Friday, March 27, 2009
Upbeat Global Mood Lifts Market Past 10,000 Pts
Upbeat Global Mood Lifts Market Past 10,000 Pts
The Economic Times, March 27, 2009, Page 1
SENSEX ON ROAD TO REDEMPTION
TENTH PASS
GREEN SIGNALS: RECOVERY ROUND THE CORNER? The pall of gloom over the economy may just be lifting if the Sensex’s good run in recent days—on Thursday, it rose 335 points to breach 10k—and pickup in steel production are any indicators...
Our Bureau MUMBAI
THE Sensex closed above the psychological 10,000 mark on Thursday after more than two-and-a-half months, reviving fond memories of the boom days and hopes that equities may finally be on the recovery path. Brokers attributed the gains to frantic covering of short positions in the derivatives segment—Thursday being settlement day—and the upbeat mood in world markets.
While Indian stocks have gained nearly 23% since the worldwide rally in equities began early this month, market watchers are still unsure if the rally is indicative of an impending economic recovery. Since March 9, the Sensex has gained 1,842 points, with five stocks—Reliance Industries, Infosys Technologies, ICICI Bank, HDFC and HDFC Bank—accounting for over 53% of those gains. Reliance alone made up for 25% of the rise, as the market is expecting some announcement relating to production of gas from its KG Basin blocks shortly.
The Sensex closed at 10,003.10, up 335.20 points, or 3.5%, over its previous close while the 50-share Nifty closed at 3082.25, up 97.90 points, or 3.3%. According to BSE provisional data, foreign funds net bought shares worth around Rs 1,300 crore, easily offsetting the net sales worth Rs 462 crore by local institutions.
“Even after the recent run-up, shares are not significantly expensive,” says Bajaj Allianz Life Insurance CIO Sashi Krishnan.
The Economic Times, March 27, 2009, Page 1
SENSEX ON ROAD TO REDEMPTION
TENTH PASS
GREEN SIGNALS: RECOVERY ROUND THE CORNER? The pall of gloom over the economy may just be lifting if the Sensex’s good run in recent days—on Thursday, it rose 335 points to breach 10k—and pickup in steel production are any indicators...
Our Bureau MUMBAI
THE Sensex closed above the psychological 10,000 mark on Thursday after more than two-and-a-half months, reviving fond memories of the boom days and hopes that equities may finally be on the recovery path. Brokers attributed the gains to frantic covering of short positions in the derivatives segment—Thursday being settlement day—and the upbeat mood in world markets.
While Indian stocks have gained nearly 23% since the worldwide rally in equities began early this month, market watchers are still unsure if the rally is indicative of an impending economic recovery. Since March 9, the Sensex has gained 1,842 points, with five stocks—Reliance Industries, Infosys Technologies, ICICI Bank, HDFC and HDFC Bank—accounting for over 53% of those gains. Reliance alone made up for 25% of the rise, as the market is expecting some announcement relating to production of gas from its KG Basin blocks shortly.
The Sensex closed at 10,003.10, up 335.20 points, or 3.5%, over its previous close while the 50-share Nifty closed at 3082.25, up 97.90 points, or 3.3%. According to BSE provisional data, foreign funds net bought shares worth around Rs 1,300 crore, easily offsetting the net sales worth Rs 462 crore by local institutions.
“Even after the recent run-up, shares are not significantly expensive,” says Bajaj Allianz Life Insurance CIO Sashi Krishnan.
RBI guv sees swifter recovery
RBI guv sees swifter recovery
The Economic Times, March 27, 2009, Page 16
Our Bureau NEW DELHI
RESERVE Bank of India (RBI) governor D Subbarao on Thursday said that the next fiscal (2008-09) will be more challenging than the present fiscal in terms of maintaining a positive growth momentum.
He, however, added that India’s turnaround would be steeper and swifter once there is a turnaround in global economy.
“We believe that growth moderation might be steeper than we had thought earlier. I believe 2009-10 is going to be a more challenging year than 2008-09,” Mr Subbarao said at a conference organised by Confederation of Indian Industry (CII).
Growth in present fiscal was sustained because of development of the brownfield projects (projects which were up for expansion) while most of the industrial houses put the greenfield (new) projects on hold. This may have an impact on the world’s economy in the month’s to come, the RBI chief said.
On the possibility of deflation in Indian economy Mr Subbarao ruled out any possibility of a sustained deflation. He said that inflationary tendencies are likely to be healthy in the coming days.
“Consumer Price Index (CPI) is still elevated. There are four indices of CPI. Some of them are still in double digits. Our own view is that there is no fear of sustained deflation in India,” he said. On the need of a further stimulus package Mr Subbarao said that there is a need that the policy-makers and government should first allow the first two packages to percolate completely.
“There is a cost to support further stimulus, there will be pressure on the credit market. I personally think we should give them (earlier packages) time to run for the moment,” he said.
The Economic Times, March 27, 2009, Page 16
Our Bureau NEW DELHI
RESERVE Bank of India (RBI) governor D Subbarao on Thursday said that the next fiscal (2008-09) will be more challenging than the present fiscal in terms of maintaining a positive growth momentum.
He, however, added that India’s turnaround would be steeper and swifter once there is a turnaround in global economy.
“We believe that growth moderation might be steeper than we had thought earlier. I believe 2009-10 is going to be a more challenging year than 2008-09,” Mr Subbarao said at a conference organised by Confederation of Indian Industry (CII).
Growth in present fiscal was sustained because of development of the brownfield projects (projects which were up for expansion) while most of the industrial houses put the greenfield (new) projects on hold. This may have an impact on the world’s economy in the month’s to come, the RBI chief said.
On the possibility of deflation in Indian economy Mr Subbarao ruled out any possibility of a sustained deflation. He said that inflationary tendencies are likely to be healthy in the coming days.
“Consumer Price Index (CPI) is still elevated. There are four indices of CPI. Some of them are still in double digits. Our own view is that there is no fear of sustained deflation in India,” he said. On the need of a further stimulus package Mr Subbarao said that there is a need that the policy-makers and government should first allow the first two packages to percolate completely.
“There is a cost to support further stimulus, there will be pressure on the credit market. I personally think we should give them (earlier packages) time to run for the moment,” he said.
Revival process may start soon: Tendulkar
Revival process may start soon: Tendulkar
The Economic Times, March 27, 2009, Page 16
Even as the Sensex pierced the 10K barrier on Thursday after months of economic gloom, Prime Minister’s Economic Advisory Council chairman Suresh Tendulkar spread cheer by forecasting that the economy might be on a recovery path by September 2009, reports Our Bureau from Kolkata. Speaking at a seminar organised by Merchant Chamber of Commerce on Thursday, he said: “I am reasonably hopeful that the low interest rate regime will come as a relief and with that I expect the revival process to start in the next 3-6 months.”
OPTIMISTIC: D Subbarao
The Economic Times, March 27, 2009, Page 16
Even as the Sensex pierced the 10K barrier on Thursday after months of economic gloom, Prime Minister’s Economic Advisory Council chairman Suresh Tendulkar spread cheer by forecasting that the economy might be on a recovery path by September 2009, reports Our Bureau from Kolkata. Speaking at a seminar organised by Merchant Chamber of Commerce on Thursday, he said: “I am reasonably hopeful that the low interest rate regime will come as a relief and with that I expect the revival process to start in the next 3-6 months.”
OPTIMISTIC: D Subbarao
Interest rates unlikely to come down further
Interest rates unlikely to come down further
The Times of India, March 27, 2009, Page 23
‘Govt Borrowing For Stimulus Hampering RBI’s Efforts, 0.27% Inflation Won’t Help’
Prabhakar Sinha TNN
New Delhi: The stimulus packages offered by government to fight the impact of global recession on Indian economy seem to be backfiring. At present, it is discouraging the efforts of RBI to bring down the interest rates to revive demand in the domestic market.
On Thursday, interest rate on 10-year government bond scaled the 7% mark to touch 7.02%. The rate had fallen to 4.86% in January 2009. The interest rates firmed up as the government announced that it would borrow Rs 2,41,000 crore in the first six months of 2009-10 to fund stimulus packages. Government would borrow Rs 48,000 crore every month in the first quarter and Rs 32,000 crore every month of the second quarter, which is putting pressure on interest rates.
Indian Bank's Association chairman TS Narayansami said this huge government borrowing programme is creating upward pressure on interest rates. So, RBI's step to cut its short term lending rate to banks (repo rate) will not help in bringing down the rates, he added.
Meanwhile, RBI governor D Subbarao at a CII conference said he was talking to various banks to understand why the lending rates are not coming down despite the central bank has cut the key rates. ‘‘Policy rates have to be transmitted to lending rates by banks. We are looking into the transmission mechanism,'' Subbarao said. He added that interest rates should soften for India to become competitive. Fall in lending rates will revive the demand and so the economic activities.
However, bankers feel that the softening of interest rate is no more linked to cut in key policy rates. Narayansami said, ‘‘RBI's repo rate cut will not have any effect as the interest rates on government bonds are firming up.'' This means, even if RBI reduces the policy rates, taking advantage of inflation touching zero, it will not bring down the interest rates in the present condition.
ICICI MD KV Kamath also said that firming up of the interest rates on government bond is not allowing lending rates to come down. Because of rise in the bond rates, cost of funds is not reducing, prompting banks to hold interest rates at higher levels.
As the government's spending as part of the stimulus packages would be financed from the borrowed money, this will affect availability of funds to the private sector and create upward pressure on interest rates.
In the current financial year, government's borrowing has increased to Rs 3,26,000 crore as again the budgeted amount of Rs 1,33,000 crore. In the 2009-10 also, government will have to borrow around Rs 3,40,000 crore to fund revenue shortfall.
Bankers are arguing that RBI should buy bonds from the market and inject money into the system. Narayansami said instead of cutting the policy rates, RBI should pump more money by purchasing government bonds from the market. As the inflation has already fallen to 0.27% during the week ending March 14, the government can inject liquidity without worrying about the inflation. This would only help in bringing down the interest rates, bankers said.
The Times of India, March 27, 2009, Page 23
‘Govt Borrowing For Stimulus Hampering RBI’s Efforts, 0.27% Inflation Won’t Help’
Prabhakar Sinha TNN
New Delhi: The stimulus packages offered by government to fight the impact of global recession on Indian economy seem to be backfiring. At present, it is discouraging the efforts of RBI to bring down the interest rates to revive demand in the domestic market.
On Thursday, interest rate on 10-year government bond scaled the 7% mark to touch 7.02%. The rate had fallen to 4.86% in January 2009. The interest rates firmed up as the government announced that it would borrow Rs 2,41,000 crore in the first six months of 2009-10 to fund stimulus packages. Government would borrow Rs 48,000 crore every month in the first quarter and Rs 32,000 crore every month of the second quarter, which is putting pressure on interest rates.
Indian Bank's Association chairman TS Narayansami said this huge government borrowing programme is creating upward pressure on interest rates. So, RBI's step to cut its short term lending rate to banks (repo rate) will not help in bringing down the rates, he added.
Meanwhile, RBI governor D Subbarao at a CII conference said he was talking to various banks to understand why the lending rates are not coming down despite the central bank has cut the key rates. ‘‘Policy rates have to be transmitted to lending rates by banks. We are looking into the transmission mechanism,'' Subbarao said. He added that interest rates should soften for India to become competitive. Fall in lending rates will revive the demand and so the economic activities.
However, bankers feel that the softening of interest rate is no more linked to cut in key policy rates. Narayansami said, ‘‘RBI's repo rate cut will not have any effect as the interest rates on government bonds are firming up.'' This means, even if RBI reduces the policy rates, taking advantage of inflation touching zero, it will not bring down the interest rates in the present condition.
ICICI MD KV Kamath also said that firming up of the interest rates on government bond is not allowing lending rates to come down. Because of rise in the bond rates, cost of funds is not reducing, prompting banks to hold interest rates at higher levels.
As the government's spending as part of the stimulus packages would be financed from the borrowed money, this will affect availability of funds to the private sector and create upward pressure on interest rates.
In the current financial year, government's borrowing has increased to Rs 3,26,000 crore as again the budgeted amount of Rs 1,33,000 crore. In the 2009-10 also, government will have to borrow around Rs 3,40,000 crore to fund revenue shortfall.
Bankers are arguing that RBI should buy bonds from the market and inject money into the system. Narayansami said instead of cutting the policy rates, RBI should pump more money by purchasing government bonds from the market. As the inflation has already fallen to 0.27% during the week ending March 14, the government can inject liquidity without worrying about the inflation. This would only help in bringing down the interest rates, bankers said.
‘Economy to revive in 3-6 months’
‘Economy to revive in 3-6 months’
The Times of India, March 27, 2009, Page 23
Kolkata: Despite the turmoil worldwide, Indian economy will commence on its upward recovery curve by the middle of this year, Suresh D Tendulkar, chairman of the Prime Minister's Economic Advisory Council indicated here on Thursday. "The stimulus packages and monetary policies will take some time to come into effect. This, along with, the low lending rate regime will help the economic situation. The revival process in India should begin in another 3-6 months," Tendulkar said. He was speaking at an event organised by the Merchants' Chamber of Commerce.
Tendulkar said the country's robust internal demand coupled with a well-capitalised banking system will ensure an expedited recovery process. "There has been a 4.5% growth in the agricultural sector and the harvest this year is expected to be good. Bulk of the rural purchasing power is not going to be affected. The banks, too, as compared to the west, are doing well and hopefully the credit flow will start soon," he said. He said an exported "psychology of doom and gloom" had inflated the risk aversion sentiment in the country which, in turn, had intensified the slowdown in India. TNN
The Times of India, March 27, 2009, Page 23
Kolkata: Despite the turmoil worldwide, Indian economy will commence on its upward recovery curve by the middle of this year, Suresh D Tendulkar, chairman of the Prime Minister's Economic Advisory Council indicated here on Thursday. "The stimulus packages and monetary policies will take some time to come into effect. This, along with, the low lending rate regime will help the economic situation. The revival process in India should begin in another 3-6 months," Tendulkar said. He was speaking at an event organised by the Merchants' Chamber of Commerce.
Tendulkar said the country's robust internal demand coupled with a well-capitalised banking system will ensure an expedited recovery process. "There has been a 4.5% growth in the agricultural sector and the harvest this year is expected to be good. Bulk of the rural purchasing power is not going to be affected. The banks, too, as compared to the west, are doing well and hopefully the credit flow will start soon," he said. He said an exported "psychology of doom and gloom" had inflated the risk aversion sentiment in the country which, in turn, had intensified the slowdown in India. TNN
India to grow at 6% in 2009: UN survey
India to grow at 6% in 2009: UN survey
The Times of India, March 27, 2009, Page 24
New Delhi: India is expected to grow at a rate of around 6% in 2009 mainly supported by fiscal measures taken by government amid many developed economies falling into recession, says a report by the United Nations .
"The government took measures to improve the liquidity of the financial sector and relaxed monetary policy. It also introduced fiscal stimulus packages which should soften the economic downturn," the report by UN Economic and Social Commission for Asia and the Pacific (UN-ESCAP) said.
Supported by the measures announced by the government, the Indian economy is expected to grow at around 6% in 2009, the report said. Real economies of South Asia are set to weather the effects of the global slowdown better than many in the Asia-Pacific region due to India's economic growth, it added.
India's growth rate in 2009, however, would be lower than 7.1% estimated in 2008 mainly on account of fall in exports, economic affairs officer of ESCAP Shuvojit Banerjee said after releasing the report.
Developed nations such as the US, UK and Japan are already in recession. On inflation, the report said with falling prices of oil and other commodities in the international market, the rate of price rise is expected to dip further.
It added that due to increase in government salaries and subsidies for food, fertiliser and certain fuel products, the budget deficit is estimated to rise to 6% of the GDP in 2008. AGENCIES
The Times of India, March 27, 2009, Page 24
New Delhi: India is expected to grow at a rate of around 6% in 2009 mainly supported by fiscal measures taken by government amid many developed economies falling into recession, says a report by the United Nations .
"The government took measures to improve the liquidity of the financial sector and relaxed monetary policy. It also introduced fiscal stimulus packages which should soften the economic downturn," the report by UN Economic and Social Commission for Asia and the Pacific (UN-ESCAP) said.
Supported by the measures announced by the government, the Indian economy is expected to grow at around 6% in 2009, the report said. Real economies of South Asia are set to weather the effects of the global slowdown better than many in the Asia-Pacific region due to India's economic growth, it added.
India's growth rate in 2009, however, would be lower than 7.1% estimated in 2008 mainly on account of fall in exports, economic affairs officer of ESCAP Shuvojit Banerjee said after releasing the report.
Developed nations such as the US, UK and Japan are already in recession. On inflation, the report said with falling prices of oil and other commodities in the international market, the rate of price rise is expected to dip further.
It added that due to increase in government salaries and subsidies for food, fertiliser and certain fuel products, the budget deficit is estimated to rise to 6% of the GDP in 2008. AGENCIES
Cement industry's Q4 may be the best in FY09
Cement industry's Q4 may be the best in FY09
Business Standard – Commodity, March 27, 2009, Section II, Page 4
Chandan Kishore Kant / Mumbai
This is the concluding part of the two-part series on the sectoral impact of a revival in demand for commodities.
The over Rs 85,000-crore domestic cement industry is set to see some relief in the March quarter. Industry analysts and market players feel that the current quarter will turn out to be the best in the current financial year in terms of revenues, margins and profitability.
Higher prices, significant despatches resulting from better-than-expected demand, declining input costs, favourable government decisions such as cutting excise duty and re-imposition of counter-vailing duty on imported cement are expected to help the industry come up with a better performance than the past three quarters.
Barring southern market, which saw lower despatches and weak prices, the industry anticipates better results in other parts of the country.
Vinod Juneja, managing director, Binani Cement (a North-based manufacturer), said, “The fourth quarter will be the best in FY09. Prices have improved from Rs 230-235 per bag last year (same quarter) to Rs 245-250 in the North. No company is having any inventory as despatches are good.”
The current quarter saw prices being hiked in two-three tranches by around Rs 8-12 per bag. The eastern and northern markets saw a firm pricing trend. In January and February, despatches grew by 8.26 per cent and 8.73 per cent at 16.13 million tonnes and 16.07 million tonnes, respectively.
Looking at the despatches trend, March is expected to clock despataches of over 17.5 million tonnes, which will be the highest ever for the industry.
On a year-on-year basis, the March quarter might not see a rise in profits, but in sequential terms, margins would be better and so the profitability, said an industry analyst.
He added that in the first three quarters, the industry saw margins getting shrunk by as much as 4-5 per cent compared to the corresponding quarters of the last financial year, whereas in the current quarter, margins will either be flat or shrink by not more than 1-2 per cent.
Hari Mohan Bangur, chairman and managing director of Shree Cement, and president of the Cement Manufacturers’ Association, said, “The industry saw a price rise in February as well as in March. The quarter will be a little better than the earlier quarters. Profitability is expected to maintain pace as far as Shree is concerned.”
When asked about the depreciation impact on new capacity additions, Bangur said that it (depreciation) would not have much effect. He added that despatches growth rate in March was expected to remain above 8 per cent. Along with Shree Cement, UltraTech, Grasim and India Cements too are adding new capacities.
For most of the cement makers, profits in the first three quarters remained low compared with the last year. “The current quarter will not be any different but it will certainly improve on a sequential basis,” said an analyst.
Industry experts are expecting a rise of around 10-12 per cent in revenues on y-o-y basis as prices have gone up by 6-7 per cent in the March quarter. Last year during the same period, the average price of a 50-kg cement bag across the country was Rs 230, whereas now it is ruling around Rs 240-245.
Business Standard – Commodity, March 27, 2009, Section II, Page 4
Chandan Kishore Kant / Mumbai
This is the concluding part of the two-part series on the sectoral impact of a revival in demand for commodities.
The over Rs 85,000-crore domestic cement industry is set to see some relief in the March quarter. Industry analysts and market players feel that the current quarter will turn out to be the best in the current financial year in terms of revenues, margins and profitability.
Higher prices, significant despatches resulting from better-than-expected demand, declining input costs, favourable government decisions such as cutting excise duty and re-imposition of counter-vailing duty on imported cement are expected to help the industry come up with a better performance than the past three quarters.
Barring southern market, which saw lower despatches and weak prices, the industry anticipates better results in other parts of the country.
Vinod Juneja, managing director, Binani Cement (a North-based manufacturer), said, “The fourth quarter will be the best in FY09. Prices have improved from Rs 230-235 per bag last year (same quarter) to Rs 245-250 in the North. No company is having any inventory as despatches are good.”
The current quarter saw prices being hiked in two-three tranches by around Rs 8-12 per bag. The eastern and northern markets saw a firm pricing trend. In January and February, despatches grew by 8.26 per cent and 8.73 per cent at 16.13 million tonnes and 16.07 million tonnes, respectively.
Looking at the despatches trend, March is expected to clock despataches of over 17.5 million tonnes, which will be the highest ever for the industry.
On a year-on-year basis, the March quarter might not see a rise in profits, but in sequential terms, margins would be better and so the profitability, said an industry analyst.
He added that in the first three quarters, the industry saw margins getting shrunk by as much as 4-5 per cent compared to the corresponding quarters of the last financial year, whereas in the current quarter, margins will either be flat or shrink by not more than 1-2 per cent.
Hari Mohan Bangur, chairman and managing director of Shree Cement, and president of the Cement Manufacturers’ Association, said, “The industry saw a price rise in February as well as in March. The quarter will be a little better than the earlier quarters. Profitability is expected to maintain pace as far as Shree is concerned.”
When asked about the depreciation impact on new capacity additions, Bangur said that it (depreciation) would not have much effect. He added that despatches growth rate in March was expected to remain above 8 per cent. Along with Shree Cement, UltraTech, Grasim and India Cements too are adding new capacities.
For most of the cement makers, profits in the first three quarters remained low compared with the last year. “The current quarter will not be any different but it will certainly improve on a sequential basis,” said an analyst.
Industry experts are expecting a rise of around 10-12 per cent in revenues on y-o-y basis as prices have gone up by 6-7 per cent in the March quarter. Last year during the same period, the average price of a 50-kg cement bag across the country was Rs 230, whereas now it is ruling around Rs 240-245.
Real estate firms do a 'Nano'...
Real estate firms do a 'Nano'...
Business Standard, March 27, 2009, Page 4
Joe C Mathew / New Delhi/ Mumbai March 27, 2009, 0:17 IST
...bet big on sub-Rs 5 lakh flats.
R Nagaraju, head, corporate planning and strategy, Unitech, calls it “the Nano effect.” His company is now pinning hopes on the sub-Rs 5 lakh category of flats to counter slowdown in the property sector.
So are a host of others. Apart from Unitech, others such as Omaxe, Raheja, Tata Housing and Ansal API are planning new projects in the suburbs of satellite towns or smaller cities to target the bottom segment, to generate more cash.
New Delhi-based Unitech and the Raheja group are planning to build single-bedroom homes in and around Gurgaon. While Unitech is busy conceptualising the project, Raheja has announced plans to construct 10,000 flats in the Rs 5 lakh range at Gurgaon, the satellite town bordering New Delhi. Tata Housing Development, too, is working out the feasibility of a sub-Rs 5 lakh housing project.
Unitech plans to launch mid-segment residential projects in the Rs 5-10 lakh range in metros like Chennai and Kolkata, and suburban cities like Gurgaon, over the next few months.
Another developer, Omaxe, is planning a sub-Rs 4-10 lakh project at Peetampur and the Dewas industrial area near Indore to target workers. In the first phase, to be launched in the next 10 days, Omaxe would launch 5,000 flats and in the second phase, 5,000 more flats, the company said.
“The inspiration to develop smaller and cheaper apartments comes from the Nano, which is eliciting a tremendous response. I am sure our project will see a similar response, given the fact that we will come up with such low-cost apartments near metros,” said Nagaraju.
“Many industries around Udyog Vihar and Manesar are looking for houses for their workers. Our demand survey has shown tremendous interest among such firms to provide houses for their employees in the vicinity of the workplace. The new project will take care of their interest,” said Navin M Raheja, managing director, Raheja Developers.
“Nothing is selling today, as people do not have money. When both large and mid-income projects are not selling, developers have to come up with smaller projects, though they cannot earn the 30-50 per cent margins that they used to make earlier,” said Akshaya Kumar, chief executive of Park Lane Property Advisors.
Developers are battling slowing sales since the beginning of 2008. Higher property prices, which more than doubled in metro cities during 2004-07, and high interest rates have made property buyers stay away from new purchases. Despite a nearly 30 per cent fall in property prices and a cut in loan rates from 11 per cent to 8.5 per cent in recent months, property sales have fallen 70 per cent from their peak last year.
DLF, Unitech, Parsvnath and all other major developers have entered the Rs 20-40 lakh segment to generate liquidity, even as their top line fell as much as 80 per cent in the last quarter.
But property experts believe sub-Rs 5 lakh projects have few takers, even in smaller cities like Indore. “Even a good wage earner wants to stay in a comfortable home, which costs between Rs 8 lakh and Rs 10 lakh in smaller cities and Rs 18 lakh and Rs 20 lakh in the metros,” said a top executive of a New Delhi-based realty firm who did not wish to be quoted.
“At such as a price (sub Rs 5 lakh), either the houses have to be small or not in a good location. Prices should at least be in the range of Rs 10-15 lakh (per flat) for a project to make profit,” said Kumar of Park Lane Advisors.
But developers are still launching projects to generate cash. Ansal API has launched 4,000 apartments in Jaipur, Jodhpur, Agra and Meerut. “We have priced these apartments in the range of Rs 5-10 lakh per unit, keeping in mind customers who are ready to buy small apartments. The size of a one-bedroom apartment is 500-550 sq ft, while a two-bedroom apartment has an area of 850-900 sq ft,” said a company spokesperson. The company will launch another 6,000 apartments in the coming months.
In associate with Raghavendra Kamath & Neeraj Thakur.
Business Standard, March 27, 2009, Page 4
Joe C Mathew / New Delhi/ Mumbai March 27, 2009, 0:17 IST
...bet big on sub-Rs 5 lakh flats.
R Nagaraju, head, corporate planning and strategy, Unitech, calls it “the Nano effect.” His company is now pinning hopes on the sub-Rs 5 lakh category of flats to counter slowdown in the property sector.
So are a host of others. Apart from Unitech, others such as Omaxe, Raheja, Tata Housing and Ansal API are planning new projects in the suburbs of satellite towns or smaller cities to target the bottom segment, to generate more cash.
New Delhi-based Unitech and the Raheja group are planning to build single-bedroom homes in and around Gurgaon. While Unitech is busy conceptualising the project, Raheja has announced plans to construct 10,000 flats in the Rs 5 lakh range at Gurgaon, the satellite town bordering New Delhi. Tata Housing Development, too, is working out the feasibility of a sub-Rs 5 lakh housing project.
Unitech plans to launch mid-segment residential projects in the Rs 5-10 lakh range in metros like Chennai and Kolkata, and suburban cities like Gurgaon, over the next few months.
Another developer, Omaxe, is planning a sub-Rs 4-10 lakh project at Peetampur and the Dewas industrial area near Indore to target workers. In the first phase, to be launched in the next 10 days, Omaxe would launch 5,000 flats and in the second phase, 5,000 more flats, the company said.
“The inspiration to develop smaller and cheaper apartments comes from the Nano, which is eliciting a tremendous response. I am sure our project will see a similar response, given the fact that we will come up with such low-cost apartments near metros,” said Nagaraju.
“Many industries around Udyog Vihar and Manesar are looking for houses for their workers. Our demand survey has shown tremendous interest among such firms to provide houses for their employees in the vicinity of the workplace. The new project will take care of their interest,” said Navin M Raheja, managing director, Raheja Developers.
“Nothing is selling today, as people do not have money. When both large and mid-income projects are not selling, developers have to come up with smaller projects, though they cannot earn the 30-50 per cent margins that they used to make earlier,” said Akshaya Kumar, chief executive of Park Lane Property Advisors.
Developers are battling slowing sales since the beginning of 2008. Higher property prices, which more than doubled in metro cities during 2004-07, and high interest rates have made property buyers stay away from new purchases. Despite a nearly 30 per cent fall in property prices and a cut in loan rates from 11 per cent to 8.5 per cent in recent months, property sales have fallen 70 per cent from their peak last year.
DLF, Unitech, Parsvnath and all other major developers have entered the Rs 20-40 lakh segment to generate liquidity, even as their top line fell as much as 80 per cent in the last quarter.
But property experts believe sub-Rs 5 lakh projects have few takers, even in smaller cities like Indore. “Even a good wage earner wants to stay in a comfortable home, which costs between Rs 8 lakh and Rs 10 lakh in smaller cities and Rs 18 lakh and Rs 20 lakh in the metros,” said a top executive of a New Delhi-based realty firm who did not wish to be quoted.
“At such as a price (sub Rs 5 lakh), either the houses have to be small or not in a good location. Prices should at least be in the range of Rs 10-15 lakh (per flat) for a project to make profit,” said Kumar of Park Lane Advisors.
But developers are still launching projects to generate cash. Ansal API has launched 4,000 apartments in Jaipur, Jodhpur, Agra and Meerut. “We have priced these apartments in the range of Rs 5-10 lakh per unit, keeping in mind customers who are ready to buy small apartments. The size of a one-bedroom apartment is 500-550 sq ft, while a two-bedroom apartment has an area of 850-900 sq ft,” said a company spokesperson. The company will launch another 6,000 apartments in the coming months.
In associate with Raghavendra Kamath & Neeraj Thakur.
STEEL IS STAINLESS AGAIN
STEEL IS STAINLESS AGAIN
The Economic Times, March 27, 2009, Page 1
Big steel cos operating at full capacity after long lull
Pramugdha Mamgain & Subhash Narayan, NEW DELHI
INDIA’S largest steelmakers are operating at full capacity after a five-month lull that saw them cutting production, raising hopes of an imminent economic recovery.
SAIL, Tata Steel, JSW and Essar have all resumed normal production, a marked contrast from last October when most steel companies were forced to cut output by up to 40% due to a steep fall in demand.
The steel sector’s revival can be linked to an improvement in the economic scene since January, largely due to the fiscal and monetary moves taken by the Centre and RBI to spur demand. Demand in the rural sector has also risen in the last two months.
“Since steel has a high co-relation with the GDP, a pickup in production is a clear indication of an increase in manufacturing and industrial growth,” said HDFC Bank chief economist Abheek Barua.
Local steel prices fell by over 35% from the July 2008 peak of Rs 50,000/tonne to Rs 28,000-30,000/tonne earlier this month. Prices have more or less stabilised since then. Incidentally, global steel prices have seen a steeper fall to around $450-500/tonne from last year’s peak of $1,400. “While prices continue to fall marginally in the global market due to a dip in raw material prices, steel prices have almost stabilised in the domestic market on the back of a demand revival ,” said AS Firoz, a steel and natural resources consultant.
The Economic Times, March 27, 2009, Page 1
Big steel cos operating at full capacity after long lull
Pramugdha Mamgain & Subhash Narayan, NEW DELHI
INDIA’S largest steelmakers are operating at full capacity after a five-month lull that saw them cutting production, raising hopes of an imminent economic recovery.
SAIL, Tata Steel, JSW and Essar have all resumed normal production, a marked contrast from last October when most steel companies were forced to cut output by up to 40% due to a steep fall in demand.
The steel sector’s revival can be linked to an improvement in the economic scene since January, largely due to the fiscal and monetary moves taken by the Centre and RBI to spur demand. Demand in the rural sector has also risen in the last two months.
“Since steel has a high co-relation with the GDP, a pickup in production is a clear indication of an increase in manufacturing and industrial growth,” said HDFC Bank chief economist Abheek Barua.
Local steel prices fell by over 35% from the July 2008 peak of Rs 50,000/tonne to Rs 28,000-30,000/tonne earlier this month. Prices have more or less stabilised since then. Incidentally, global steel prices have seen a steeper fall to around $450-500/tonne from last year’s peak of $1,400. “While prices continue to fall marginally in the global market due to a dip in raw material prices, steel prices have almost stabilised in the domestic market on the back of a demand revival ,” said AS Firoz, a steel and natural resources consultant.
Irate buyers force DLF to slash Gurgaon project rates by 20%
Irate buyers force DLF to slash Gurgaon project rates by 20%
The Economic Times, March 27, 2009, Page 5
Sanjeev Choudhary NEW DELHI
THE COUNTRY’S largest property developer, DLF, has cut prices by up to a fifth at a housing project in its home market Gurgaon, buckling under pressure from customers who are angry that not a single brick has been laid nearly a year after the venture was announced. The latest move by DLF for its New Town Heights project is its third such in about a month and follows price cuts of up to 32% at its projects in Chennai and Bangalore.
The company has told buyers at its Gurgaon project that “in order to further strengthen the value proposition”, DLF is offering a 5% discount on the basic sale price, increasing the built-up area by 5% at no extra cost and offering a 10% “timely payment rebate” on the sale price.
Customers furious about the absence of progress on the project have been demanding their money back and many of them stopped paying their instalments.
In Chennai, too, DLF’s hand was forced by buyers of apartments at its Garden City project joining forces after they saw that work had not started even a year-and-ahalf after the announcement.
DLF’s price cuts in Chennai and Bangalore triggered expectations that other big real estate firms would follow suit to try and boost sagging demand, but there have been no significant reductions so far.
Several analysts have been saying a 30-35% decline in prices is essential to spur demand. As sales dried up, credit became expensive and private equity funds vanished, property companies ran into a severe cash crunch. Realty firms have also been under pressure from banks and the government to reduce prices.
Many builders have not been making formal price cut announcements but customers driving hard bargains are able to to wangle substantial discounts. DLF’s latest move is seen pressuring other developers to bring down prices in the National Capital Region, which has not seen many firms come forward to meaningfully cut prices.
DLF launched New Town Heights almost a year ago in sectors 86, 90 and 91 of Gurgaon at a basic price of Rs 2,250 per sq ft. The project comprised three- and fourbed room apartments ranging in size from 1,760 sq ft to 2,505 sq ft and priced at Rs 45-75 lakh. Almost 85% of the total 3,147 flats have been sold, said a DLF executive.
DLF is also telling its New Town Heights customers that they will be protected from falling property rates by the company passing on the benefits of any further price reductions to them. Furthermore, it has doubled penalty to Rs 10 per sq ft per month for delay in handing over the homes.
The company has promised to deliver the home three years from date of booking by the customer, but it appears unlikely that the deadline can be met for the earliest buyers at New Town Heights.
“We are a highly compliant organisation, and we would like to start construction only after we have received the final environment clearance, which is awaited,” DLF wrote to customers.
Another DLF sweetener for its New Town Heights customers is the change in the payment plan. Whereas so far buyers were required to make periodic payments, the new plan allows those who have paid at least 35% of the cost of apartment to make their payments only when the company meets construction milestones.
LOWLY HEIGHTS
DLF launched New Town Heights almost a year ago. But so far not a single brick has been laid
Customers have been demanding their money back and many stopped paying their instalments
DLF is offering a 5% discount on basic price, increasing built-up area by 5% at no extra cost and offering a 10% “timely payment rebate”
Co will pass on benefits of any further price cuts & has doubled penalty for delays to Rs 10/sq ft per month
Rahejas to sell 30k NCR flats for Rs 4-25 L
Rahejas to sell 30k NCR flats for Rs 4-25 L
The Economic Times, March 27, 2009, Page 5
New Delhi: Realty player Raheja Developers will build up to 30,000 apartments in the affordable housing category in the National Capital Region in the next two years, which will be offered at Rs 4-25 lakh.
“Though there has been some correction in the realty market, demand is still there, especially in the affordable housing segment. We have already received approvals for developing about 20,000 apartments in the NCR,” Raheja Developers managing director Navin M Raheja said here. The company has planned to develop up to 30,000 units in the NCR in the next two years, he added.
“We have decided to fix the prices of the apartments in the range of Rs 4 lakh to Rs 25 lakh, depending on the size,” Mr Raheja said, adding the minimum size of a unit would be 300 sq ft. He, however, declined to give details about the size of investment the company is looking to put in. “The launch of this affordable housing scheme will (take place) in the next two months ... We will not tie up with any partner,” Mr Raheja said. Construction would be completed in two years and deliveries would start in 2011.—PTI
The Economic Times, March 27, 2009, Page 5
New Delhi: Realty player Raheja Developers will build up to 30,000 apartments in the affordable housing category in the National Capital Region in the next two years, which will be offered at Rs 4-25 lakh.
“Though there has been some correction in the realty market, demand is still there, especially in the affordable housing segment. We have already received approvals for developing about 20,000 apartments in the NCR,” Raheja Developers managing director Navin M Raheja said here. The company has planned to develop up to 30,000 units in the NCR in the next two years, he added.
“We have decided to fix the prices of the apartments in the range of Rs 4 lakh to Rs 25 lakh, depending on the size,” Mr Raheja said, adding the minimum size of a unit would be 300 sq ft. He, however, declined to give details about the size of investment the company is looking to put in. “The launch of this affordable housing scheme will (take place) in the next two months ... We will not tie up with any partner,” Mr Raheja said. Construction would be completed in two years and deliveries would start in 2011.—PTI
Housing start-up index to indicate construction volume every quarter
Housing start-up index to indicate construction volume every quarter
The Financial Express, March 27, 2009, Page 5
Kakoly Chatterjee, New Delhi
While Residex, an index planned to benchmark the housing sector, would serve as an indicator of property prices, the housing start-up index (HSUI) planned by the Reserve Bank of India aims to indicate the volume of construction taking place in a particular location. The RBI expects to start publishing the data by March 2010. Once operational, the data is expected to be published every quarter.
HSUI is also meant to serve as a lead indicator of economy's growth as more houses would propel demand for input materials like cement and steel, labour requirements and credit demand. The demand for consumer durables would also increase apparently.
The index would cover metro cities and some tier I cities initially. It would then eventually cover the rest of the country.
Also, it is a barometer of housing demand in future. It would help probe factors responsible for increasing property prices. Industry experts believe that with the help of HSUI, property bubble could be detected in its early stages and be controlled subsequently.
“Data collection will start from the last eight quarters while the ground survey of the number of conversions taking place would be conducted every three to five years. This data will be processed through a co-efficient matrix that will make clear how many conversions are actually happening. This will of course vary in larger cities and small towns,” said RBI Technical Advisory Group chairman Amitabh Kundu.
According to the group, an advisory committee on HSUI at NBO may be set up to guide and oversee the entire process of compilation of housing permit data from concerned local bodies and the Directorate of Economics and Statistics of the state governments. The number of housing-starts (a case where the construction begins) during a period would indicate the demand and supply situation in the housing market, as reflected in conversion(a case where housing permits translate into real construction).
“Real estate is largely an unorganised market and a dearth of data makes any analysis or extrapolation really difficult. This data will help both the players and the consumers,” Shailesh Kanani, real estate analyst with Angel Broking said. This index would be useful for developers as it would help know areas of oversupply. They can hence refrain from construction activity in those areas. In case of an oversupply in a particular location, consumers before investing would wait till prices fall, he added.
HSUI would help bridge the demand and supply gap in a particular location as realty players would be aware of the demand in a location.
House that!
•The RBI expects to start publishing the data by March 2010. Once operational, the data is expected to be published every quarter
• HSUI is meant to serve as a lead indicator of economy's growth as more houses would propel demand for input materials like cement and steel, labour requirements and credit demand
• The index would cover metro cities and some tier I cities initially. It would eventually cover the rest of the country and also serve as a barometer of housing demand in the future
• An advisory committee on HSUI at NBO may be set up to guide and oversee the entire process of compilation of housing permit data from the concerned local bodies and the Directorate of Economics and Statistics of state governments
The Financial Express, March 27, 2009, Page 5
Kakoly Chatterjee, New Delhi
While Residex, an index planned to benchmark the housing sector, would serve as an indicator of property prices, the housing start-up index (HSUI) planned by the Reserve Bank of India aims to indicate the volume of construction taking place in a particular location. The RBI expects to start publishing the data by March 2010. Once operational, the data is expected to be published every quarter.
HSUI is also meant to serve as a lead indicator of economy's growth as more houses would propel demand for input materials like cement and steel, labour requirements and credit demand. The demand for consumer durables would also increase apparently.
The index would cover metro cities and some tier I cities initially. It would then eventually cover the rest of the country.
Also, it is a barometer of housing demand in future. It would help probe factors responsible for increasing property prices. Industry experts believe that with the help of HSUI, property bubble could be detected in its early stages and be controlled subsequently.
“Data collection will start from the last eight quarters while the ground survey of the number of conversions taking place would be conducted every three to five years. This data will be processed through a co-efficient matrix that will make clear how many conversions are actually happening. This will of course vary in larger cities and small towns,” said RBI Technical Advisory Group chairman Amitabh Kundu.
According to the group, an advisory committee on HSUI at NBO may be set up to guide and oversee the entire process of compilation of housing permit data from concerned local bodies and the Directorate of Economics and Statistics of the state governments. The number of housing-starts (a case where the construction begins) during a period would indicate the demand and supply situation in the housing market, as reflected in conversion(a case where housing permits translate into real construction).
“Real estate is largely an unorganised market and a dearth of data makes any analysis or extrapolation really difficult. This data will help both the players and the consumers,” Shailesh Kanani, real estate analyst with Angel Broking said. This index would be useful for developers as it would help know areas of oversupply. They can hence refrain from construction activity in those areas. In case of an oversupply in a particular location, consumers before investing would wait till prices fall, he added.
HSUI would help bridge the demand and supply gap in a particular location as realty players would be aware of the demand in a location.
House that!
•The RBI expects to start publishing the data by March 2010. Once operational, the data is expected to be published every quarter
• HSUI is meant to serve as a lead indicator of economy's growth as more houses would propel demand for input materials like cement and steel, labour requirements and credit demand
• The index would cover metro cities and some tier I cities initially. It would eventually cover the rest of the country and also serve as a barometer of housing demand in the future
• An advisory committee on HSUI at NBO may be set up to guide and oversee the entire process of compilation of housing permit data from the concerned local bodies and the Directorate of Economics and Statistics of state governments
SBI goes ‘green’ with its home loans
SBI goes ‘green’ with its home loans
The Hindu Business Line, March 27, 2009, Page 1
DWELLING ON ECO THEME.
K Ram Kumar
Mumbai, March 26 State Bank of India has introduced a new home loan product that will make other banks go green with envy.
By launching ‘Green Homes’, the country’s largest bank wants to support rated environment friendly residential projects by offering concessions - reduced margin, softer interest rate, and zero processing fee - on home loans to discerning buyers.
In case you are planning to buy a house with a loan from SBI in an environment friendly residential project, which has been rated by the Indian Green Building Council (IGBC), then the bank is willing to woo you with concessions.
The concessions: the upfront margin that you will have to stump up will be lower at 15 per cent of the loan amount instead of the normal 20 per cent; interest rate on the loan will be 25 basis points lower than the card rate; and no processing fee will be charged.
A ‘Green Building/ Home’, according to the IGBC, is one that uses less energy, water and natural resources, creates less waste and is healthier for the people living inside compared to a standard building. The council is a part of the Confederation of Indian Industry - Sohrabji Godrej Green Business Centre.
“As part of our endeavour to promote rated eco-friendly residential projects, we have announced easy loan terms for prospective home buyers. Our move will also encourage builders to come up with such projects,” said a senior SBI official.
The bank, which introduced the ‘Green Homes’ product a couple of months back, is currently supporting ‘green’ residential projects by Tata Housing and Mahindra’s.
“Today, home buyers are ready to shell out extra money towards amenities such as swimming pool, club house and joggers’ park. Frankly, these are only ‘theoretical’ benefits which a majority of the residents hardly use. In the case of eco-friendly homes, owners will actually realise tangible as well as intangible benefits.
Hence, buyers should shed their reluctance to pay that extra, which can be recouped in 2 to 3 years, for buying a house in an eco-friendly project as they stand to gain via savings in terms of energy and water,” the official said.
Owners of ‘green homes’ can hope to reap tangible benefits in the form of 20-30 per cent energy savings as the apartments are designed in such a manner that they can enjoy ample natural light throughout the day.
The construction material used in such homes ensures adequate thermal storage mass for retaining heat energy thereby keeping the interiors cool despite the heat outside.
Further, water savings, anywhere between 30 and 50 per cent, can be made on account of rain-water harvesting and recycling.
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