Monday, March 30, 2009
Global markets rally again
Global markets rally again
The Economic Times, March 30, 2009, Page 12
Some Signs Of Recovery Provide Hope
GLOBAL stock markets have rallied as isolated instances of economic recovery have emerged close on the heels of the US plan to buy toxic assets from banks, which promises to somewhat thaw the global financial system. Most markets, developed and emerging included, are up in the range of 25% from their lows reached earlier this month. The sensex, for instance, has rallied to over 10,000 from about 8,000 on March 6. The question is whether this recovery will sustain. The answer to that is normally available only in hindsight. What we do know is the equities typically start looking some six months before the real economy picks up. And there are some indications of revival. In the US, consumer spending was up second month running in February, and house sales have recovered slightly. Commodities are up sharply from their December 2009 lows, and manufacturing appears to be picking up in China. Back home, steel producers claim to be running at full capacity, cement dispatches are strong and consumer goods demand is firm. What has given greater weight to these early signs of revival is the growing belief that the plethora of fiscal and monetary measures by governments across the world would prevent the recession from taking deeper roots. The most decisive was perhaps the US plan to buy toxic assets even though its efficacy is still under cloud.
The immediate test for this small fig leaf for markets would be the January-March quarter results. Market will look out for a visible sign of improvement in earnings or at least stability. Any disappointment or for that matter signs of greater weakness could cause a sharp correction. In fact, volatility is more likely to increase in the coming months. Pitted against the possibly worst recession in decades is a once in lifetime opportunity to invest in shares which can potentially give handsome returns over the medium to long run. The money parked in virtually zero interest money market funds is waiting to rush in at the first sign of improvement. So, while good news could send the indices soaring, any deterioration could cause them to crash equally sharply. Those ready to take the plunge must be ready for a gut-wrenching ride.
The Economic Times, March 30, 2009, Page 12
Some Signs Of Recovery Provide Hope
GLOBAL stock markets have rallied as isolated instances of economic recovery have emerged close on the heels of the US plan to buy toxic assets from banks, which promises to somewhat thaw the global financial system. Most markets, developed and emerging included, are up in the range of 25% from their lows reached earlier this month. The sensex, for instance, has rallied to over 10,000 from about 8,000 on March 6. The question is whether this recovery will sustain. The answer to that is normally available only in hindsight. What we do know is the equities typically start looking some six months before the real economy picks up. And there are some indications of revival. In the US, consumer spending was up second month running in February, and house sales have recovered slightly. Commodities are up sharply from their December 2009 lows, and manufacturing appears to be picking up in China. Back home, steel producers claim to be running at full capacity, cement dispatches are strong and consumer goods demand is firm. What has given greater weight to these early signs of revival is the growing belief that the plethora of fiscal and monetary measures by governments across the world would prevent the recession from taking deeper roots. The most decisive was perhaps the US plan to buy toxic assets even though its efficacy is still under cloud.
The immediate test for this small fig leaf for markets would be the January-March quarter results. Market will look out for a visible sign of improvement in earnings or at least stability. Any disappointment or for that matter signs of greater weakness could cause a sharp correction. In fact, volatility is more likely to increase in the coming months. Pitted against the possibly worst recession in decades is a once in lifetime opportunity to invest in shares which can potentially give handsome returns over the medium to long run. The money parked in virtually zero interest money market funds is waiting to rush in at the first sign of improvement. So, while good news could send the indices soaring, any deterioration could cause them to crash equally sharply. Those ready to take the plunge must be ready for a gut-wrenching ride.
The world is starting to look up and ahead
The world is starting to look up and ahead
The Economic Times, March 30, 2009, Page 13
SUDESHNA SEN
RIGHT. Please don’t hang me if I’m wrong. But I sense a very, very faint green shoot under all the recessionary snow. It has nothing to do with my indices screens turning green, for a change, and there will probably be absolutely no change for at least six months. But yes, everyone I talk to also senses that something is happening. What, we don’t quite have a grip on yet. People seem to be emerging from their catatonic state through the winter, and actually beginning to go back to economic activity, with the accent on activity. Even if it isn’t resulting in anything, most people report a sudden jump in being busy during March. “We aren’t getting any orders, but we’re getting a lot more enquiries. It’s not as dead as it was in the last quarter.”
I have this theory, which is that as soon as people put their heads down and start doing things, anything, even if it is running a Red Queen’s Race, things are ‘going to begin to start to improve’.
Half the global recession is economic — the other half is psychological. The psychological bottom of the recession, if there is such a thing, seems to be where we are floundering now. Despair has given way to resigned, but positive activity. People have just given up on being depressed with bad news, stopped waiting for happy headlines, and are slowly, painfully, shaking themselves out of shock and getting on with the grim business of making a living in the bad new world. As one banker told me, “we’ve started cautiously venturing out and around — the past three months we were just going around feeling the walls to make sure they didn’t fall in on us.”
And, umm, since the entire concept of banking has always been some kind of mass induced hallucination, resting on a universal suspension of disbelief, and the kind of blind faith any messiah should enviously covet, psychology does matter. (Ask any bank which has had a run on it. The economists call it confidence, and trust, and so on. Everyone else calls it blind faith based on a self-perpetuating myth, ever since we came off the gold standard.)
If the global markets’ reaction to Tim Geithner’s latest bank rescue plan is any indication, when every theoretically approved action by any government over the past six months has failed, markets, financial services, the real economy, investors — everyone is now clutching at straws to start the upward climb again. It doesn’t matter if Mr Geithner’s hugely complex plan works or not. People want to believe it will, so it just may.
Again, indicators are beginning to fluctuate as much as the currency markets. Since October 2008, there was only one way every indicator went — straight down. Now, there’s a lot more confusion — one week a confidence survey in Germany looks good, the next it looks bad. One month we see retail sales arresting the slide, the next it’s down again. A purchasing manager’s survey in the Eurozone looks good, an employment number in US looks bad. Foreclosures are up, but so are mortgages. The signals are getting very mixed, but that’s a positive. At least, there’s something happening out there.
Make no mistake, to quote the unlamented Mr George Bush, there’s a lot of pain still to come. And knowing India, while the rest of the pundits are predicting we’ll come out of the downturn faster, I predict we won’t. What commentators like the RBI governor are missing is that sentiment in India has gone all technicolor tragedy, a good year after it went belly up in the west, and the recovery time lag will be the same. That herd mentality is alive and kicking, thanks. India took five years, almost, to recover from a dotcom bust which really should have affected us about as little as a dot. As an India watcher said ruefully, “If the western countries had even the thin cushion of comfort that India does, they’d be going all out to exploit it. But we’re busy whining and scaling back, and we’ll shoot ourselves in the foot.” Oh well. That’s the trouble with having too many decisions taken by the handful of Indian corporates who attend the same parties — and wakes — as Wall Street bankers and western CEOs do.
Here, at the epicentre of the economic earthquake though, I suspect that everyone’s finally reconciled to the fact that the world is going to be much poorer than before, and staggering up after the knockout.
After all, how long can you sit around twiddling your losses? Life goes on. There’s just that long you can mourn the loss of an old order. It could be the temporary effect of spring, but it is definitely not my imagination. It’s not exactly a buzz in the air, it’s more like crawling out of bed after a bad bout of flu and pottering groggily around the kitchen, but we are getting out of the sickbed. If I was the betting type, which I’m not, I’d say the world is starting to look up. Or at least look ahead. Hallelujah.
Economy to stay weak, but worst may be over
Economy to stay weak, but worst may be over
The Economic Times, March 30, 2009, Page 15
A temporary inventory-related bounce is likely, but don’t expect recession to cease so soon, says Morgan Stanley’s Asia ops chairman Stephen Roach
MOST economists think that a $1-trillion fund is not enough to buy America’s toxic banking assets. George Smith Alexander and Deeptha Rajkumar spoke to Stephen S Roach, one of the world’s leading bears. After holding the position of chief economist of Morgan Stanley for 16 years, Roach was promoted and named chairman of Morgan Stanley’s Asia operations in April 2007. He also served on the research staff of the Federal Reserve Board in Washington, DC.
What could be the impact of the $1-trillion fund, which is being set up to buy toxic assets?
The concept is good but there are some aspects that remain problematic, particularly the scale. It’s most likely that toxic assets in the system are somewhere around $2.5 trillion or $3 trillion. So it would require going back to the US Congress for further funding, and the politics of that are problematic. It remains to be seen how the actual implementation is planned, the price points that are offered by private investors, their attractiveness to banks. I give the plan a ‘B’ grade. It’s a noble effort, but it’s not big enough.
Is the recent rise in the market a bear rally?
I am suspicious that this rally is indicative of a bottoming in the global economy. The global economy is going to remain weak for some time. There have been terribly sharp declines in global growth in the fourth quarter of last year and the first quarter of this year. We cannot expect that to continue. Some of those declines are inventory related. There could be a temporary inventory-related bounce some point this year. But if the markets are rallying on hopes that the global recession is coming to an end, then those would be false hopes.
What are the signs to look for when the economy hits the bottom?
The most important sign would be the rebalancing of the American consumer. The biggest and the most important source of instability on the demand side of the global economy right now is the overly-extended, asset-dependant American consumer. And consumers have been hit by a massive wealth shock of around $12 trillion over the past year. It could not have come at a worst time for the 77-million baby boomers, who started to retire last year. There is a huge push for Americans to start saving again. The government is making a huge mistake by telling American consumers not to save. The consumers are, however, smarter than the government.
Where will US consumers invest their savings in?
This is not your normal modest bear market correction. This is a massive wealth shock. It comes at a time when the dreams of 77-million Americans, who are starting to retire, have been shattered. Behavioural finance argues that the pain of the loss has a more significant psychological imprint on investors than the joy of the gain. This points to a sea change in investor appetite towards risky assets, with strategies focused more towards fixed income and wealth preservation. It will be a much more conservative environment going forward.
Would they look at investing in emerging markets?
Investors have seen a massive correction in emerging market equities. It comes as a huge shock to many investors outside this region that were seduced by the so-called decoupling scenario — a belief that you were in the emerging market would get special dispensation from a global shock. That possibility — export-led developing economies could be an oasis in an otherwise weakening economic world — was snake oil. India has a smaller external sector than other emerging economies, but India is very heavily reliant on portfolio inflows to fund current account deficits. I think investors will be reluctant to make the same bets again.
What is the assessment of the effects of stimulus packages on China and India?
What worries me the most is the inclination of politicians to recreate the same type of boom that just went bust. That’s politically expedient, but it is reckless, irresponsible and dangerous. What the world needs here is not everybody to save. We need a shift in the mix of global saving. Those who don’t save need to save, and those who save in excess like the Chinese, need to draw down their savings and start consuming.
One of the dangerous things that has been allowed to occur in the world over the last decade is the imbalance between excess savers and those who didn’t save. I also worry about China because the Chinese are doing what they always do in a global downturn — they embrace what they call a proactive fiscal stimulus, which is driven by infrastructure and investment spending. They talk a lot about stimulating internal private consumption, but they never do. China perpetuates its export and investment-led growth model, hoping that their external demand will come back, led by US consumer. If that turns out to be the case — and I don’t think it will — China would be well positioned to capture this recovery in external demand.
Are we entering a phase of nasty asset price bubbles?
Not for a while. We have a lot of slack in the world right now and the inflationary implications of this slack on CPI inflation, or asset inflation, are not likely to be serious for a while. But as the slack gets absorbed in the global economy, and if the current monetary and fiscal stimulus remains in place, then you could have a renewed outbreak of asset inflation or CPI inflation or both.
The Economic Times, March 30, 2009, Page 15
A temporary inventory-related bounce is likely, but don’t expect recession to cease so soon, says Morgan Stanley’s Asia ops chairman Stephen Roach
MOST economists think that a $1-trillion fund is not enough to buy America’s toxic banking assets. George Smith Alexander and Deeptha Rajkumar spoke to Stephen S Roach, one of the world’s leading bears. After holding the position of chief economist of Morgan Stanley for 16 years, Roach was promoted and named chairman of Morgan Stanley’s Asia operations in April 2007. He also served on the research staff of the Federal Reserve Board in Washington, DC.
What could be the impact of the $1-trillion fund, which is being set up to buy toxic assets?
The concept is good but there are some aspects that remain problematic, particularly the scale. It’s most likely that toxic assets in the system are somewhere around $2.5 trillion or $3 trillion. So it would require going back to the US Congress for further funding, and the politics of that are problematic. It remains to be seen how the actual implementation is planned, the price points that are offered by private investors, their attractiveness to banks. I give the plan a ‘B’ grade. It’s a noble effort, but it’s not big enough.
Is the recent rise in the market a bear rally?
I am suspicious that this rally is indicative of a bottoming in the global economy. The global economy is going to remain weak for some time. There have been terribly sharp declines in global growth in the fourth quarter of last year and the first quarter of this year. We cannot expect that to continue. Some of those declines are inventory related. There could be a temporary inventory-related bounce some point this year. But if the markets are rallying on hopes that the global recession is coming to an end, then those would be false hopes.
What are the signs to look for when the economy hits the bottom?
The most important sign would be the rebalancing of the American consumer. The biggest and the most important source of instability on the demand side of the global economy right now is the overly-extended, asset-dependant American consumer. And consumers have been hit by a massive wealth shock of around $12 trillion over the past year. It could not have come at a worst time for the 77-million baby boomers, who started to retire last year. There is a huge push for Americans to start saving again. The government is making a huge mistake by telling American consumers not to save. The consumers are, however, smarter than the government.
Where will US consumers invest their savings in?
This is not your normal modest bear market correction. This is a massive wealth shock. It comes at a time when the dreams of 77-million Americans, who are starting to retire, have been shattered. Behavioural finance argues that the pain of the loss has a more significant psychological imprint on investors than the joy of the gain. This points to a sea change in investor appetite towards risky assets, with strategies focused more towards fixed income and wealth preservation. It will be a much more conservative environment going forward.
Would they look at investing in emerging markets?
Investors have seen a massive correction in emerging market equities. It comes as a huge shock to many investors outside this region that were seduced by the so-called decoupling scenario — a belief that you were in the emerging market would get special dispensation from a global shock. That possibility — export-led developing economies could be an oasis in an otherwise weakening economic world — was snake oil. India has a smaller external sector than other emerging economies, but India is very heavily reliant on portfolio inflows to fund current account deficits. I think investors will be reluctant to make the same bets again.
What is the assessment of the effects of stimulus packages on China and India?
What worries me the most is the inclination of politicians to recreate the same type of boom that just went bust. That’s politically expedient, but it is reckless, irresponsible and dangerous. What the world needs here is not everybody to save. We need a shift in the mix of global saving. Those who don’t save need to save, and those who save in excess like the Chinese, need to draw down their savings and start consuming.
One of the dangerous things that has been allowed to occur in the world over the last decade is the imbalance between excess savers and those who didn’t save. I also worry about China because the Chinese are doing what they always do in a global downturn — they embrace what they call a proactive fiscal stimulus, which is driven by infrastructure and investment spending. They talk a lot about stimulating internal private consumption, but they never do. China perpetuates its export and investment-led growth model, hoping that their external demand will come back, led by US consumer. If that turns out to be the case — and I don’t think it will — China would be well positioned to capture this recovery in external demand.
Are we entering a phase of nasty asset price bubbles?
Not for a while. We have a lot of slack in the world right now and the inflationary implications of this slack on CPI inflation, or asset inflation, are not likely to be serious for a while. But as the slack gets absorbed in the global economy, and if the current monetary and fiscal stimulus remains in place, then you could have a renewed outbreak of asset inflation or CPI inflation or both.
Cashing on the affordability factor
Cashing on the affordability factor
The Financial Express, March 29, 2009, Page 6
Mona Mehta
Extending the affordable housing scheme till the year 2010 and further increasing the supply of property in the buyer-starved market, will help spur the growth of the Rs 10,000-crore Indian real estate sector. This desperation comes at a time when the Indian real estate sector has contributed only 1.6% to India’s GDP in Q4 2008-09 due to severe liquidity crunch from banks since the past three quarters, as compared to 30% contribution it registered during the financial year 2007-08, believe industry experts.
Lalit Kumar Jain, President, Promoters Builders Association of Pune, and Vice-President Confederation of Real Estate Developer’s Associations of India (CREDAI), says, “We strongly believe that Indian real estate industry is all set to grow to Rs 30,000-32,000 crore at a rate of 40% by April 2010. We feel that the ongoing affordable housing schemes in the metros will be sold out completely by April 2011. But, since many of these cities are facing infrastructure and service-tax issues, not all developers will be able to start with affordable home projects as the land prices will still continue to be high in various locations.”
Inevitable crunch
Industry experts feel that post April 2011, there will be a severe supply crunch and real estate prices will be rising again as developers will not be able start any new construction immediately. And those who even start development will not be able to complete projects for the next one-and-a-half years. Jain, also Chairman of Kumar Builders, stated that the company is currently talking to various private equity players in order to infuse funds to develop affordable real estate projects.
For instance, there is a requirement of 4-5 lakh affordable homes in Mumbai alone, whereas the supply is only 40,000 flats, 80%-90% of which will be sold out by April 2010. Apart from Mumbai, other cities such as Delhi, Bangalore, Pune, Chennai too would join the race in selling out most affordable flats by April 2011. Infrastructure and service-tax issues are forcing developers from launching attractive schemes for the end buyers. This is despite the fact that property rates across the metros have dipped by 25% to 40%.
During Q4 2008-09, property prices in Kurla, Mumbai have reduced from Rs 8,000 to Rs 3,500 per sqft in Kurla. Thane has witnessed a drop from Rs 5,000 to Rs 3,000 per sqft. Similarly, prices in Virar have nosedived from Rs 3,000 to Rs 1,800 per sqft. As compared to Q3 2008-09, inquiries for properties have started increasing since February-March 2009, which has led to a fair conversion of flats in Thane, Bhandup, Vasai, Virar, Dombivali as these localities have close railway connectivity. Similarly, other leading builders such as Akruti City, Mayfair Housing, Evershine Builders, Lokhandwala Builders have all set visions of bringing in rising demand that matches the supply of properties as was seen during the financial year 2006-07.
Corrective measures
Following the recent announcement of third stimulus package by the government, realty bigwigs in India, bitten by severe credit crunch (since the past three quarters of the financial year 2008-09) have started strongly focusing on the affordable housing development and converting affordable properties into actual sales. With no other option left, developers are taking a final chance by reducing property prices in certain metros by about 25% to 40%, which will be compounded with the benefits they will be able to derive through the stimulus package.
Recently, the special home-loan schemes, was launched by the State Bank of India at 8%. Dewan Housing Finance Corporation Limited (DHFL) has announced a reduction in interest rates for both its new and existing customers. In line with various fiscal and other measures announced by the government of India and National Housing Bank (NHB), DHFL will now offer home loans starting at 9.75% variable interest rate for loans below Rs 20 lakh and at 11.25% variable interest rate for loans above Rs 20 lakh with immediate effect. With this, DHFL intends to provide more affordable home loans to lower and middle income group customers. For the existing customers, the rates will be reduced by 25 bps, according to company officials.
Rising demand?
Finally, with home loans getting cheaper, demand for residential properties in tier II and tier III cities is expected to pick up by 25% by the first half of 2009, from the current rate of 5%, feel industry experts. According to Rohit Rana, Head, Marketing and Communications, Sankalpan Group, the external periphery of Mangalore, Chandigarh, Dehradun, Nagpur, Kolhapur and Jaipur will start witnessing immediate emergence of demand due to the recent cheaper home loans announcement. Delhi-based Parsvanath Developers has already started constructing affordable homes in some of these locations, which can suffice the Rs 20 lakh limit of home loan borrowers.
According to Anand Gupta, Chairman, Builders Association of India, “There would be some acceleration in sales to the tune of 10% to 12% on tier I city outskirts where affordable housing is coming up through the ‘Budget Home Schemes’ and townships with a cluster of 3,000 to 5,000 homes in each township. Besides, demand for properties will emerge at Pen, Karjat and Lonavala as rates are between Rs 3 lakh and Rs 7-8 lakhs similar to that of Virar in far suburbs.”
However, despite the special home- loan schemes launched recently by the State Bank of India at 8%, the new applications still remain dull in various urban areas as the end-buyers are expecting further dip in real-estate prices and interest rates, said a senior SBI official from Mumbai. The moot point here is how will cheaper loans bridge the gap between demand and supply of residential properties in Tier II, III cities including metros? Anuj Puri, Chairman and Country Head, Jones Lang LaSalle Meghraj explained, “There will be increased absorption of existing supply in tier II, tier III cities and next to none in the metros. Affordable housing projects that are coming up on tier I city outskirts or in the far suburbs will also see increased sales. While such projects are not coming up in prime locations, reputable builders who concentrated largely on mid-to-upper-end homes are launching budget home schemes in far suburbs.” Affordable housing is the flavour of the future.
The Financial Express, March 29, 2009, Page 6
Mona Mehta
Extending the affordable housing scheme till the year 2010 and further increasing the supply of property in the buyer-starved market, will help spur the growth of the Rs 10,000-crore Indian real estate sector. This desperation comes at a time when the Indian real estate sector has contributed only 1.6% to India’s GDP in Q4 2008-09 due to severe liquidity crunch from banks since the past three quarters, as compared to 30% contribution it registered during the financial year 2007-08, believe industry experts.
Lalit Kumar Jain, President, Promoters Builders Association of Pune, and Vice-President Confederation of Real Estate Developer’s Associations of India (CREDAI), says, “We strongly believe that Indian real estate industry is all set to grow to Rs 30,000-32,000 crore at a rate of 40% by April 2010. We feel that the ongoing affordable housing schemes in the metros will be sold out completely by April 2011. But, since many of these cities are facing infrastructure and service-tax issues, not all developers will be able to start with affordable home projects as the land prices will still continue to be high in various locations.”
Inevitable crunch
Industry experts feel that post April 2011, there will be a severe supply crunch and real estate prices will be rising again as developers will not be able start any new construction immediately. And those who even start development will not be able to complete projects for the next one-and-a-half years. Jain, also Chairman of Kumar Builders, stated that the company is currently talking to various private equity players in order to infuse funds to develop affordable real estate projects.
For instance, there is a requirement of 4-5 lakh affordable homes in Mumbai alone, whereas the supply is only 40,000 flats, 80%-90% of which will be sold out by April 2010. Apart from Mumbai, other cities such as Delhi, Bangalore, Pune, Chennai too would join the race in selling out most affordable flats by April 2011. Infrastructure and service-tax issues are forcing developers from launching attractive schemes for the end buyers. This is despite the fact that property rates across the metros have dipped by 25% to 40%.
During Q4 2008-09, property prices in Kurla, Mumbai have reduced from Rs 8,000 to Rs 3,500 per sqft in Kurla. Thane has witnessed a drop from Rs 5,000 to Rs 3,000 per sqft. Similarly, prices in Virar have nosedived from Rs 3,000 to Rs 1,800 per sqft. As compared to Q3 2008-09, inquiries for properties have started increasing since February-March 2009, which has led to a fair conversion of flats in Thane, Bhandup, Vasai, Virar, Dombivali as these localities have close railway connectivity. Similarly, other leading builders such as Akruti City, Mayfair Housing, Evershine Builders, Lokhandwala Builders have all set visions of bringing in rising demand that matches the supply of properties as was seen during the financial year 2006-07.
Corrective measures
Following the recent announcement of third stimulus package by the government, realty bigwigs in India, bitten by severe credit crunch (since the past three quarters of the financial year 2008-09) have started strongly focusing on the affordable housing development and converting affordable properties into actual sales. With no other option left, developers are taking a final chance by reducing property prices in certain metros by about 25% to 40%, which will be compounded with the benefits they will be able to derive through the stimulus package.
Recently, the special home-loan schemes, was launched by the State Bank of India at 8%. Dewan Housing Finance Corporation Limited (DHFL) has announced a reduction in interest rates for both its new and existing customers. In line with various fiscal and other measures announced by the government of India and National Housing Bank (NHB), DHFL will now offer home loans starting at 9.75% variable interest rate for loans below Rs 20 lakh and at 11.25% variable interest rate for loans above Rs 20 lakh with immediate effect. With this, DHFL intends to provide more affordable home loans to lower and middle income group customers. For the existing customers, the rates will be reduced by 25 bps, according to company officials.
Rising demand?
Finally, with home loans getting cheaper, demand for residential properties in tier II and tier III cities is expected to pick up by 25% by the first half of 2009, from the current rate of 5%, feel industry experts. According to Rohit Rana, Head, Marketing and Communications, Sankalpan Group, the external periphery of Mangalore, Chandigarh, Dehradun, Nagpur, Kolhapur and Jaipur will start witnessing immediate emergence of demand due to the recent cheaper home loans announcement. Delhi-based Parsvanath Developers has already started constructing affordable homes in some of these locations, which can suffice the Rs 20 lakh limit of home loan borrowers.
According to Anand Gupta, Chairman, Builders Association of India, “There would be some acceleration in sales to the tune of 10% to 12% on tier I city outskirts where affordable housing is coming up through the ‘Budget Home Schemes’ and townships with a cluster of 3,000 to 5,000 homes in each township. Besides, demand for properties will emerge at Pen, Karjat and Lonavala as rates are between Rs 3 lakh and Rs 7-8 lakhs similar to that of Virar in far suburbs.”
However, despite the special home- loan schemes launched recently by the State Bank of India at 8%, the new applications still remain dull in various urban areas as the end-buyers are expecting further dip in real-estate prices and interest rates, said a senior SBI official from Mumbai. The moot point here is how will cheaper loans bridge the gap between demand and supply of residential properties in Tier II, III cities including metros? Anuj Puri, Chairman and Country Head, Jones Lang LaSalle Meghraj explained, “There will be increased absorption of existing supply in tier II, tier III cities and next to none in the metros. Affordable housing projects that are coming up on tier I city outskirts or in the far suburbs will also see increased sales. While such projects are not coming up in prime locations, reputable builders who concentrated largely on mid-to-upper-end homes are launching budget home schemes in far suburbs.” Affordable housing is the flavour of the future.
Developers respond to demand signals, focus now on housing
Developers respond to demand signals, focus now on housing
The Financial Express, March 30, 2009, Page 4
Kakoly Chatterjee, New Delhi
Flow of investment in the real estate sector for commercial space has dried up. A CMIE study—the think tank that tracks key economy indicators—says in the period during January-February this year 47 projects were launched for housing while only 4 came up in other sectors.
It seems real estate companies are now investing only in the housing segment.
This makes sense in a scenario where demand for office and shopping space has touched rock bottom. At the same time, excess supply is still sloshing around. So developers are not finding it profitable anymore to invest in commercial and retail segments. Realtors are also faced with a major problem of cash flow and consequently a crunch of their working capital cycle.
But there is something more here. Companies are now responding to demand signals rather than going by their estimate of profitability.
“This is the only survival strategy available for real estate companies. Till now they were not so much concerned about demand and built only what was more profitable for them. But now their construction activities are very much demand driven,” said a Bombay based analyst.
As a result the balance is tipped heavily towards residential projects. To make the residential projects attractive, realtors are also slashing the price of existing projects. The biggest realty player, DLF has already cut down prices of its Chennai, Bangalore and Hyderabad projects in the range of 20% to 30%. This will benefit both new and existing customers. This is expected to cascade onto others too.
In the January-February period, Omaxe has announced Gujarat Residential Township Project which is worth Rs 10,000 crore.
Akruti City has announced Just Perfect Homes’ Phase I Housing Project which will cost Rs 1,500 crore. Hindustan Construction Company has launched Sanand Township Project which is estimated to cost Rs 40,000 crore.
Ansal Properties & Infrastructure Ltd has launched Multi Location Low Cost Housing Project which will cost Rs 500 crore.
The learning process has taken time. After the slowdown started and it touched the Indian shores early last year real estate was hit very badly as sales dropped sharply. Price cuts followed after the RBI slashed interest cuts to save the situation.
But the stock of projects with the realtors were basically high margin ones. The premium housing segment generated profit margins when the going was good. But it is now that the companies are shifting their attention in terms of new projects to the demand driven low and medium cost housing.
Of the 121 projects captured in CMIE CapEx data base more than 100 projects are housing and most of them in the non-premium segment.
The Financial Express, March 30, 2009, Page 4
Kakoly Chatterjee, New Delhi
Flow of investment in the real estate sector for commercial space has dried up. A CMIE study—the think tank that tracks key economy indicators—says in the period during January-February this year 47 projects were launched for housing while only 4 came up in other sectors.
It seems real estate companies are now investing only in the housing segment.
This makes sense in a scenario where demand for office and shopping space has touched rock bottom. At the same time, excess supply is still sloshing around. So developers are not finding it profitable anymore to invest in commercial and retail segments. Realtors are also faced with a major problem of cash flow and consequently a crunch of their working capital cycle.
But there is something more here. Companies are now responding to demand signals rather than going by their estimate of profitability.
“This is the only survival strategy available for real estate companies. Till now they were not so much concerned about demand and built only what was more profitable for them. But now their construction activities are very much demand driven,” said a Bombay based analyst.
As a result the balance is tipped heavily towards residential projects. To make the residential projects attractive, realtors are also slashing the price of existing projects. The biggest realty player, DLF has already cut down prices of its Chennai, Bangalore and Hyderabad projects in the range of 20% to 30%. This will benefit both new and existing customers. This is expected to cascade onto others too.
In the January-February period, Omaxe has announced Gujarat Residential Township Project which is worth Rs 10,000 crore.
Akruti City has announced Just Perfect Homes’ Phase I Housing Project which will cost Rs 1,500 crore. Hindustan Construction Company has launched Sanand Township Project which is estimated to cost Rs 40,000 crore.
Ansal Properties & Infrastructure Ltd has launched Multi Location Low Cost Housing Project which will cost Rs 500 crore.
The learning process has taken time. After the slowdown started and it touched the Indian shores early last year real estate was hit very badly as sales dropped sharply. Price cuts followed after the RBI slashed interest cuts to save the situation.
But the stock of projects with the realtors were basically high margin ones. The premium housing segment generated profit margins when the going was good. But it is now that the companies are shifting their attention in terms of new projects to the demand driven low and medium cost housing.
Of the 121 projects captured in CMIE CapEx data base more than 100 projects are housing and most of them in the non-premium segment.
Real estate sales expected to improve after Diwali
Real estate sales expected to improve after Diwali
The Hindu Business Line, March 30, 2009, Page 3
MD of Orbit Corporation says they are prepared for the slowdown.
S. Shanker, Mumbai, March 29
Orbit Corporation is among the top real estate companies in Mumbai that cater to the high-end residential and commercial segments, primarily through redeveloping old and dilapidated properties. It has developed over 1.5 million sq.ft in prime locations of the city and the average price of properties sold has been about Rs 25,000 a sq.ft. The company has 11 lakh sq.ft slotted for completion in 2010 and another 20 lakh sq.ft scheduled for 2013.
Speaking to Business Line, Mr Pujit Aggarwal, Managing Director, shares his views on the real estate scenario and his strategy to combat the slowdown in trying times.
The premium housing segment has probably taken the worst beating in the slowdown and prices have dropped substantially. How much have you lowered prices?
We have cut prices by 30-35 per cent across projects. We are now quoting Rs 50,000 a sq.ft as against Rs 72,000 a sq.ft at Napean Sea Road. Similarly, we have lowered the price from Rs 24,000 to Rs 19,000 at Lower Parel.
What about sales?
The market is difficult. The last three months of 2008 were real bad to say the least. January was better with sale of one super-luxury apartment, while February went blank. March has been good thus far, logging sale of two to three apartments. The rules of the game have changed. Customers with cheque books in hand call the shots today.
What is your strategy at the current juncture?
We are prepared to take a hit. It has been cut-throat bargaining sessions with customers. But then, we have to move on and we cannot be lowering prices in slabs and end up sitting on high inventory. We intend to liquidate stocks and of 11 lakh sq.ft under construction we have sold 6.7 lakh sq.ft. This apart, we have about 2.75 lakh sq.ft in Andheri as well. So, from an unsold total of 7.75 lakh sq.ft, we intend to raise over Rs 1,550 crore over the next year and a half. Our objective is to sell at lower prices to generate cash to acquire distressed assets that come our way. So, any hit we take will be notional which will more or less average out with future projects. The key in these difficult times is timely project execution. We do have a certain amount of headroom in our projects, as once we get the rights from the landlord, a little restraint can be exercised in settlements with tenants and their rehabilitation process.
When do you expect the market to pick up?
Post-monsoon, after Diwali, is when I expect sentiments to improve and sales to kick in.
Do you have plans for entering the affordable home segment?
No. But then we are game if we get an asset with all clearances on board and which can be completed in two years. We understand HDIL has garnered sizable bookings in the segment with the right pricing strategy.
Orbit got Rs 200 crore from a Cyprus-based fund. How has the fund been deployed?
We are going to build beachfront villas near Alibaug. About Rs 110 acres have been acquired with the funds and another 90 acres have been tied up. Contrary to the current scenario, we anticipate no trouble in selling the premium villas of 4000 sq.ft to 15,000 sq.ft each in the price range of Rs 2 crore to Rs 15 crore.
The Hindu Business Line, March 30, 2009, Page 3
MD of Orbit Corporation says they are prepared for the slowdown.
S. Shanker, Mumbai, March 29
Orbit Corporation is among the top real estate companies in Mumbai that cater to the high-end residential and commercial segments, primarily through redeveloping old and dilapidated properties. It has developed over 1.5 million sq.ft in prime locations of the city and the average price of properties sold has been about Rs 25,000 a sq.ft. The company has 11 lakh sq.ft slotted for completion in 2010 and another 20 lakh sq.ft scheduled for 2013.
Speaking to Business Line, Mr Pujit Aggarwal, Managing Director, shares his views on the real estate scenario and his strategy to combat the slowdown in trying times.
The premium housing segment has probably taken the worst beating in the slowdown and prices have dropped substantially. How much have you lowered prices?
We have cut prices by 30-35 per cent across projects. We are now quoting Rs 50,000 a sq.ft as against Rs 72,000 a sq.ft at Napean Sea Road. Similarly, we have lowered the price from Rs 24,000 to Rs 19,000 at Lower Parel.
What about sales?
The market is difficult. The last three months of 2008 were real bad to say the least. January was better with sale of one super-luxury apartment, while February went blank. March has been good thus far, logging sale of two to three apartments. The rules of the game have changed. Customers with cheque books in hand call the shots today.
What is your strategy at the current juncture?
We are prepared to take a hit. It has been cut-throat bargaining sessions with customers. But then, we have to move on and we cannot be lowering prices in slabs and end up sitting on high inventory. We intend to liquidate stocks and of 11 lakh sq.ft under construction we have sold 6.7 lakh sq.ft. This apart, we have about 2.75 lakh sq.ft in Andheri as well. So, from an unsold total of 7.75 lakh sq.ft, we intend to raise over Rs 1,550 crore over the next year and a half. Our objective is to sell at lower prices to generate cash to acquire distressed assets that come our way. So, any hit we take will be notional which will more or less average out with future projects. The key in these difficult times is timely project execution. We do have a certain amount of headroom in our projects, as once we get the rights from the landlord, a little restraint can be exercised in settlements with tenants and their rehabilitation process.
When do you expect the market to pick up?
Post-monsoon, after Diwali, is when I expect sentiments to improve and sales to kick in.
Do you have plans for entering the affordable home segment?
No. But then we are game if we get an asset with all clearances on board and which can be completed in two years. We understand HDIL has garnered sizable bookings in the segment with the right pricing strategy.
Orbit got Rs 200 crore from a Cyprus-based fund. How has the fund been deployed?
We are going to build beachfront villas near Alibaug. About Rs 110 acres have been acquired with the funds and another 90 acres have been tied up. Contrary to the current scenario, we anticipate no trouble in selling the premium villas of 4000 sq.ft to 15,000 sq.ft each in the price range of Rs 2 crore to Rs 15 crore.
Interest rate cuts, offers bring first-timers to housing market
Interest rate cuts, offers bring first-timers to housing market
Business Standard, March 28, 2009, Page 4
GAUTAM CHAKRAVORTHY Mumbai
Renu Sud Karnad, joint managing director of HDFC, the country’s largest mortgage player, said she saw “increased interest” from first-time house buyers, courtesy the correction in property prices, interest rate cuts and developers introducing affordable housing by resizing the offered areas.
Property developers agree. Consider this:
HDIL Ltd launched a housing project at Kurla, a central suburb of Mumbai, in February, at a price 30 per cent lower than market rates. More than half its sales came from first-time home buyers. Of the 756 units on offer, the developer has already sold 575.
About 85 per cent of the 500 flats at DLF Westend Heights in Bangalore have already been sold. The project was aimed at information technology professionals and the flats were priced 24 per cent less than market rates.
DLF says about 60 per cent of the buyers are first-time house owners.
Unitech, which launched Uniworld Gardens–II at Sohna Road, Gurgaon, and cut prices by more than 20 per cent, has sold more than half the flats. It now plans to launch affordable housing projects in the Rs 5-10 lakh range in Chennai, Kolkata and other cities.
Bankers also see a sharp rise in enquiries from first-time buyers, after an 18-month hiatus. Bank of India Executive Director M Narendra said many first-time buyers were coming to the bank for loans as the availability of affordable projects had increased.
Cuts in interest rates and property prices have improved affordability. First-time buyers have been a huge beneficiary of the former. Every 0.5 per cent increase in the interest rate reduces home loan eligibility by about 7per cent, shows a study by Liases Foras, a real estate rating & research agency. Liases said real estate would attain the 2005 efficiency if home loan rates came down to 7.5 per cent and property prices fall by 5 per cent. The risk spread in the real estate sector would then be negligible.
First-time home buyers have stayed away from the market ever since developers, in a bid to cash in on the market sentiment, focused on launching luxurious projects, bigger in size and priced beyond the reach of average buyers.
Property prices across India more than tripled from 2003-07, owing to rising incomes, mortgage availability at inexpensive rates, higher tax benefits and speculators flocking to the market.
As a result, inventory levels of property jumped to 40 months of equivalent sales, compared with eight months or lower a few years ago, said Pankaj Kapoor, CEO of Liases Foras.
However, some analysts and experts said it might be difficult to sustain the momentum as several genuine buyers were expecting a further drop in prices and uncertainty in the job market might make matters worse.
Business Standard, March 28, 2009, Page 4
GAUTAM CHAKRAVORTHY Mumbai
Renu Sud Karnad, joint managing director of HDFC, the country’s largest mortgage player, said she saw “increased interest” from first-time house buyers, courtesy the correction in property prices, interest rate cuts and developers introducing affordable housing by resizing the offered areas.
Property developers agree. Consider this:
HDIL Ltd launched a housing project at Kurla, a central suburb of Mumbai, in February, at a price 30 per cent lower than market rates. More than half its sales came from first-time home buyers. Of the 756 units on offer, the developer has already sold 575.
About 85 per cent of the 500 flats at DLF Westend Heights in Bangalore have already been sold. The project was aimed at information technology professionals and the flats were priced 24 per cent less than market rates.
DLF says about 60 per cent of the buyers are first-time house owners.
Unitech, which launched Uniworld Gardens–II at Sohna Road, Gurgaon, and cut prices by more than 20 per cent, has sold more than half the flats. It now plans to launch affordable housing projects in the Rs 5-10 lakh range in Chennai, Kolkata and other cities.
Bankers also see a sharp rise in enquiries from first-time buyers, after an 18-month hiatus. Bank of India Executive Director M Narendra said many first-time buyers were coming to the bank for loans as the availability of affordable projects had increased.
Cuts in interest rates and property prices have improved affordability. First-time buyers have been a huge beneficiary of the former. Every 0.5 per cent increase in the interest rate reduces home loan eligibility by about 7per cent, shows a study by Liases Foras, a real estate rating & research agency. Liases said real estate would attain the 2005 efficiency if home loan rates came down to 7.5 per cent and property prices fall by 5 per cent. The risk spread in the real estate sector would then be negligible.
First-time home buyers have stayed away from the market ever since developers, in a bid to cash in on the market sentiment, focused on launching luxurious projects, bigger in size and priced beyond the reach of average buyers.
Property prices across India more than tripled from 2003-07, owing to rising incomes, mortgage availability at inexpensive rates, higher tax benefits and speculators flocking to the market.
As a result, inventory levels of property jumped to 40 months of equivalent sales, compared with eight months or lower a few years ago, said Pankaj Kapoor, CEO of Liases Foras.
However, some analysts and experts said it might be difficult to sustain the momentum as several genuine buyers were expecting a further drop in prices and uncertainty in the job market might make matters worse.
DLF’s retail arm plans 500 luxury lifestyle stores
DLF’s retail arm plans 500 luxury lifestyle stores
Business Standard, March 28, 2009, Page 4
REALTY SHOWS SIGNS OF BOUNCE-BACK
RAGHAVENDRA KAMATH Mumbai, 27 March
DLF Brands, the retail management subsidiary of DLF, the country’s biggest developer, plans to open 500 stores selling luxury lifestyle labels in the next five years, entailing an investment of over Rs 1,000 crore, a top group official said.
Already partnering seven international brands such as Giorgio Armani and Salvatore Ferragamo, it also plans to tie up with 12-15 global brands in the next five years. The company plans to fund its expansion through a mix of equity and debt and go in for tie-ups through joint ventures (JVs) and franchise routes. The focus of expansion would be in metros such as Delhi, Mumbai, Hyderabad and Chennai in the initial phase, the official said.
DLF Brands currently has joint ventures with international brands such as Giorgio Armani Holding BV, Salvatore Ferragamo and Boggi, and franchising agreements with brands such as Alcott, Sia Home Fashion and Sun Glass Hut. With its current portfolio, DLF has over adozen stores in the country.
“The retailer plans to have at least four stores for each of the international brands by the end of 2009,” said Kelvin Coyle, its managing director. On Wednesday, it entered into a franchisee agreement with Donna Karan Studio LLC, part of the luxury goods maker LVMH Moet Hennessy Louis Vuitton SA. The company is expected to invest as much as Rs 65 crore in opening 28 Donna Karan stores in the next five years.
“We know there is an economic slowdown. Today, our business plans are not the same as we were looking at a year ago. While chalking out our current plans, we have factored in the downturn and reduced the plans by 25 per cent,’’ said Coyle.
On anticipated investment, he said it might go up or down, depending on overall conditions and the retail environment. The company plans to open at least 100 stores by the end of 2010, Coyle has said.
The company is also in talks with a couple of international brands and expected to tieup with two-three brands in the next year, which Coyle refused to name, citing confidentiality agreements.
“Ultimately, we will have atie-up with 12-15 brands in the luxury and premium market,’’ he said.
According to retail experts, though the untapped market for luxury goods is attracting global players to India, most will tread cautiously during the current downturn. “India is still attractive, given the saturation in western markets. That is why international brands are looking at India, China and other South East Asian markets. But, if they planned to open 20 stores acouple of years ago, they will open only four-five stores in the current scenario,’’ said Hemant Kalbag, partner and vice-president, AT Kearney India, a business consultancy.
“The luxury brands market will continue to be a niche market in Indian metros and they will not be able to penetrate in India as deeply as they have done in the US, Europe and other developed countries,’’ he added.
Coyle agrees the current downturn is impacting all walks of life. “We have a strategy in mind which is in tune with the slowdown. It will move with a slower start and grow rapidly when things get back to normalcy.’’ DLF Brands, says Coyle, is striving to provide price parity for its international brands in India in comparison with their home markets and absorb duties to keep pricing under check. Coyle said that RayBan of the Luxottica group sold for 50 per cent less in the Indian market compared to western ones, and Sia Home sold for 20 per cent less than its home market, France.
DLF Brands currently has joint ventures with international brands such as Giorgio Armani Holding BV, Salvatore Ferragamo and Boggi, and franchising agreements with brands such as Alcott, Sia Home Fashion and Sun Glass Hut
Business Standard, March 28, 2009, Page 4
REALTY SHOWS SIGNS OF BOUNCE-BACK
RAGHAVENDRA KAMATH Mumbai, 27 March
DLF Brands, the retail management subsidiary of DLF, the country’s biggest developer, plans to open 500 stores selling luxury lifestyle labels in the next five years, entailing an investment of over Rs 1,000 crore, a top group official said.
Already partnering seven international brands such as Giorgio Armani and Salvatore Ferragamo, it also plans to tie up with 12-15 global brands in the next five years. The company plans to fund its expansion through a mix of equity and debt and go in for tie-ups through joint ventures (JVs) and franchise routes. The focus of expansion would be in metros such as Delhi, Mumbai, Hyderabad and Chennai in the initial phase, the official said.
DLF Brands currently has joint ventures with international brands such as Giorgio Armani Holding BV, Salvatore Ferragamo and Boggi, and franchising agreements with brands such as Alcott, Sia Home Fashion and Sun Glass Hut. With its current portfolio, DLF has over adozen stores in the country.
“The retailer plans to have at least four stores for each of the international brands by the end of 2009,” said Kelvin Coyle, its managing director. On Wednesday, it entered into a franchisee agreement with Donna Karan Studio LLC, part of the luxury goods maker LVMH Moet Hennessy Louis Vuitton SA. The company is expected to invest as much as Rs 65 crore in opening 28 Donna Karan stores in the next five years.
“We know there is an economic slowdown. Today, our business plans are not the same as we were looking at a year ago. While chalking out our current plans, we have factored in the downturn and reduced the plans by 25 per cent,’’ said Coyle.
On anticipated investment, he said it might go up or down, depending on overall conditions and the retail environment. The company plans to open at least 100 stores by the end of 2010, Coyle has said.
The company is also in talks with a couple of international brands and expected to tieup with two-three brands in the next year, which Coyle refused to name, citing confidentiality agreements.
“Ultimately, we will have atie-up with 12-15 brands in the luxury and premium market,’’ he said.
According to retail experts, though the untapped market for luxury goods is attracting global players to India, most will tread cautiously during the current downturn. “India is still attractive, given the saturation in western markets. That is why international brands are looking at India, China and other South East Asian markets. But, if they planned to open 20 stores acouple of years ago, they will open only four-five stores in the current scenario,’’ said Hemant Kalbag, partner and vice-president, AT Kearney India, a business consultancy.
“The luxury brands market will continue to be a niche market in Indian metros and they will not be able to penetrate in India as deeply as they have done in the US, Europe and other developed countries,’’ he added.
Coyle agrees the current downturn is impacting all walks of life. “We have a strategy in mind which is in tune with the slowdown. It will move with a slower start and grow rapidly when things get back to normalcy.’’ DLF Brands, says Coyle, is striving to provide price parity for its international brands in India in comparison with their home markets and absorb duties to keep pricing under check. Coyle said that RayBan of the Luxottica group sold for 50 per cent less in the Indian market compared to western ones, and Sia Home sold for 20 per cent less than its home market, France.
DLF Brands currently has joint ventures with international brands such as Giorgio Armani Holding BV, Salvatore Ferragamo and Boggi, and franchising agreements with brands such as Alcott, Sia Home Fashion and Sun Glass Hut
DLF offers price cuts for housing project delays
DLF offers price cuts for housing project delays
Business Standard, March 28, 2009, Page 6
JOE C MATHEW New Delhi
Realty giant DLF has offered some sweeteners for the buyers of its new housing project at Gurgaon. In a first-of-its-kind move, the company wrote to people who had booked flats at its New Town Heights residential project, where construction is yet to start, of an amendment to its sale agreement. The change entitles customers to benefits that will work out to a price reduction, it says, of about 20 per cent.
The company has announced a 5 per cent discount over the basic sale price. It has also announced another 10 per cent timely-payment rebate. The changes also include an increase in the compensation rates for delays from Rs 5 per sq ft per month to Rs 10.
It has also rescheduled the payment plan. Now, instalments have been linked to various construction milestones. All payments received over and above 35 per cent of the sale price will thus be treated as advance payment, and a rebate equivalent to 13 per cent interest will be allowed to the customer.
The company said the move was in tune with its earlier announcement to cut the prices of residential projects by 15-20 per cent.
“We have been implementing the price correction on a project to project basis.
Different models were worked out in cities like Chennai and Bangalore. In Hyderabad, reduced prices were announced. Each model reflects the price correction happening in specific cities,” Rajiv Talwar, group executive director, DLF said.
According to him, DLF’s attempt is to hold all existing clients, boost customer confidence and attract new customers, to ensure continued cash flow in the times of global recession. “We are trying to be responsive to the market,” he said.
Customers, however, said it wasn’t such agenerous thing. Commenting on the 10 per cent timely payment rebate, they said the rebate was on 65 per cent of the total amount, as 35 per cent was always paid as advance. “This means the rebate is effectively 6 per cent and not 10 as claimed by DLF. When the total benefit may not be more than 11 per cent, how can the company claim to offer 20 per cent discount?” they asked.
The project-specific and city-specific plans also came under criticism. However, the customers agreed that the DLF move was not a legal compulsion but a goodwill gesture.
The move has generated interest among other players also. Delhi-based property developer, Omaxe, said the company was working out a similar offer for its Greater Noida customers.
The move aims to hold existing customers, attract new ones and ensure continued cash flow in the times of global recession
Business Standard, March 28, 2009, Page 6
JOE C MATHEW New Delhi
Realty giant DLF has offered some sweeteners for the buyers of its new housing project at Gurgaon. In a first-of-its-kind move, the company wrote to people who had booked flats at its New Town Heights residential project, where construction is yet to start, of an amendment to its sale agreement. The change entitles customers to benefits that will work out to a price reduction, it says, of about 20 per cent.
The company has announced a 5 per cent discount over the basic sale price. It has also announced another 10 per cent timely-payment rebate. The changes also include an increase in the compensation rates for delays from Rs 5 per sq ft per month to Rs 10.
It has also rescheduled the payment plan. Now, instalments have been linked to various construction milestones. All payments received over and above 35 per cent of the sale price will thus be treated as advance payment, and a rebate equivalent to 13 per cent interest will be allowed to the customer.
The company said the move was in tune with its earlier announcement to cut the prices of residential projects by 15-20 per cent.
“We have been implementing the price correction on a project to project basis.
Different models were worked out in cities like Chennai and Bangalore. In Hyderabad, reduced prices were announced. Each model reflects the price correction happening in specific cities,” Rajiv Talwar, group executive director, DLF said.
According to him, DLF’s attempt is to hold all existing clients, boost customer confidence and attract new customers, to ensure continued cash flow in the times of global recession. “We are trying to be responsive to the market,” he said.
Customers, however, said it wasn’t such agenerous thing. Commenting on the 10 per cent timely payment rebate, they said the rebate was on 65 per cent of the total amount, as 35 per cent was always paid as advance. “This means the rebate is effectively 6 per cent and not 10 as claimed by DLF. When the total benefit may not be more than 11 per cent, how can the company claim to offer 20 per cent discount?” they asked.
The project-specific and city-specific plans also came under criticism. However, the customers agreed that the DLF move was not a legal compulsion but a goodwill gesture.
The move has generated interest among other players also. Delhi-based property developer, Omaxe, said the company was working out a similar offer for its Greater Noida customers.
The move aims to hold existing customers, attract new ones and ensure continued cash flow in the times of global recession
Unitech reschedules, repays Rs 600-700-cr debt due by March
Unitech reschedules, repays Rs 600-700-cr debt due by March
The Hindu Business Line, March 28, 2009, Page 15
Liquidity position improves on good response for housing projects.
Moumita Bakshi Chatterjee, New Delhi
Real estate company Unitech Ltd has rescheduled and repaid about Rs 600-700 crore of debt, which was due by March 2009. The stock price of the company gained 33 per cent this week. It closed at Rs 35.90 on Friday.
However, there is no clarity on how much of the debt has been restructured and the proportion that has been repaid. While a questionnaire sent to the company spokesperson remained unanswered, a person in the know said the liquidity position of Unitech has improved on several counts — namely the sale of hotel property, funds received from Telenor deal, and an “encouraging” response for new affordable housing projects.
Money matters
Unitech recently sold its hotel in Gurgaon for Rs 235 crore, of which it has received 45 per cent of the payment; the balance 55 per cent will come in April. Besides this, with Telenor’s infusion of the first tranche of investment (of Rs 1,250 crore) into Unitech Wireless, nearly Rs 380 crore has come to Unitech Ltd’s coffers.
This is in lieu of advances Unitech Ltd extended to Unitech Wireless in the past. In addition, about Rs 2,000 crore telecom debt is now off Unitech; it got transferred from the erstwhile consolidated balance sheet of the Unitech Group to Unitech Wireless’ new balance sheet.
Settling counts
The balance debt on Unitech’s books now stands at Rs 8,000 crore, sources said. Unitech’s Managing Director, Mr Sanjay Chandra, had told reporters in January this year, that the company was able to repay or reschedule nearly three-fourths of Rs 2,500 crore loans then due by March 2009; at that point it needed to retire the balance (Rs 600-700 crore) debt. Sources said this Rs 600-700 crore debt has now been settled.
Sources said that in the first phase of the new affordable housing project in Gurgaon (priced at Rs 30-Rs 40 lakh) where the company had offered 150 apartments, the entire stock was sold-out within first 15 days. “The company then launched phase-II of the project and by now has sold 300 apartments (from phase-I and Phase-II). The project in Dadar, Mumbai has also been getting very good response,” sources said.
When contacted, a Mumbai-based analyst said the rally in share price may be in line with the broader markets. “I do not see any company-specific or sector-specific improvement. Even if they have been able to restructure their debt due by March 2009, that is on the expected lines post the completion of the Telenor deal,” the analyst said.
Another real estate analyst from a Mumbai-based brokerage firm pointed out that stock was “oversold and has got corrected now. No one expected the company to default on the loans, anyway.”
The Hindu Business Line, March 28, 2009, Page 15
Liquidity position improves on good response for housing projects.
Moumita Bakshi Chatterjee, New Delhi
Real estate company Unitech Ltd has rescheduled and repaid about Rs 600-700 crore of debt, which was due by March 2009. The stock price of the company gained 33 per cent this week. It closed at Rs 35.90 on Friday.
However, there is no clarity on how much of the debt has been restructured and the proportion that has been repaid. While a questionnaire sent to the company spokesperson remained unanswered, a person in the know said the liquidity position of Unitech has improved on several counts — namely the sale of hotel property, funds received from Telenor deal, and an “encouraging” response for new affordable housing projects.
Money matters
Unitech recently sold its hotel in Gurgaon for Rs 235 crore, of which it has received 45 per cent of the payment; the balance 55 per cent will come in April. Besides this, with Telenor’s infusion of the first tranche of investment (of Rs 1,250 crore) into Unitech Wireless, nearly Rs 380 crore has come to Unitech Ltd’s coffers.
This is in lieu of advances Unitech Ltd extended to Unitech Wireless in the past. In addition, about Rs 2,000 crore telecom debt is now off Unitech; it got transferred from the erstwhile consolidated balance sheet of the Unitech Group to Unitech Wireless’ new balance sheet.
Settling counts
The balance debt on Unitech’s books now stands at Rs 8,000 crore, sources said. Unitech’s Managing Director, Mr Sanjay Chandra, had told reporters in January this year, that the company was able to repay or reschedule nearly three-fourths of Rs 2,500 crore loans then due by March 2009; at that point it needed to retire the balance (Rs 600-700 crore) debt. Sources said this Rs 600-700 crore debt has now been settled.
Sources said that in the first phase of the new affordable housing project in Gurgaon (priced at Rs 30-Rs 40 lakh) where the company had offered 150 apartments, the entire stock was sold-out within first 15 days. “The company then launched phase-II of the project and by now has sold 300 apartments (from phase-I and Phase-II). The project in Dadar, Mumbai has also been getting very good response,” sources said.
When contacted, a Mumbai-based analyst said the rally in share price may be in line with the broader markets. “I do not see any company-specific or sector-specific improvement. Even if they have been able to restructure their debt due by March 2009, that is on the expected lines post the completion of the Telenor deal,” the analyst said.
Another real estate analyst from a Mumbai-based brokerage firm pointed out that stock was “oversold and has got corrected now. No one expected the company to default on the loans, anyway.”
Parsvnath goes slow on hotel expansion
Parsvnath goes slow on hotel expansion
Sunday Business Standard, March 29, 2009, Page 3
To conserve cash, the firm is not buying new land for hotels and projects have been pushed back 12-18 months
BS REPORTER
New Delhi-based Parsvnath Developers is going slow on hotel expansion to conserve cash in the business, a top company official has said.
Parsvnath had planned to open 100 hotels in seven years with about 10,000 rooms. Now, the company is not buying any land for hotels apart from what it has for its 20 hotel projects, of which six are under way.
“We will not buy new land for now. We are focussing on six projects and will start the other 14 in due course of time,” said Parsvnath Chairman Pradeep Jain.
Most real estate developers, like DLF, Unitech and others, are scaling down or slowing hotel plans due to the current slowdown in the property sector and the cash crunch. While property prices have dropped as much as 50 per cent from their peak in 2008 in metros and sales have declined 70 per cent compared with last year, banks have tightened lending to property developers.
According to experts, 2030 per cent of the room capacity planned by 2010 would be deferred by at two to three years.
DLF, the country’s largest property developer, is said to be pushing back its hotel plans by 12-18 months due to the tough credit environment, while Unitech, another New Delhi-based developer, has sold its Gurgaon hotel to reduce its debt burden.
Even hotel chains are passing through a rough patch with occupancies falling 58 per cent in January 2009 and average room rates declining 14 per cent in the month.
Analysts expect Parsvnath’s balance sheet to be under pressure in the current quarter and the next financial year due to decline in execution, high receivables and overall slowdown in the property market.
The company’s consolidated third-quarter profit fell 95 per cent to Rs 5.42 crore and sales dropped 80 per cent to Rs 90.52 crore. In the fourth quarter, on a year-on-year basis, analysts expect revenues and net profit to drop further.
The company’s execution slowed in every quarter of the current financial year. The company has an executed space of 1.3 million sq ft in Q3 of FY09, compared with 2.2 million in Q2. Receivables from buyers went up to Rs 1,496 crore by the end of the December quarter, from Rs 1,346 crore in the September quarter.
“Developers cannot launch new projects when sales are slow and cash is hard to come by,” said an analyst with a Mumbai-based brokerage firm.
Parsvnath is developing six hotels in Mohali, Shirdi, Hyderabad, Lucknow, Ahmedabad, and expects to start the rollout by the second half of 2009. The company is in the process of getting approvals for 14 other projects, which are expected to start in the next 12 months.
Jain said the company was looking at diluting stakes in individual hotel projects and drop its earlier plan to dilute stake in the entire portfolio. “Today, there are no takers for consolidated assets. That is why we are looking at divesting stakes in individual projects,” said Jain.
Sunday Business Standard, March 29, 2009, Page 3
To conserve cash, the firm is not buying new land for hotels and projects have been pushed back 12-18 months
BS REPORTER
New Delhi-based Parsvnath Developers is going slow on hotel expansion to conserve cash in the business, a top company official has said.
Parsvnath had planned to open 100 hotels in seven years with about 10,000 rooms. Now, the company is not buying any land for hotels apart from what it has for its 20 hotel projects, of which six are under way.
“We will not buy new land for now. We are focussing on six projects and will start the other 14 in due course of time,” said Parsvnath Chairman Pradeep Jain.
Most real estate developers, like DLF, Unitech and others, are scaling down or slowing hotel plans due to the current slowdown in the property sector and the cash crunch. While property prices have dropped as much as 50 per cent from their peak in 2008 in metros and sales have declined 70 per cent compared with last year, banks have tightened lending to property developers.
According to experts, 2030 per cent of the room capacity planned by 2010 would be deferred by at two to three years.
DLF, the country’s largest property developer, is said to be pushing back its hotel plans by 12-18 months due to the tough credit environment, while Unitech, another New Delhi-based developer, has sold its Gurgaon hotel to reduce its debt burden.
Even hotel chains are passing through a rough patch with occupancies falling 58 per cent in January 2009 and average room rates declining 14 per cent in the month.
Analysts expect Parsvnath’s balance sheet to be under pressure in the current quarter and the next financial year due to decline in execution, high receivables and overall slowdown in the property market.
The company’s consolidated third-quarter profit fell 95 per cent to Rs 5.42 crore and sales dropped 80 per cent to Rs 90.52 crore. In the fourth quarter, on a year-on-year basis, analysts expect revenues and net profit to drop further.
The company’s execution slowed in every quarter of the current financial year. The company has an executed space of 1.3 million sq ft in Q3 of FY09, compared with 2.2 million in Q2. Receivables from buyers went up to Rs 1,496 crore by the end of the December quarter, from Rs 1,346 crore in the September quarter.
“Developers cannot launch new projects when sales are slow and cash is hard to come by,” said an analyst with a Mumbai-based brokerage firm.
Parsvnath is developing six hotels in Mohali, Shirdi, Hyderabad, Lucknow, Ahmedabad, and expects to start the rollout by the second half of 2009. The company is in the process of getting approvals for 14 other projects, which are expected to start in the next 12 months.
Jain said the company was looking at diluting stakes in individual hotel projects and drop its earlier plan to dilute stake in the entire portfolio. “Today, there are no takers for consolidated assets. That is why we are looking at divesting stakes in individual projects,” said Jain.
DDA to lend Rs 100 crore to Emaar
DDA to lend Rs 100 crore to Emaar
The Economic Times, March 28, 2009, Page 15
Sanjeev Choudhary NEW DELHI
DELHI Development Authority (DDA) has agreed to lend Rs 100 crore to cashstrapped realty firm Emaar MGF to ensure the Commonwealth Games Village project is completed on time, a DDA official said.
But the development agency is willing to consider lending more later, he added. DDA would extend the Rs 100-crore loan if Emaar MGF offers apartments worth the same value either as collateral or for outright sale to the government-run body. The Village will have 1,168 apartments to accommodate 8,500 athletes likely to participate in the Commonwealth Games.
DDA has set up a committee to decide on the value of apartments in the village. The panel is expected to submit the valuation report in two weeks. Following this, DDA will decide if it wants to buy these apartments or give a loan using them as security.
It will be difficult for DDA to justify buying apartments at a steep price because it will have to sell them later. DDA is known to sell apartments at 30-40% discount to market rate.
Emaar MGF has been insisting DDA to buy apartments because the purchase can bring in some cash to the developer, whereas a loan will have to be repaid in a falling market.
A DDA spokesman said: “We are yet to take a final decision, but DDA will do all that is required to facilitate the timely completion of Commonwealth Games Village.”
Three months ago, Emaar MGF had requested DDA for a Rs 300-crore loan, saying it would not be able to meet the deadline of April 2010 due to a cash crunch.
Emaar MGF had bagged the project in 2007 after bidding Rs 321 crore for it. According to its contract with DDA, Emaar MGF can sell twothird of the total apartments. The balance will be handed over to DDA for free. The village, located on the bank of river Yamuna in east Delhi, is almost 45% complete.
A booming realty market, good location and high-quality features had encouraged Emaar MGF to price the project aggressively.
With a price tag ranging from Rs 1.8-4.8 crore, apartments in the athletes village are being offered by Emaar MGF for an average price of Rs 13,000 per sq ft.
But, a combination of global and local economic factors have badly impacted the property market and sent prices crashing. Buyers are staying away, waiting for a price cut similar to those in some projects belonging to country’s largest realty company DLF.
DLF will shortly launch a housing project in Delhi, around 7 km from Connaught Place, almost the same distance as Emaar MGF’s Village. But DLF’s project is likely to be priced at almost half Emaar’s rate.
Emaar MGF officials say the company will not lower prices to induce buying as the project is already competitively priced. Around 260 apartments have been sold so far and last four months have been very bad, they added.
NEW LIFE
Delhi Development Authority agrees to lend to ensure timely completion of the Commonwealth Games Village project
It may lend more if Emaar offers apartments worth the same value either as collateral or for outright sale
DDA has also set up a committee to decide on the value of apartments which is expected to submit the report in two weeks
Emaar MGF had earlier requested DDA for a Rs 300-crore loan, saying it would not be able to meet the April 2010 deadline due to a cash crunch
The Economic Times, March 28, 2009, Page 15
Sanjeev Choudhary NEW DELHI
DELHI Development Authority (DDA) has agreed to lend Rs 100 crore to cashstrapped realty firm Emaar MGF to ensure the Commonwealth Games Village project is completed on time, a DDA official said.
But the development agency is willing to consider lending more later, he added. DDA would extend the Rs 100-crore loan if Emaar MGF offers apartments worth the same value either as collateral or for outright sale to the government-run body. The Village will have 1,168 apartments to accommodate 8,500 athletes likely to participate in the Commonwealth Games.
DDA has set up a committee to decide on the value of apartments in the village. The panel is expected to submit the valuation report in two weeks. Following this, DDA will decide if it wants to buy these apartments or give a loan using them as security.
It will be difficult for DDA to justify buying apartments at a steep price because it will have to sell them later. DDA is known to sell apartments at 30-40% discount to market rate.
Emaar MGF has been insisting DDA to buy apartments because the purchase can bring in some cash to the developer, whereas a loan will have to be repaid in a falling market.
A DDA spokesman said: “We are yet to take a final decision, but DDA will do all that is required to facilitate the timely completion of Commonwealth Games Village.”
Three months ago, Emaar MGF had requested DDA for a Rs 300-crore loan, saying it would not be able to meet the deadline of April 2010 due to a cash crunch.
Emaar MGF had bagged the project in 2007 after bidding Rs 321 crore for it. According to its contract with DDA, Emaar MGF can sell twothird of the total apartments. The balance will be handed over to DDA for free. The village, located on the bank of river Yamuna in east Delhi, is almost 45% complete.
A booming realty market, good location and high-quality features had encouraged Emaar MGF to price the project aggressively.
With a price tag ranging from Rs 1.8-4.8 crore, apartments in the athletes village are being offered by Emaar MGF for an average price of Rs 13,000 per sq ft.
But, a combination of global and local economic factors have badly impacted the property market and sent prices crashing. Buyers are staying away, waiting for a price cut similar to those in some projects belonging to country’s largest realty company DLF.
DLF will shortly launch a housing project in Delhi, around 7 km from Connaught Place, almost the same distance as Emaar MGF’s Village. But DLF’s project is likely to be priced at almost half Emaar’s rate.
Emaar MGF officials say the company will not lower prices to induce buying as the project is already competitively priced. Around 260 apartments have been sold so far and last four months have been very bad, they added.
NEW LIFE
Delhi Development Authority agrees to lend to ensure timely completion of the Commonwealth Games Village project
It may lend more if Emaar offers apartments worth the same value either as collateral or for outright sale
DDA has also set up a committee to decide on the value of apartments which is expected to submit the report in two weeks
Emaar MGF had earlier requested DDA for a Rs 300-crore loan, saying it would not be able to meet the April 2010 deadline due to a cash crunch
Demand-supply mismatch to dog cement industry amid capacity rise
Demand-supply mismatch to dog cement industry amid capacity rise
Business Standard, March 30, 2009, Page 8
Business Standard, March 30, 2009, Page 8
Steel makers witness revival of demand
Steel makers witness revival of demand
Business Standard, March 30, 2009, Page 8
PRESS TRUST OF INDIA New Delhi
Steel makers, including the Steel Authority of India (SAIL), Tata Steel and JSW Steel, are witnessing a revival of demand following improved consumption from sectors such as construction and automobile.
“The steel sector is doing quite well now. There is an overall growth in demand. It is a positive sign,” JSW Steel ViceChairman and MD Sajjan Jindal said.
Steel companies saw the demand for the alloy waning due to the global industrial downturn in the second half of the current financial year. However, JSW Steel expects demand to improve by 4-5 per cent in the next fianancial year.
“This whole year, we will see aslight growth in demand, maybe by 4-5 per cent as consumption increases,” Jindal said.
Ruling out any changes in the price structure, Jindal said, “Domestic steel prices have already come down. We have already more or less bottomed out. Let’s not talk about pushing it further down,” he said.
Echoing the sentiments, other domestic producers such as Essar Steel and VISA Steel said they expect the improving trend to continue in the next financial year.
“Domestic demand is picking up. The offtake in February was better than in January. March will be better than February and the trend is expected to continue,” Essar Steel Business Group CEO J Mehra said, adding, howe ver, that the export market continues to be in bad shape.
Global steel majors such as ArcelorMittal and Posco have cut their output by up to 45 per cent due to the fall in demand. Steel prices have almost halved to $450 a tonne from highs of $1,150-1,250 a tonne seen last year. Following the trend, the Indian companies had also cut prices and output.
But the recent increase in demand has seen domestic steel mills embracing full capacity.
“Along with demand, capacity of steel mills in India are also growing in the past few months,” Visa Steel Chairman Vishambar Saran said.
The country’s steel behemoths — SAIL and Tata Steel —are witnessing a better demand for the commodity in the last quarter of the financial year than the previous quarter, mainly on improving demand in the construction sector.
Business Standard, March 30, 2009, Page 8
PRESS TRUST OF INDIA New Delhi
Steel makers, including the Steel Authority of India (SAIL), Tata Steel and JSW Steel, are witnessing a revival of demand following improved consumption from sectors such as construction and automobile.
“The steel sector is doing quite well now. There is an overall growth in demand. It is a positive sign,” JSW Steel ViceChairman and MD Sajjan Jindal said.
Steel companies saw the demand for the alloy waning due to the global industrial downturn in the second half of the current financial year. However, JSW Steel expects demand to improve by 4-5 per cent in the next fianancial year.
“This whole year, we will see aslight growth in demand, maybe by 4-5 per cent as consumption increases,” Jindal said.
Ruling out any changes in the price structure, Jindal said, “Domestic steel prices have already come down. We have already more or less bottomed out. Let’s not talk about pushing it further down,” he said.
Echoing the sentiments, other domestic producers such as Essar Steel and VISA Steel said they expect the improving trend to continue in the next financial year.
“Domestic demand is picking up. The offtake in February was better than in January. March will be better than February and the trend is expected to continue,” Essar Steel Business Group CEO J Mehra said, adding, howe ver, that the export market continues to be in bad shape.
Global steel majors such as ArcelorMittal and Posco have cut their output by up to 45 per cent due to the fall in demand. Steel prices have almost halved to $450 a tonne from highs of $1,150-1,250 a tonne seen last year. Following the trend, the Indian companies had also cut prices and output.
But the recent increase in demand has seen domestic steel mills embracing full capacity.
“Along with demand, capacity of steel mills in India are also growing in the past few months,” Visa Steel Chairman Vishambar Saran said.
The country’s steel behemoths — SAIL and Tata Steel —are witnessing a better demand for the commodity in the last quarter of the financial year than the previous quarter, mainly on improving demand in the construction sector.
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