrar General and housing ministry to launch the index and monitor its progress.
"The number of housing starts during a period indicates the demand and supply situation in the housing market, as reflected in conversion of the building permits into actual starts," the RBI said in a statement.
The proposal has come after a technical advisory group (TAG) on the issue submitted its report based on pilot survey in five cities for the start-up index and recommended setting up of the standing committee.
The survey compared the number of building permits issued across five cities, including Delhi, Mumbai, Coimbatore, Villupuram and Saswad, with how many had actually translated to construction activity.
The TAG, which suggested field survey once in three years, argued that the present system of data collection by National Buildings Organisation (NBO) could be finetuned to get data on building permits on quarterly basis which would constitute the basic information for the index.
The base year of the index is 2003-04. The lack of reliable and accurate data on housing restricts experts and government's ability to make economic forecasts which could change with the launch of the index.
"Presently, the government is not aware of what is really happening in the housing sector, even though construction has strong forward and backward linkages with various sectors," said an official.
The HSU index is likely to become an important indicator to monitor the housing sector, considering the global economic downturn being partially linked to the development in the sector.
All major economies, including US, Canada and Japan, use similar indices to assess economic activity using demand and supply data on the housing sector.
As housing has forward and backward linkages, the proposed index will be useful in assessing demand and supply situations in other sectors, such as cement and steel.
An official said a rise in the index would indicate economic growth, potential rise in real estate prices and potential pressure on interest rates. Conversely, a fall in the housing index would mean a fall in real estate prices and interest rates would follow suit. It would also mean that GDP growth is slowing.
Parsvnath plans residential project in Lucknow
Parsvnath plans residential project in Lucknow
The Hindu Business Line, March 6, 2009, Page 17
The Hindu Business Line, March 6, 2009, Page 17
Realty firm Parsvnath Developers announced on Thursday that it would build a residential project in Lucknow in the Rs. 13.95 lakh to Rs. 27.5 lakh "affordable range. The company is expecting sales realisation of about Rs 100 crore from this project comprising 510 independent floors covering over six lakh sq ft area.
“The total realisation for this project is approximately Rs 100 crore which would be realised over a period of two years,'' Parsvnath Developers said in a statement. The construction work of the project, which is a part of 35-acre township, is expected to get completed in two years. “At Parsvnath, it has been our constant endeavor to design products to cater on the ongoing demand trends. The need of the hour is quality construction at economical rates,'' company's Chairman Pradeep Jain said.
Real estate developers, including country’s largest realty firm DLF, have started focusing on affordable housing projects to beat the slow down in property demand, which has affected their sales volumes significantly.
Parsvnath, with presence across 50 cities in 17 States, has a developable area of 209 million sqft, of which 81 million sq.ft is under construction.
“The total realisation for this project is approximately Rs 100 crore which would be realised over a period of two years,'' Parsvnath Developers said in a statement. The construction work of the project, which is a part of 35-acre township, is expected to get completed in two years. “At Parsvnath, it has been our constant endeavor to design products to cater on the ongoing demand trends. The need of the hour is quality construction at economical rates,'' company's Chairman Pradeep Jain said.
Real estate developers, including country’s largest realty firm DLF, have started focusing on affordable housing projects to beat the slow down in property demand, which has affected their sales volumes significantly.
Parsvnath, with presence across 50 cities in 17 States, has a developable area of 209 million sqft, of which 81 million sq.ft is under construction.
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