Thursday, April 9, 2009
Realty sees new lease of life
Realty sees new lease of life
The Economic Times, April 9, 2009, page 5
50-70% Increase in Leasing Enquiries: Cushman & Wakefield
Ravi Teja Sharma, NEW DELHI
THERE are signs that the commercial real estate sector is looking up. Enquiries, which had totally dried up in the October-December quarter, are now re-starting in the leasing area. Kaustuv Roy, executive director at Cushman & Wakefield says there has been a 50-70% increase in enquiries over the last quarter. Property advisory companies have started to see this new interest since the beginning of January. Across the country, office space rentals are down 20-40% from the peak in late 2007 and early 2008 and this is one of the main triggers for this movement in the market.
“Certain sectors which are doing well even in the downturn are now starting to execute their expansion plans. They were sitting on the sides waiting for a correction,” says Anuj Puri, chairman and country head at JLL-M. Sectors like pharma, healthcare, education, telecom, FMCG, infrastructure have been comparatively less affected because of the downturn.
Because of the perceived correction, people who have growth plans are sniffing around. “These were the people who smartly held back their decisions earlier. Now that the market has started to correct, they are beginning to look around,” says Vivek Dahiya, CEO of GenReal, a property consultancy firm.
Some leasing deals have already happened in the last few months. According to sources, United Power has picked up 20,000-25,000 sq ft of space in 3C Group’s Green Boulevard; Mid Land Credit has picked up 80,000 sq ft in sector 44, Gurgaon; a management institute has picked up 44,000 sq ft in Gurgaon; Avenue Capital has taken 2,000 sq ft at Global Business Park in Gurgaon; Asia Pacific Diagnostics has taken 1,500 sq ft at Global Orchid and Future Generali has picked up 6,000 sq ft at sector 29, Gurgaon. Dahiya suggests this is a good time do a thorough site search and selection to get the best product at the best rate and then take a decision in the next few months.
The requirement for space though is smaller at the moment. “People are not taking big positions right now. Office space pickup is happening but the size of transactions is small,” says Anshuman Magazine, managing director of CB Richard Ellis. The firm is getting some large deals as well but in a fragmented manner, unlike earlier when there was a steady stream of large ticket size deals where companies were looking at space in the 200,000-300,000 sq ft range. “But in this market, even to get these larger deals in a fragmented manner is a very good sign,” he says. Any pickup of space for expansion is a sign that business is moving for these companies and new employment is being created. Rentals have rationalized in the last few months and this, along with an option to move to better quality office space is starting to move the market.
The Economic Times, April 9, 2009, page 5
50-70% Increase in Leasing Enquiries: Cushman & Wakefield
Ravi Teja Sharma, NEW DELHI
THERE are signs that the commercial real estate sector is looking up. Enquiries, which had totally dried up in the October-December quarter, are now re-starting in the leasing area. Kaustuv Roy, executive director at Cushman & Wakefield says there has been a 50-70% increase in enquiries over the last quarter. Property advisory companies have started to see this new interest since the beginning of January. Across the country, office space rentals are down 20-40% from the peak in late 2007 and early 2008 and this is one of the main triggers for this movement in the market.
“Certain sectors which are doing well even in the downturn are now starting to execute their expansion plans. They were sitting on the sides waiting for a correction,” says Anuj Puri, chairman and country head at JLL-M. Sectors like pharma, healthcare, education, telecom, FMCG, infrastructure have been comparatively less affected because of the downturn.
Because of the perceived correction, people who have growth plans are sniffing around. “These were the people who smartly held back their decisions earlier. Now that the market has started to correct, they are beginning to look around,” says Vivek Dahiya, CEO of GenReal, a property consultancy firm.
Some leasing deals have already happened in the last few months. According to sources, United Power has picked up 20,000-25,000 sq ft of space in 3C Group’s Green Boulevard; Mid Land Credit has picked up 80,000 sq ft in sector 44, Gurgaon; a management institute has picked up 44,000 sq ft in Gurgaon; Avenue Capital has taken 2,000 sq ft at Global Business Park in Gurgaon; Asia Pacific Diagnostics has taken 1,500 sq ft at Global Orchid and Future Generali has picked up 6,000 sq ft at sector 29, Gurgaon. Dahiya suggests this is a good time do a thorough site search and selection to get the best product at the best rate and then take a decision in the next few months.
The requirement for space though is smaller at the moment. “People are not taking big positions right now. Office space pickup is happening but the size of transactions is small,” says Anshuman Magazine, managing director of CB Richard Ellis. The firm is getting some large deals as well but in a fragmented manner, unlike earlier when there was a steady stream of large ticket size deals where companies were looking at space in the 200,000-300,000 sq ft range. “But in this market, even to get these larger deals in a fragmented manner is a very good sign,” he says. Any pickup of space for expansion is a sign that business is moving for these companies and new employment is being created. Rentals have rationalized in the last few months and this, along with an option to move to better quality office space is starting to move the market.
Deposit the problem
Deposit the problem
The Financial Express, April 9, 2009, page 6
On Monday, banks parked Rs 1,22,000 crore with RBI for which they received an interest rate of only 3.5%, the reverse repo rate. Set this against the fact that banks are: (a) not lending much and, therefore, missing out on higher spreads, (b) not lending despite the cost of funds-deposit rates-having now come down and availability of funds-bank deposits-having gone up. As these columns have been arguing, this is perverse from the point of view of the economy. Some data throws the picture in sharp relief. For the 11 months of 2008-09, credit growth was 13% as against 17% for the corresponding period of last 2007-08. In absolute terms, this means Rs 3.06 lakh crore as against Rs 3.23 lakh crore. Plus, most of the credit offtake by corporates during the last quarter was largely for meeting working capital requirements, not term credit. Banks have almost certainly not met the projected 24% credit growth target for 2008-09, and that too by a wide margin, and bank deposits almost certainly have grown at more than the 19% projected rate. Total time deposits with scheduled commercial banks (fixed deposits) in January 2008 was Rs 25,56,689 crore, in February 2009, the figure was Rs 32,61,173 crore: a big jump.
Deposit rates had climbed up—looking at one-year fixed deposit rates—from around 9% in January 2008 to 10.5% in October 2008 but are now have dropped to around 8.75%. It is clear, therefore, that in 2009-10, India can bank itself into a low growth zone that is entirely avoidable. A few sectors are reporting relatively good economic news and there’s little doubt that latent demand in the economy remains high. What is crucial is getting business confidence back. And for that, interest rates are the first, though not the only, variable. Private investment has driven India’s growth and private investment will respond if the double-digit interest rate environment changes. The situation is, of course, made complicated by the fact that public sector banks have enjoyed an unearned bonus in terms of being declared ‘ultra safe’ and attracting fresh deposits and expect they will be applauded more for more ‘conservative’ banking—this time, niggardly lending. And private sector banks are not the game-changers they were in the last three or four years. The game has to change from a combined push from RBI and the government.
Banks see 50-bp PLR cut soon
Banks see 50-bp PLR cut soon
The Financial Express, April 9, 2009, Page 1
Banking Bureau, Mumbai
RBI governor D Subbarao appears to have finally prevailed upon bankers to pare lending rates. Subbarao, who met bankers on Wednesday in the run-up to the central bank’s annual credit and monetary policy announcement, was assured by the banking fraternity that lending rates would soon be reduced by another 50 basis points. Earlier this week, the RBI governor had lamented the fact that lending rates had not fallen in line with recent reductions in policy rates.
Bank of India CMD TS Narayanasami, who is also Indian Banks’ Association chairman, said, “There is scope for a cut in deposit rates by 50-75 basis points over a period of one month, which could lead to a cut in lending rates by 50 basis points thereafter. We are also endeavouring to bring down our cost of funds so that we can pass it on in the form of lending rate cuts. As a banker, I would expect interest rates to come down in an economy poised for a sharper downturn.”
Narayanasami said bankers discussed the liquidity position and factors limiting a reduction in interest rates. They impressed upon RBI the likelihood of non-performing assets going up this year and said that with the economic slowdown, credit growth would be moderated. Yields, which remained high, also hindered any reduction in rates, bankers felt.
“It is likely to remain slightly high for some time, and the cost of funds is likely to be up. The BPLR will probably remain sticky for the next few months. Only then it may move southwards,’’ said Union Bank of India CMD MV Nair, who was also present at the meeting.
“If yields aren’t coming down, it is due to a variety of reasons. Though RBI is managing government borrowings efficiently, the market has not taken that into account. Market stabilisation scheme redemption will also take place. Still, there is no cause for the debt market to firm up at this level,” said Narayanasami. He said it is in the banks’ interests to bring down lending rates so that asset portfolios aren’t impaired.
“Deposit rates have started coming down. You will see more banks dropping their deposit rates over the next fortnight. Though there is little scope in today’s context to cut interest rates, it will happen over a period of few weeks,’’ he said. Banks with sufficient liquidity can afford to bring down their deposit rates.
“We have already reduced our rates by 200 basis points in the past few months. Hence, now it is the turn of the private peers to do the same,” said Nair.
“Though RBI didn’t ask us to cut deposit or lending rates, it has given enough signals through successive repo rate cuts for rates to come down. Only, if there is a sharper downturn, it will impair our asset quality further,” Narayanasami added.
Among the other bankers who attended the meeting were Punjab National Bank CMD KC Chakrabarty, Canara Bank CMD AC Mahajan, Standard Chartered India chief Neeraj Swaroop and IDBI Bank CMD Yogesh Aggarwal.
RBI governor Subbarao will also be meeting with top industrialists, credit rating agencies and apex bodies to get their views on the current slowdown and on interest rates ahead of the credit policy announcement scheduled for April 29.
The Financial Express, April 9, 2009, Page 1
Banking Bureau, Mumbai
RBI governor D Subbarao appears to have finally prevailed upon bankers to pare lending rates. Subbarao, who met bankers on Wednesday in the run-up to the central bank’s annual credit and monetary policy announcement, was assured by the banking fraternity that lending rates would soon be reduced by another 50 basis points. Earlier this week, the RBI governor had lamented the fact that lending rates had not fallen in line with recent reductions in policy rates.
Bank of India CMD TS Narayanasami, who is also Indian Banks’ Association chairman, said, “There is scope for a cut in deposit rates by 50-75 basis points over a period of one month, which could lead to a cut in lending rates by 50 basis points thereafter. We are also endeavouring to bring down our cost of funds so that we can pass it on in the form of lending rate cuts. As a banker, I would expect interest rates to come down in an economy poised for a sharper downturn.”
Narayanasami said bankers discussed the liquidity position and factors limiting a reduction in interest rates. They impressed upon RBI the likelihood of non-performing assets going up this year and said that with the economic slowdown, credit growth would be moderated. Yields, which remained high, also hindered any reduction in rates, bankers felt.
“It is likely to remain slightly high for some time, and the cost of funds is likely to be up. The BPLR will probably remain sticky for the next few months. Only then it may move southwards,’’ said Union Bank of India CMD MV Nair, who was also present at the meeting.
“If yields aren’t coming down, it is due to a variety of reasons. Though RBI is managing government borrowings efficiently, the market has not taken that into account. Market stabilisation scheme redemption will also take place. Still, there is no cause for the debt market to firm up at this level,” said Narayanasami. He said it is in the banks’ interests to bring down lending rates so that asset portfolios aren’t impaired.
“Deposit rates have started coming down. You will see more banks dropping their deposit rates over the next fortnight. Though there is little scope in today’s context to cut interest rates, it will happen over a period of few weeks,’’ he said. Banks with sufficient liquidity can afford to bring down their deposit rates.
“We have already reduced our rates by 200 basis points in the past few months. Hence, now it is the turn of the private peers to do the same,” said Nair.
“Though RBI didn’t ask us to cut deposit or lending rates, it has given enough signals through successive repo rate cuts for rates to come down. Only, if there is a sharper downturn, it will impair our asset quality further,” Narayanasami added.
Among the other bankers who attended the meeting were Punjab National Bank CMD KC Chakrabarty, Canara Bank CMD AC Mahajan, Standard Chartered India chief Neeraj Swaroop and IDBI Bank CMD Yogesh Aggarwal.
RBI governor Subbarao will also be meeting with top industrialists, credit rating agencies and apex bodies to get their views on the current slowdown and on interest rates ahead of the credit policy announcement scheduled for April 29.
Banks find sub-PLR lending a liability
Banks find sub-PLR lending a liability
The Economic Times, April 9, 2009, page 7
BANKERS POUR OUT HEART TO RBI AT PRE-CREDIT POLICY MEET, DEMAND AIMED AT TRANSPARENCY IN INTEREST RATES
Our Bureau MUMBAI
FACED with a growing corporate demand that banks should fix their prime lending rates (PLRs) at single digits, lenders have asked the Reserve Bank of India (RBI) to scrap the current practice of sub-PLR lending. Bankers argue that since 75% of the loans are disbursed at sub-PLR, doing away with such loans would automatically lower the PLR, which would then serve as a floor rate.
The demand is aimed at bringing in greater transparency in the interest rate structure and also at proving a point to corporates and the government that a lot of borrowers are actually raising money at below PLR.
Bankers indicated this to RBI during the customary pre-credit policy meeting between RBI governor S Subbarao and CEOs of large banks on Wednesday.
The sub-PLR loan issue came up in context of last week’s meeting of banks with Cabinet Secretary KM Chandrasekhar, during which industry representative Federation of Indian Chambers of Commerce and Industry (Ficci) urged lenders to bring down lending rates to single digits. Most PSU banks have pegged PLR in the range of 12-12.5%.
However, banks maintained that given their cost structure of raising deposits, maintaining cash reserve ratio (CRR) and statutory liquidity ratio (SLR), they would not be in a position to lower lending rates.
The resistance to lower lending rates immediately is also because most PSU banks, except for State Bank of India (SBI), have lowered lending rates with effect from April 1.
In 2001, RBI gave banks the freedom to charge customers interest rates below their benchmark PLRs. “While it is not mandatory for banks to give sub-PLR loans, competition is driving them to offer such advances. If there is a regulatory ban, it will be easier for banks to transit to a more transparent lending system and a singledigit benchmark rate,” pointed out a banker at the pre-credit policy meet.
Some bankers asked RBI to relax the valuation method used to arrive at provisioning norms. Banks have to make provisions for loans based on the hit they have taken after loan restructuring. They pointed out that in certain cases, provisioning on restructured assets was higher than that required had the loan turned bad.
Another issue that came up for discussion was the insistence by auditors from Institute of Chartered Accountants of India (ICAI) that banks make provisions for loans the moment they received an application for loan restructuring from a customer and not after the restructuring exercise. Bankers felt that RBI had accepted the auditors’ stand on the issue.
As a one-time dispensation, RBI issued a circular last year that an account which was a standard loan as on September 1, 2008, could continue to be treated as a standard asset post-restructuring if a bank received an application from a customer for rescheduling the loan before March 31, 2008.
The implication of the circular is that if a client is regular in his payments to a bank as on September 1, 2008, but could be on the verge of defaulting in subsequent months, his account could be restructured and continue to be classified as a standard asset.
PLR OF STRENGTH
Bankers argue that since 75% of the loans are disbursed at sub-PLR, doing away with such loans would automatically lower the PLR
Given the costs of raising deposits and maintaining CRR and SLR rates, banks are not willing to lower lending rates
The resistance to lower lending rates is also because most PSBs have lowered lending rates with effect from April 1
The Economic Times, April 9, 2009, page 7
BANKERS POUR OUT HEART TO RBI AT PRE-CREDIT POLICY MEET, DEMAND AIMED AT TRANSPARENCY IN INTEREST RATES
Our Bureau MUMBAI
FACED with a growing corporate demand that banks should fix their prime lending rates (PLRs) at single digits, lenders have asked the Reserve Bank of India (RBI) to scrap the current practice of sub-PLR lending. Bankers argue that since 75% of the loans are disbursed at sub-PLR, doing away with such loans would automatically lower the PLR, which would then serve as a floor rate.
The demand is aimed at bringing in greater transparency in the interest rate structure and also at proving a point to corporates and the government that a lot of borrowers are actually raising money at below PLR.
Bankers indicated this to RBI during the customary pre-credit policy meeting between RBI governor S Subbarao and CEOs of large banks on Wednesday.
The sub-PLR loan issue came up in context of last week’s meeting of banks with Cabinet Secretary KM Chandrasekhar, during which industry representative Federation of Indian Chambers of Commerce and Industry (Ficci) urged lenders to bring down lending rates to single digits. Most PSU banks have pegged PLR in the range of 12-12.5%.
However, banks maintained that given their cost structure of raising deposits, maintaining cash reserve ratio (CRR) and statutory liquidity ratio (SLR), they would not be in a position to lower lending rates.
The resistance to lower lending rates immediately is also because most PSU banks, except for State Bank of India (SBI), have lowered lending rates with effect from April 1.
In 2001, RBI gave banks the freedom to charge customers interest rates below their benchmark PLRs. “While it is not mandatory for banks to give sub-PLR loans, competition is driving them to offer such advances. If there is a regulatory ban, it will be easier for banks to transit to a more transparent lending system and a singledigit benchmark rate,” pointed out a banker at the pre-credit policy meet.
Some bankers asked RBI to relax the valuation method used to arrive at provisioning norms. Banks have to make provisions for loans based on the hit they have taken after loan restructuring. They pointed out that in certain cases, provisioning on restructured assets was higher than that required had the loan turned bad.
Another issue that came up for discussion was the insistence by auditors from Institute of Chartered Accountants of India (ICAI) that banks make provisions for loans the moment they received an application for loan restructuring from a customer and not after the restructuring exercise. Bankers felt that RBI had accepted the auditors’ stand on the issue.
As a one-time dispensation, RBI issued a circular last year that an account which was a standard loan as on September 1, 2008, could continue to be treated as a standard asset post-restructuring if a bank received an application from a customer for rescheduling the loan before March 31, 2008.
The implication of the circular is that if a client is regular in his payments to a bank as on September 1, 2008, but could be on the verge of defaulting in subsequent months, his account could be restructured and continue to be classified as a standard asset.
PLR OF STRENGTH
Bankers argue that since 75% of the loans are disbursed at sub-PLR, doing away with such loans would automatically lower the PLR
Given the costs of raising deposits and maintaining CRR and SLR rates, banks are not willing to lower lending rates
The resistance to lower lending rates is also because most PSBs have lowered lending rates with effect from April 1
Banks set to cut deposit rates to aid cheaper loans
Banks set to cut deposit rates to aid cheaper loans
Hindustan Times – Business, April 9, 2009, Page 19
Banks would reduce interest rates on deposits in the second half of this month to bring down cost of funds in order to enable a cut in lending rates, the country’s banking association said on Wednesday.
The reduction in deposit rates are likely after the Reserve Bank of India (RBI) announces its monetary policy for 2009-10 on April 21.
“More banks will drop deposit rates in the next fortnight to bring down the cost of funds and pass on the benefits of lower interest rates to borrowers as warranted by the monetary policy,” T S Narayanasami, chairman of the Indian Banks Association, said after bankers held a customary meeting ahead of the policy with RBI governor Duvvuri Subbarao.
The RBI, in an unusual move, has been in talks with banks to make them reduce interest rates in line with the easing of the monetary policy but banks are worried about the cost of the money they get in the form of deposits.
“We are trying our best to ensure transmission of policy rates to lending rates,” Subbarao said on Monday at a meeting organised by the Federation of Indian Chambers of Commerce and Industry (FICCI).
The RBI has cut its signal repo rate — the short term rate at which it lends to commercial banks — by 400 basis points (one basis point is one hundredth of one per cent) and cash reserve ratio (CRR), the proportion of deposits banks have to set aside as reserves, by 400 basis points since October 2008.
Banks, however, have reduced lending rates by only up to 150 basis points. They are flush with funds, but the question is now more over the rates than the quantum of funds available.
During the pre-policy meeting, bankers also conveyed to the central bank their concerns about the probability of a sharp rise in non-performing assets (NPAs) in the years ahead.
“As the economic slowdown prolongs, bankers fear that even the corporate loans which have been restructured could turn bad in the next one year or two,” the chief of a public sector bank who attended the meeting said on the condition of anonymity.
“It is in our own interest to bring down lending rates so that our asset portfolios do not get impaired. We are making every endeavour to see that cost of funds are bought down,” said Narayanasami, who is also the chairman of Bank of India.
Hindustan Times – Business, April 9, 2009, Page 19
Banks would reduce interest rates on deposits in the second half of this month to bring down cost of funds in order to enable a cut in lending rates, the country’s banking association said on Wednesday.
The reduction in deposit rates are likely after the Reserve Bank of India (RBI) announces its monetary policy for 2009-10 on April 21.
“More banks will drop deposit rates in the next fortnight to bring down the cost of funds and pass on the benefits of lower interest rates to borrowers as warranted by the monetary policy,” T S Narayanasami, chairman of the Indian Banks Association, said after bankers held a customary meeting ahead of the policy with RBI governor Duvvuri Subbarao.
The RBI, in an unusual move, has been in talks with banks to make them reduce interest rates in line with the easing of the monetary policy but banks are worried about the cost of the money they get in the form of deposits.
“We are trying our best to ensure transmission of policy rates to lending rates,” Subbarao said on Monday at a meeting organised by the Federation of Indian Chambers of Commerce and Industry (FICCI).
The RBI has cut its signal repo rate — the short term rate at which it lends to commercial banks — by 400 basis points (one basis point is one hundredth of one per cent) and cash reserve ratio (CRR), the proportion of deposits banks have to set aside as reserves, by 400 basis points since October 2008.
Banks, however, have reduced lending rates by only up to 150 basis points. They are flush with funds, but the question is now more over the rates than the quantum of funds available.
During the pre-policy meeting, bankers also conveyed to the central bank their concerns about the probability of a sharp rise in non-performing assets (NPAs) in the years ahead.
“As the economic slowdown prolongs, bankers fear that even the corporate loans which have been restructured could turn bad in the next one year or two,” the chief of a public sector bank who attended the meeting said on the condition of anonymity.
“It is in our own interest to bring down lending rates so that our asset portfolios do not get impaired. We are making every endeavour to see that cost of funds are bought down,” said Narayanasami, who is also the chairman of Bank of India.
FIs storm back to help sustain market rally
FIs storm back to help sustain market rally
The Financial Express, April 9, 2009, Page 1
Markets Bureau, Mumbai
Indian equity markets bucked the downward trend of their Asian peers to close on Wednesday at a record five-month high after preliminary estimates showed factory output in February had grown, albeit marginally, after two consecutive months of contraction. The figures are to be officially released on Thursday. Domestic stock markets were among the strongest gainers worldwide, continuing a three-week rally.
Analysts said the current market trend is the precise opposite of that seen last October-November. “At that time, there was complete risk aversion and valuations completely fell off a cliff. Now, risk appetite is increasing, which is why the market has gone up sharply in the last three weeks,” stated a research note issued by Elara Capital.
The rising risk appetite has been hastened by fund houses, which missed the recent rally and have now started investing. Market breadth, therefore, remained strong throughout the trading session. On the BSE, 2,021 stocks advanced compared with 468 stocks that declined. At the NSE, volumes touched Rs 17,000 crore, the highest in the last six months.
Markets also responded to NTPC posting an annual net profit rise of 5.5%, better than in 2007-08. Even though this was lower than market forecasts, NTPC shares closed up 6.7%, its highest close in 11 months.
The 30-share BSE Sensex opened to weak cues from Asian markets, tanking 362.96 points. However, sustained buying in mid-caps rubbed off on pivotals, helping the Sensex recover to end the day with a 207.47-points gain—a 570.43-point rally from the day’s low. Similarly, the broader NSE Nifty ended the day at 3,342.95 points, gaining 86.35 points, or 2.65%.
“A lot of FIIs and foreign mutual funds in India with huge cash positions who missed the recent rally have now started investing in the market,” said Gopal Agarwal, head of equity at Mirae Asset Management. Overseas investors were net buyers to the extent of $1.72 billion on April 6.
Antique Stock Broking CEO Anish Jhaveri said, “In the last few trading sessions, participation from domestic institutions, including mutual funds, has picked up dramatically. Seeing the increasing number of bulk deals, we sense that the risk appetite of investors is improving. If the rally continues, we could witness the entry of retail investors, whose participation is currently very low.”
The Financial Express, April 9, 2009, Page 1
Markets Bureau, Mumbai
Indian equity markets bucked the downward trend of their Asian peers to close on Wednesday at a record five-month high after preliminary estimates showed factory output in February had grown, albeit marginally, after two consecutive months of contraction. The figures are to be officially released on Thursday. Domestic stock markets were among the strongest gainers worldwide, continuing a three-week rally.
Analysts said the current market trend is the precise opposite of that seen last October-November. “At that time, there was complete risk aversion and valuations completely fell off a cliff. Now, risk appetite is increasing, which is why the market has gone up sharply in the last three weeks,” stated a research note issued by Elara Capital.
The rising risk appetite has been hastened by fund houses, which missed the recent rally and have now started investing. Market breadth, therefore, remained strong throughout the trading session. On the BSE, 2,021 stocks advanced compared with 468 stocks that declined. At the NSE, volumes touched Rs 17,000 crore, the highest in the last six months.
Markets also responded to NTPC posting an annual net profit rise of 5.5%, better than in 2007-08. Even though this was lower than market forecasts, NTPC shares closed up 6.7%, its highest close in 11 months.
The 30-share BSE Sensex opened to weak cues from Asian markets, tanking 362.96 points. However, sustained buying in mid-caps rubbed off on pivotals, helping the Sensex recover to end the day with a 207.47-points gain—a 570.43-point rally from the day’s low. Similarly, the broader NSE Nifty ended the day at 3,342.95 points, gaining 86.35 points, or 2.65%.
“A lot of FIIs and foreign mutual funds in India with huge cash positions who missed the recent rally have now started investing in the market,” said Gopal Agarwal, head of equity at Mirae Asset Management. Overseas investors were net buyers to the extent of $1.72 billion on April 6.
Antique Stock Broking CEO Anish Jhaveri said, “In the last few trading sessions, participation from domestic institutions, including mutual funds, has picked up dramatically. Seeing the increasing number of bulk deals, we sense that the risk appetite of investors is improving. If the rally continues, we could witness the entry of retail investors, whose participation is currently very low.”
Rush of bookings for DLF housing project in Delhi
Rush of bookings for DLF housing project in Delhi
The Financial Express, April 9, 2009, Page 1
The massive pent up demand for affordable flats in Indian metros was on display in Delhi as DLF launched its largest-ever residential project in the city. The first day alone saw 900 bookings for a set of 1,400 flats at the 200-acre residential-cum-office complex in central Delhi. The 1,200 sq ft flats will cost around Rs 54 lakh each. That’s less than half the comparable cost of similar properties in nearby precincts of central Delhi, which are currently priced at around Rs 1.2 crore per flat.
The project is a rare one in India, as decades-old urban land ceiling legislation vested all housing development with government-run development bodies—which explains the rush. In Delhi, the Act was repealed only in 2006 and following that, the DLF Capital Greens project is one of the first ventures from the private sector. An Emaar MGF project to build a residential block on the Yamuna riverfront is on government land and will be handed over to the developers only after the Commonwealth Games is concluded in October 2010.
Land for the DLF project, on the other hand, was bought by the company from the defunct Swatantra Bharat Mills at the end of 2007. Sources said that the initial 1,400 flats would be built over ten buildings. The New Delhi Municipal Corporation would be responsible for the landscaping and greening of the neighbourhood of the project, which is being developed by India’s largest real estate company.
The housing sector in India has been massively underprovided, with a shortage estimated by the government at over 20 million units. The combination of land control in such a scenario has, in turn, created massive premiums for real estate developers—they have been one of the best performers on the stock markets. These companies have focused on high-end flats, as the returns were the most from this category.
But that picture changed once the economic downturn set in. Companies have seen potential buyers lose interest across the country as income flows have dried up. So, now companies are cutting prices and also moving towards affordable housing.
For instance, DLF has cut prices of its apartments in the Garden City project on Old Mahabalipuram Road on the outskirts of Chennai by Rs 200 per sq ft. When contacted by FE, DLF refused to comment on its Delhi project.
Soaring take – off for DLF’s Delhi project
Soaring take – off for DLF’s Delhi project
Business Standard, April 9, 2009, Page 4
The project is priced at least 24 per cent lower than the market price.
DLF Ltd, the country’s largest developer, sold more than 85 per cent of its West Delhi housing project in less than 24 hours of its launch, a company official said. The project was priced at least 24 per cent lower than the prevailing market price.
The New Delhi-based developer sold as many as 1,200 of the 1,400 units on offer at its Shivaji Marg (better known as Najafgarh Road) project, a company official said, declining to be identified. The project, close to the busy Moti Nagar crossing, was launched on Tuesday. City brokers, however, said DLF was able to sell only 500 units. The DLF spokesperson declined to comment on both project and sales.
DLF, which had earlier dropped prices at least three other projects, announced an inaugural price of Rs 5,000-6,000 per sq ft, with an additional discount of Rs 500 per sq ft for timely payment of future instalments. The project is being developed on a 38-acre parcel of land, for which DLF had paid Rs 1,675 crore in a 2007 auction, making it the biggest land deal of that time.
The project will be a ground plus 18-floor structure. Each apartment is between 1,200 and 1,525 sq ft, with the final price of Rs 60-91.5 lakh.
According to data from property consultant Cushman & Wakefield, the current market price in the nearest comparable residential area is Rs 6,000 per sq ft. DLF has kept its pricing competitive. “The residential market is seeing a revival and transactions are happening if the projects are rightly priced,” said Aditi Vijayakar, executive director-residential, Cushman & Wakefield.
DLF has been forced to drop prices in some projects after facing opposition from customers. In the past month, it has reduced prices in Chennai, Bangalore and Gurgaon projects by 10-20 per cent.
After the inaugural offer, DLF is expected to raise the prices of the Shivaji Marg apartments to Rs 6,000-7,000 a sq ft. The company had last month indicated a price range of Rs 6,500-7,000 a sq ft for the project.
DLF had earlier planned to develop an integrated township, combining an information technology SEZ, a shopping mall and a residential project, at the site. However, the IT SEZ was de-notified last year and the company does not want to talk about its plan for a shopping mall.
Business Standard, April 9, 2009, Page 4
The project is priced at least 24 per cent lower than the market price.
DLF Ltd, the country’s largest developer, sold more than 85 per cent of its West Delhi housing project in less than 24 hours of its launch, a company official said. The project was priced at least 24 per cent lower than the prevailing market price.
The New Delhi-based developer sold as many as 1,200 of the 1,400 units on offer at its Shivaji Marg (better known as Najafgarh Road) project, a company official said, declining to be identified. The project, close to the busy Moti Nagar crossing, was launched on Tuesday. City brokers, however, said DLF was able to sell only 500 units. The DLF spokesperson declined to comment on both project and sales.
DLF, which had earlier dropped prices at least three other projects, announced an inaugural price of Rs 5,000-6,000 per sq ft, with an additional discount of Rs 500 per sq ft for timely payment of future instalments. The project is being developed on a 38-acre parcel of land, for which DLF had paid Rs 1,675 crore in a 2007 auction, making it the biggest land deal of that time.
The project will be a ground plus 18-floor structure. Each apartment is between 1,200 and 1,525 sq ft, with the final price of Rs 60-91.5 lakh.
According to data from property consultant Cushman & Wakefield, the current market price in the nearest comparable residential area is Rs 6,000 per sq ft. DLF has kept its pricing competitive. “The residential market is seeing a revival and transactions are happening if the projects are rightly priced,” said Aditi Vijayakar, executive director-residential, Cushman & Wakefield.
DLF has been forced to drop prices in some projects after facing opposition from customers. In the past month, it has reduced prices in Chennai, Bangalore and Gurgaon projects by 10-20 per cent.
After the inaugural offer, DLF is expected to raise the prices of the Shivaji Marg apartments to Rs 6,000-7,000 a sq ft. The company had last month indicated a price range of Rs 6,500-7,000 a sq ft for the project.
DLF had earlier planned to develop an integrated township, combining an information technology SEZ, a shopping mall and a residential project, at the site. However, the IT SEZ was de-notified last year and the company does not want to talk about its plan for a shopping mall.
DLF may sell Delhi hotel for Rs 55 cr
DLF may sell Delhi hotel for Rs 55 cr
The Economic Times, April 9, 2009, page 6
Sanjeev Choudhary NEW DELHI
COUNTRY’S largest realty company DLF has entered into an agreement with an unidentified wealthy individual to sell its 60-room hotel at Saket in New Delhi for around Rs 55 crore, people familiar with the development said. The move is part of company’s effort to generate cash through asset sale to support other ongoing projects. The hotel, located adjacent to DLF’s South Court mall, is built on the land purchased from DDA. The super structure of the hotel is ready and expected to be operational by July.
A DLF spokesman denied that the firm had sold the property, but two people familiar with the development said DLF had already received the token amount — around 10% of the total value— from the buyer. They didn’t identify the buyer, but said he was a businessman with no presence in hotel industry. Recently, Unitech, too, reportedly sold off its 198-room Gurgaon hotel for around Rs 230 crore to a wealthy individual- Tata Motors dealer Roop Madan. Unitech is also looking for buyers for its other hotel and serviced apartment projects.
Several realty companies are in deep distress due to a global economic meltdown and a slump in the domestic real estate sector. Many real estate companies have put off their hotel plans and have been desperately looking for buyers for their hotel projects.
DLF too has scaled back its hotel plans and is selling its smaller hotel or land parcels meant for hotels in several cities across the country. Even though it has been able to raise substantial debt recently, largely to replace short-term loans with long-term debt, DLF needs to arrange large amount of cash to fund its ongoing projects and fuel expansion. Country’s largest developer is facing cash crunch mainly on account of the inability of the promoter group company DLF Assets (DAL) to pay for the properties it purchased from DLF. The receivables from DAL had risen to Rs 5,400 crore as of December ‘08.
The Economic Times, April 9, 2009, page 6
Sanjeev Choudhary NEW DELHI
COUNTRY’S largest realty company DLF has entered into an agreement with an unidentified wealthy individual to sell its 60-room hotel at Saket in New Delhi for around Rs 55 crore, people familiar with the development said. The move is part of company’s effort to generate cash through asset sale to support other ongoing projects. The hotel, located adjacent to DLF’s South Court mall, is built on the land purchased from DDA. The super structure of the hotel is ready and expected to be operational by July.
A DLF spokesman denied that the firm had sold the property, but two people familiar with the development said DLF had already received the token amount — around 10% of the total value— from the buyer. They didn’t identify the buyer, but said he was a businessman with no presence in hotel industry. Recently, Unitech, too, reportedly sold off its 198-room Gurgaon hotel for around Rs 230 crore to a wealthy individual- Tata Motors dealer Roop Madan. Unitech is also looking for buyers for its other hotel and serviced apartment projects.
Several realty companies are in deep distress due to a global economic meltdown and a slump in the domestic real estate sector. Many real estate companies have put off their hotel plans and have been desperately looking for buyers for their hotel projects.
DLF too has scaled back its hotel plans and is selling its smaller hotel or land parcels meant for hotels in several cities across the country. Even though it has been able to raise substantial debt recently, largely to replace short-term loans with long-term debt, DLF needs to arrange large amount of cash to fund its ongoing projects and fuel expansion. Country’s largest developer is facing cash crunch mainly on account of the inability of the promoter group company DLF Assets (DAL) to pay for the properties it purchased from DLF. The receivables from DAL had risen to Rs 5,400 crore as of December ‘08.
Retailers in VK, Saket DLF malls down shutters
Retailers in VK, Saket DLF malls down shutters
The Economic Times, April 9, 2009, page 6
Abhishek Gupta & Ambika Nathani, NEW DELHI
A MAJORITY of retailers in DLF’s upmarket Saket and Vasant Kunj malls have shut shop to protest over the realty major’s refusal to reduce rentals. This follows recent protests by DLF flat owners in Gurgaon and Chennai over high prices and affirms the growing trend of consumer activism in the real estate sector. Says DLF’s Saket retail association president Aakash Oberoi: “We will not open our shops till the time DLF reduces the rent.” The shop owners claim that while DLF is now renting out retail outlets at 50% discounts, it is refusing to bring down their rentals which were finalised way back in 2005. In the mall, more than 20 shops have been shut. The retail outlets here range from small shops like Indigo to big brands like VIP and ColorPlus.
A similar situation exists at the Vasant Kunj mall though this is a new shopping complex and therefore several shops are unoccupied. When contacted, the DLF spokesperson said the relevant executives were not available for comment. A DLF executive, who did not wish to be named, told ET that retailers were given a 50% discount from March-June and they had agreed to run operations smoothly. He said that the shop owners’ decision to boycott the mall constituted a violations of the written contract.
Omaxe gets moratorium on 40% of debt
Omaxe gets moratorium on 40% of debt
Business Standard, April 9, 2009, Page 4
Neeraj Thakur / New Delhi
New Delhi-based developer, Omaxe Ltd, has managed to get more than a year’s postponement on repayment of principal and interest on 40 per cent of its debt, according to a top company official.
Omaxe, which has about Rs 1,513 crore worth of debt, said banks had granted the company a year’s moratorium on Rs 600 crore due for repayment by September 2009. The company is in talks with lenders for a similar concession for an additional Rs 300 crore debt, due for repayment later this year.
“Ten out of 14 banks have granted the moratorium on interest or principal on loans for the next 12-18 months and we are in advance talks with the remaining banks for the same,” said Sunil Malhotra, vice-president, finance. “After this, we won’t have more than Rs 50 crore due in the next 12 months,’’ he said.
The company had earlier said it was trying to restructure Rs 900 crore worth of debt, as it was facing a cash flow problem due to slowing sales.
Omaxe’s long-term rating was downgraded to BB- from A by Fitch on February 13. The rating company cited concerns over the company’s profitability and operational cash flow because of the challenging environment. CARE, another rating company, also lowered the real estate developer’s rating, citing “increased financial risk profile of the company characterised by slowdown in the real estate sector.”
Further, lower-than-anticipated cash generation and limited funding options in the market exposed the company to liquidity and refinancing risks in the short term, CARE said in a statement.
“We are trying to get the cost of our debt down by 100-150 basis points. The cost of debt for us was 14 per cent in the last fiscal, but as the lending rates of all banks are coming down, our average cost of debt will come down by at least 100 basis points by the end of this month,” Malhotra said.
Another New Delhi-based real estate developer, Unitech, is trying to restructure a part of its Rs 500 crore debt that is due to mutual funds by April 19.
According to Malhotra, the company has received a very good respose for its newly launched affordable housing project, Omaxe Eternity, in Vrindavan. Spread over 52 acres, the project will be launched in two phases and will have 3,000 apartments. In the first phase, the company has launched 1,000 apartments. Malhotra did not divulge the number of bookings for the newly launched project, even as he said the enquiries from customers had been encouraging.
Shriram in talks to buy sobha assets
Shriram in talks to buy sobha assets
The Economic Times, April 9, 2009, Page 19
Hemamalini Venkatraman & J Padmapriya, ET Bureau
CHENNAI/BANGALORE: In what could perhaps be the first sign of consolidation in the slowdown-hit realty sector, Shriram Properties — part of the $5.5-billion Chennai-based Shriram group of companies — is believed to be in talks with Bangalore-based residential market leader Sobha Developers.
It is understood that Shriram may be looking to buy some of Sobha’s asset portfolio — up to seven of them. These assets could be land with development rights or projects under development, a source close to the process said. The deal is likely to be worth Rs 200-300 crore. “Sobha is in discussions with us. But we have not taken any in-principle decision.
Sobha is evaluating to hive off assets/projects and merger options with Shriram,” a top Shriram group official told ET. Talks between both companies are going on for the past four weeks, another source said. ET learnt that Sun Apollo, an equity partner in some of Shriram’s properties, may help Shriram by putting in some of the money, even though this could not be confirmed.
When contacted, Shriram Properties MD M Murali denied any deal with Sobha. He, however, said the company was actively pursuing its expansion plans. Sobha’s JC Sharma, too, denied the development, although he maintained the company was pursuing various options to raise capital.
Sobha MD JC Sharma had earlier told ET that the company was looking at dilution of stake in the company at the entity level by up to 26% and was also open to divest stakes in its SPVs. Sobha, which is facing a liquidity crunch like many other realty players, is looking at a variety of options to raise up to Rs 600 crore in the coming months.
It was also looking to sell some of its land holdings in Chennai, Bangalore and Pune. Sobha holds about 400 acres in these cities.
The deal, if and when happens, will help the Rs 480-crore Shriram Properties — a pure-play fund manager and development company — scale up its size in the residential market. It is not known how Shriram will raise funds for the purchase.
The deal will also generate much-needed cash for Sobha. The Bangalore-based developer has debt of about Rs 1,850 crore on its books. Sobha also needs cash to develop its various projects. It is developing about 1,400 apartments in Bangalore and other parts of the south. Promoters hold 87% stake in Sobha Developers. Some of these land parcels in Bangalore are in Minerva Mill, Bangalore East and Thanisandra. Sobha’s total land bank assets are in the region of 3,000 acres.
The realty sector is groaning under the collective weight of heavy debt and slump in consumer demand. Many firms bought land when prices were very high hoping to sell the apartments at those rates and make decent returns. But the fall in prices has quashed those plans, putting many of them in quandary. They have to complete the building for which there are few takers. Banks are still unwilling to lend while public markets have turned unfriendly to builders. One solution is to consolidate, get rid of non-core properties and projects while focusing on the important ones which can generate returns. Shriram has completed projects covering 4.5 million sq ft in Bangalore, Chennai, Coimbatore and Kolkata, while 80 million sq ft of projects are in the pipeline at Vizag, Kolkata, Chennai, Coimbatore and Bangalore. Walton Street Capital made its first investment in India through Shriram Properties, while Starwood is the other investor at the entity level of the Chennai group.
Shriram also has a 50:50 joint venture with Sun Apollo, which has brought in Rs 600 crore for executing two special purpose vehicle projects in Chennai and Vizag.
The Sobha scrip closed 6.03% up at Rs 94.05 on BSE on Wednesday.
The Economic Times, April 9, 2009, Page 19
Hemamalini Venkatraman & J Padmapriya, ET Bureau
CHENNAI/BANGALORE: In what could perhaps be the first sign of consolidation in the slowdown-hit realty sector, Shriram Properties — part of the $5.5-billion Chennai-based Shriram group of companies — is believed to be in talks with Bangalore-based residential market leader Sobha Developers.
It is understood that Shriram may be looking to buy some of Sobha’s asset portfolio — up to seven of them. These assets could be land with development rights or projects under development, a source close to the process said. The deal is likely to be worth Rs 200-300 crore. “Sobha is in discussions with us. But we have not taken any in-principle decision.
Sobha is evaluating to hive off assets/projects and merger options with Shriram,” a top Shriram group official told ET. Talks between both companies are going on for the past four weeks, another source said. ET learnt that Sun Apollo, an equity partner in some of Shriram’s properties, may help Shriram by putting in some of the money, even though this could not be confirmed.
When contacted, Shriram Properties MD M Murali denied any deal with Sobha. He, however, said the company was actively pursuing its expansion plans. Sobha’s JC Sharma, too, denied the development, although he maintained the company was pursuing various options to raise capital.
Sobha MD JC Sharma had earlier told ET that the company was looking at dilution of stake in the company at the entity level by up to 26% and was also open to divest stakes in its SPVs. Sobha, which is facing a liquidity crunch like many other realty players, is looking at a variety of options to raise up to Rs 600 crore in the coming months.
It was also looking to sell some of its land holdings in Chennai, Bangalore and Pune. Sobha holds about 400 acres in these cities.
The deal, if and when happens, will help the Rs 480-crore Shriram Properties — a pure-play fund manager and development company — scale up its size in the residential market. It is not known how Shriram will raise funds for the purchase.
The deal will also generate much-needed cash for Sobha. The Bangalore-based developer has debt of about Rs 1,850 crore on its books. Sobha also needs cash to develop its various projects. It is developing about 1,400 apartments in Bangalore and other parts of the south. Promoters hold 87% stake in Sobha Developers. Some of these land parcels in Bangalore are in Minerva Mill, Bangalore East and Thanisandra. Sobha’s total land bank assets are in the region of 3,000 acres.
The realty sector is groaning under the collective weight of heavy debt and slump in consumer demand. Many firms bought land when prices were very high hoping to sell the apartments at those rates and make decent returns. But the fall in prices has quashed those plans, putting many of them in quandary. They have to complete the building for which there are few takers. Banks are still unwilling to lend while public markets have turned unfriendly to builders. One solution is to consolidate, get rid of non-core properties and projects while focusing on the important ones which can generate returns. Shriram has completed projects covering 4.5 million sq ft in Bangalore, Chennai, Coimbatore and Kolkata, while 80 million sq ft of projects are in the pipeline at Vizag, Kolkata, Chennai, Coimbatore and Bangalore. Walton Street Capital made its first investment in India through Shriram Properties, while Starwood is the other investor at the entity level of the Chennai group.
Shriram also has a 50:50 joint venture with Sun Apollo, which has brought in Rs 600 crore for executing two special purpose vehicle projects in Chennai and Vizag.
The Sobha scrip closed 6.03% up at Rs 94.05 on BSE on Wednesday.
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