Monday, May 18, 2009
Sectors to watch out for
Sectors to watch out for
Business Standard, Smart Investor, May 18, 2009, Page 3
Jitendra Kumar Gupta & Sarath Chelluri / Mumbai
Liquidity-starved sectors such as infrastructure and realty could be the biggest beneficiaries of the vote of confidence for the UPA.
A clear mandate for the United Progressive Alliance and the continuity of the current government's policies are likely to keep the markets buoyant.
Marketmen believe that foreign institutional investors and domestic institutions, which were not participating aggressively in the markets thus far, are likely to invest for the long term, given the stable government at the Centre.
Opening up of the economy, allowing foreign direct investment and easier interest rates should improve liquidity and are expected to help sectors such as infrastructure, banking, real estate, telecom, power, education and retail.
With the Left crutch that crippled decision-making now out of the way, the new government is likely to speed up the divestment of its stake in various PSUs. While experts believe that the markets could touch the 16,000 mark, stiff valuations and the burgeoning fiscal deficit could cap the upsides.
Analysts said sectors such as telecom could also see action if the government speeds up the 3G auction process, merges MTNL with BSNL and lists the new entity, and divests its 26 per cent stake in Tata Communications.
FMCG and pharma sectors, which are considered defensive, are likely to underperform as the market chases growth. IT services, which is another defensive sector, is unlikely to participate in the rally given that the rupee is expected to gain in the short term.
Banking
Analysts are not ruling out a possibility of an increase in the non-performing assets of the public sector banks, going ahead.
Further, the Congress manifesto adds that it will strive to provide interest subsidy for agriculture, small and medium industries and education sectors. Thus, the government's dependence on the banking sector may be sustained in the future as well.
With the government borrowing programme at around Rs 3.6 lakh crore in the first half of the year, bond yields are likely to stiffen and curtail treasury profits (mainly for PSU banks).
On the positive side, with the Left out of the picture, the government may open up the banking sector to foreign players and consolidate PSU banks.
For example, SBI has already merged one of its associate with itself and the government might consolidate other SBI associates with the parent.
Any moves to increase FDI limit in insurance from 26 per cent to 49 per cent will help financial institutions like ICICI Bank and HDFC to raise additional capital. Increased voting rights of foreign banks, which have more than 10 per cent stake in Indian banks, will bring the stocks of private banks into play.
Infrastructure
Most analysts believe that the market will give a thumbs up to infrastructure stocks as the Congress manifesto lists economic revival and restoring high growth as its immediate priority.
It also mentions that public expenditure on agriculture and infrastructure will be stepped up. The continuation of policies in the infrastructure space and expected increase in the liquidity should augur well for the sector.
Considering the Congress party's focus on the rural sector, investors need to look at companies in the rural infrastructure space such as IVRCL, Nagarjuna Construction and HCC.
Analysts believe that companies will now find it relatively easy to raise funds given the increasing confidence of the investors and flow of money from the FIIs and through the FDI route.
The decision-making process on projects related to infrastructure is likely to be expedited helping companies in this sector. Renewed buying is likely in infra stocks as valuations were beaten down due to growth concerns and credit crunch.
Realty
Improvement in the liquidity situation could be the biggest positive for this sector Analysts are expecting stability at the Centre and continuation of policies will attract more money from foreign investors.
Realty majors will now be able to raise funds through Qualified Institutional Placements or debt or through further equity issues. India's largest realty companies--DLF and Unitech--have already raised over a billion dollars in the recent past and chances are that others might follow.
Nirmal Jain, chairman, India Infoline, said "indications are that formation of a stable government will trigger flow of foreign capital in equity as well as debt. This would mean appreciation of the rupee and revival of liquidity-starved sectors such as real estate."
Analysts now believe that since the UPA can form the government without the support of the Left parties who were opposed to the idea of foreign direct investment, special economic zone projects, which were stalled, could get a fresh lease of life.
Looking for sops to make housing affordable
Looking for sops to make housing affordable
The Financial Express, May 18, 2009, Page 4
fe Bureau, Mumbai
Real estate developers are upbeat about the Congress-led United Progressive Alliance (UPA) winning in comfortable numbers. In order to provide a boost to affordable housing and bring the expected revival in the liquidity starved real estate sector, developers have stressed the need for the new government to implement various incentives in the financial year 2009-10.
Lalit Kumar Jain, chairman, Kumar Builders and vice president, CREDAI told FE, “Currently, 36% of the sale price of accommodation goes in stamp duty, excise and VAT apart from income tax, and, local taxes of the state government. It is necessary that the new UPA government to completely eradicates the 36% additional burden to home buyers and make housing affordable to all. Besides, special residential zones (SRZs) should be developed on the lines of special economy zones (SEZs) for implementing affordable housing projects.”
Apart from this, Jain adds, “We are sure the new UPA government will give way to urban infrastructure development which includes development of large corridors such as Delhi-Mumbai corridors apart from forming logistic highways over roads, among others.”
Niranjan Hiranandani, managing director, Hiranandani Constructions too opines on similar lines and states that it is becoming difficult now for every home buyer to own a house based on his choice and within his budget. Hence, the new UPA government should focus at incentivising the evolving needs for affordable housing, he said.
Brotin Banerjee, managing director & chief executive officer of Tata Housing Development Company Ltd, wants the government to provide land to the builders so that builders can look beyond extended suburbs and start developing affordable home projects in the suburbs of the metros for all needy home buyers.
Meanwhile, there are certain developers who feel that a strong and stable government can help the economy move towards recovery by attracting foreign investors at a quicker pace for infrastructure development. Rajesh Vardhan, managing director, Vardhman Group, “The last two months have seen FII inflows of almost two billion dollars. A strong and stable government can help the economy attract foreign investors as well as lead a turnaround over the next one year.” He added, with the UPA winning a majority, the economy can now look forward to a stable government at the centre. In its last term, the UPA government invested heavily in infrastructure development, which is something that needs to be continued with renewed vigour.”
Meanwhile, builder Vyomesh Shah, managing director, Akruti City has stressed the need for home loans and loans for roads to be available at not more than 6.5% to 7% interest. Also, business loans should be in single digit. “A stable government in India would mean a more favoured destination for investors. The new government should immediately improve tax laws and create a simplified climate for businesses to improve,” he added.
Anuj Puri, chairman & country head, Jones Lang LaSalle Meghraj (JLLM) concludes, “Which particular segments of the Indian business will get the bigger boost, and whether the real estate and retail sectors will get a badly-needed shot in the arm, depends entirely on the perceptions and interpretations of this government.
These sectors are in dire need of a boost, and we expect progressive policies to be put in place for this purpose. In any case, we can be assured that the end result will add new growth dimensions to the GDP—and this will definitely help the real estate and retail sectors.”
Markets gear up for post-result swings
Markets gear up for post-result swings
The Financial Express, May 16, 2009
fe Bureau, Mumbai, New Delhi
As the stock markets see-sawed this week ahead of the poll results on Saturday, top market authorities have reviewed the systems in place to contain extreme volatility in the markets post-results.
On Thursday, the markets regulator Securities & Exchange Board of India held a detailed discussion with officials of the two key exchanges, BSE and NSE.
A source close to the development said Madhu Kannan, the newly appointed CEO & MD of BSE, met regulatory executives for a few hours of discussions. “Last time, two circuit-breakers were applied after the election results. Hence, it would be smart to be prepared,” said a Sebi official.
Other exchange officials and some key institutions were also called in for the discussions. However, when contacted by FE, NSE flatly denied the developments.
But the key data the regulators were poring over were comfortable this time around. The BSE Sensex closed at 12,173.42, up 2.53%, on Friday. The NSE Nifty too ended at 3,671.65, up 2.18%. The Nifty is, in fact, trading at a premium of almost 9%, indicating a trend for the markets to rise. In the cash segment, both foreign and domestic institutional investors were buyers on Friday. Analysts like Arup Mishra of Elara Capital said the markets have not shown any indication of tanking after the poll results, since the downside is anyway protected.
Similarly, the volume of trade in the futures and options market has been robust despite Friday being the last trading day of the week. The total open interest in the market has risen to Rs 77,678 crore, while Rs 1,774 crore was added in open interest. A rise in open interest indicates increased interest in the market. Open interest is the outstanding contracts held by market participants at the end of the day.
On Friday, the aggregate volume of trade on NSE eased to Rs 14,820 crore, off the week’s high of Rs 16,109 crore. This is almost 50% up from the average of Rs 8,000 crore in January this year, at the depth of the downturn in the markets.
On May 17, 2004, a day after the results were announced, the Sensex dipped to a low of 4,227.50 with a record intra-day crash of 793 points, following uncertainty over economic reforms and concerns over the policies of the Left parties. It was the first time market-wide circuit filters were activated to stop trading in any scrip for the day, when prices moved more than 20% either way.
“What Sebi is doing is a precautionary measure to ensure that nothing untoward happens in the market after the election results. However, unlike in 2004, when investors were on the wrong foot and were caught off guard in the crash, this time, given the current economic environment and other factors, investors are more cautious,” said Deven Choksey, managing director, KR Choksey Securities.
According to analysts at BofA Merrill Lynch, “Post-elections, near-term movement of the market tends to react to the nature and shape of the government. The market reacted negatively to a Third Front government in 1996 and to the left support to the government in 2004 — on both occasions the market was weaker for three months after the result announcement.”
BC Khatua, chairman, Forward Markets Commission, said, “We need not have to follow the Sebi pattern and cannot compare the commodity futures market with the capital market. The working of the two markets are different. Commodity prices mainly moves on demand-supply factors, not on sentiments.”
Fund-raising by DLF, Unitech doesn’t betray ground realty
Fund-raising by DLF, Unitech doesn’t betray ground realty
The Economic Times, May 18, 2009, Page 19
The battered real estate sector may be seeing some glimmer of hope for the first time in about a year after two of its biggest names managed to raise cash by way of equity sales in recent weeks, but analysts warn it’s still not time to call an end to the sector’s travails and the real change will be felt only when private equity feels confident to return to the sector.
Promoters of India’s largest real estate company DLF sold a 9.9% stake to raise Rs 3,890 crore last week, while Unitech closed a qualified institutional placement (QIP) to investors raising Rs 1,600 crore in April.
“The fund-raising by DLF promoters and Unitech shows the improvement in general sentiment towards real estate,” says Anshuman Magazine, MD of CB Richard Ellis South Asia, a international property consultancy. But he and others are quick to add that these corporate deals can hardly be classified as a broad sectoral revival.
Unitech MD Ajay Chandra says that even now no company in the sector could possibly come out with an initial public offer for at least another year, although a couple more QIPs may get done. “There is a decent appetite among investors for QIPs,” he said. Investors are also cautioning against assuming a recovery for the sector, which was tipped into a downward spiral in February last year after one of its leading names — Emaar-MGF — was forced to abandon plans for in initial public offering of shares. Sourav Goswami, India head of USbased realty private equity firm Walton Street Capital, cautions that people are getting excited a little bit too quickly. “If some sales in the housing sector have happened, it’s not known if it’s sustainable,” he says. Goswami’s fund did its last transaction in India almost a year ago.
The past 12 months have been painful for the sector, with sales plunging, prices falling and access to funds drying up. A combination of high interest rates and skyhigh property prices sent home buyers into a wait-and-watch mode, while a weak economic outlook forced corporates and retailers to freeze expansion plans, pushing down demand for commercial real estate.
The worsening of the global credit crunch last year as large swathes of the Western banking system crumbled under the weight of toxic mortgage-backed assets worsened perceptions for the sector, left vulnerable by a sharp rise in prices and valuations in the preceding years. Borrowing costs zoomed and private equity dried up, leaving many realty firms that had piled up large amounts of debt to fund their land buying spree in boom years with little cash to service that. It was the Reserve Bank of India’s (RBI) decision to allow restructuring of commercial real estate debt that saved many companies from defaults and bankruptcy.
Recent successful transactions by DLF and Unitech are aimed at cleaning up the mess left by their past excesses, and do not necessarily signal that a broad revival of the sector is imminent. “It was a compulsive sale of shares (by Unitech and DLF),” said a senior executive at a Mumbai-based realty firm, adding that there was no overwhelming interest among investors for Indian real estate and the two recent deals were more a case of smart money shifting from low-yield bonds to high-yield equities with the risk of bankruptcy having receded.
Not all companies will be as fortunate as DLF or Unitech, say expects. “Small realty companies will still struggle for funds,” says Anshul Jain, head of property consultancy DTZ India. For these companies, the solution could come in the form of private equity, but only in 3-6 months as the situation stabilises further.
If stock markets are to be believed, there’s some evidence of the situation stabilising. Realty stocks, some of which fell as much as 95% from their January 2008 peak., have seen some recovery in the past three months in line with broader market. DFL, for instance, has doubled since February, while other stocks registered gains in line with the broader market.
Meanwhile, a host of realty companies are now looking towards private equity funds to breathe life into the sector. But, for that to happen, several things have to fall in place. Mr Magazine at CBRE says global sentiment has to improve, borrowing costs fall and demand picks up amid a revival in the broader economy.
While valuations have seen some rationalisation, they need to come down further, says Mr Goswami of Walton Street Capital. Until then, he says: “Private equity players will focus on the execution of projects where they have invested earlier.”
The Economic Times, May 18, 2009, Page 19
The battered real estate sector may be seeing some glimmer of hope for the first time in about a year after two of its biggest names managed to raise cash by way of equity sales in recent weeks, but analysts warn it’s still not time to call an end to the sector’s travails and the real change will be felt only when private equity feels confident to return to the sector.
Promoters of India’s largest real estate company DLF sold a 9.9% stake to raise Rs 3,890 crore last week, while Unitech closed a qualified institutional placement (QIP) to investors raising Rs 1,600 crore in April.
“The fund-raising by DLF promoters and Unitech shows the improvement in general sentiment towards real estate,” says Anshuman Magazine, MD of CB Richard Ellis South Asia, a international property consultancy. But he and others are quick to add that these corporate deals can hardly be classified as a broad sectoral revival.
Unitech MD Ajay Chandra says that even now no company in the sector could possibly come out with an initial public offer for at least another year, although a couple more QIPs may get done. “There is a decent appetite among investors for QIPs,” he said. Investors are also cautioning against assuming a recovery for the sector, which was tipped into a downward spiral in February last year after one of its leading names — Emaar-MGF — was forced to abandon plans for in initial public offering of shares. Sourav Goswami, India head of USbased realty private equity firm Walton Street Capital, cautions that people are getting excited a little bit too quickly. “If some sales in the housing sector have happened, it’s not known if it’s sustainable,” he says. Goswami’s fund did its last transaction in India almost a year ago.
The past 12 months have been painful for the sector, with sales plunging, prices falling and access to funds drying up. A combination of high interest rates and skyhigh property prices sent home buyers into a wait-and-watch mode, while a weak economic outlook forced corporates and retailers to freeze expansion plans, pushing down demand for commercial real estate.
The worsening of the global credit crunch last year as large swathes of the Western banking system crumbled under the weight of toxic mortgage-backed assets worsened perceptions for the sector, left vulnerable by a sharp rise in prices and valuations in the preceding years. Borrowing costs zoomed and private equity dried up, leaving many realty firms that had piled up large amounts of debt to fund their land buying spree in boom years with little cash to service that. It was the Reserve Bank of India’s (RBI) decision to allow restructuring of commercial real estate debt that saved many companies from defaults and bankruptcy.
Recent successful transactions by DLF and Unitech are aimed at cleaning up the mess left by their past excesses, and do not necessarily signal that a broad revival of the sector is imminent. “It was a compulsive sale of shares (by Unitech and DLF),” said a senior executive at a Mumbai-based realty firm, adding that there was no overwhelming interest among investors for Indian real estate and the two recent deals were more a case of smart money shifting from low-yield bonds to high-yield equities with the risk of bankruptcy having receded.
Not all companies will be as fortunate as DLF or Unitech, say expects. “Small realty companies will still struggle for funds,” says Anshul Jain, head of property consultancy DTZ India. For these companies, the solution could come in the form of private equity, but only in 3-6 months as the situation stabilises further.
If stock markets are to be believed, there’s some evidence of the situation stabilising. Realty stocks, some of which fell as much as 95% from their January 2008 peak., have seen some recovery in the past three months in line with broader market. DFL, for instance, has doubled since February, while other stocks registered gains in line with the broader market.
Meanwhile, a host of realty companies are now looking towards private equity funds to breathe life into the sector. But, for that to happen, several things have to fall in place. Mr Magazine at CBRE says global sentiment has to improve, borrowing costs fall and demand picks up amid a revival in the broader economy.
While valuations have seen some rationalisation, they need to come down further, says Mr Goswami of Walton Street Capital. Until then, he says: “Private equity players will focus on the execution of projects where they have invested earlier.”
Unitech aims to raise Rs 900 cr from asset sale by June
Unitech aims to raise Rs 900 cr from asset sale by June
Business Standard, May 19, 2009, Page 5
Neeraj Thakur / New Delhi
Unitech, the country’s second largest real estate developer, plans to generate Rs 900 crore from the sale of two hotels in Gurgaon and a commercial office complex in Saket, New Delhi, by the end of June, a top company official has said.
“We will close the deal by the end of next month,’’ the official said, without disclosing the name of the buyers.
The company plans to generate Rs 1,600 crore by selling assets, including plots and residential projects, by the end of the current fiscal.
Earlier this year, the company sold its Marriott Courtyard hotel, comprising 199 rooms, in Gurgaon for Rs 231 crore to a high net worth individual based out of Delhi.
The Sanjay Chandra-led company also plans to reduce its debt to Rs 4,000-Rs 5,000 crore by the second quarter of the next financial year from the sale of assets, the official said.
As on March 2009, Unitech had Rs 8,900 crore worth of debt on its books.
“We have charted our strategy and will repay Rs 1,000 crore debt by the end of June,” the official said.
The company is also looking to sell its school and hospital plots. “We have around 20 school and hospital plots in the national capital region (NCR) and are negotiating with prospective buyers,” the official added.
The company claims to have received bookings for 2,000 residential units in the past 45 days in its Gurgaon and Chennai-based mid-income housing projects. In April 2009, the company raised Rs 1,625 crore from the sale of shares to select investors, as part of a plan to repay debt and invest in affordable housing projects.
“The target of generating 1,600 crore by the end of this fiscal should not be a problem. However, bringing the debt level down to Rs 4,000-5,000 crore by the second quarter of FY11 would depend on the company’s ability to market its projects aggressively,” said a Mumbai-based analyst.
The promoters of the company have pledged 38 per cent shares with the institutional lenders.
Business Standard, May 19, 2009, Page 5
Neeraj Thakur / New Delhi
Unitech, the country’s second largest real estate developer, plans to generate Rs 900 crore from the sale of two hotels in Gurgaon and a commercial office complex in Saket, New Delhi, by the end of June, a top company official has said.
“We will close the deal by the end of next month,’’ the official said, without disclosing the name of the buyers.
The company plans to generate Rs 1,600 crore by selling assets, including plots and residential projects, by the end of the current fiscal.
Earlier this year, the company sold its Marriott Courtyard hotel, comprising 199 rooms, in Gurgaon for Rs 231 crore to a high net worth individual based out of Delhi.
The Sanjay Chandra-led company also plans to reduce its debt to Rs 4,000-Rs 5,000 crore by the second quarter of the next financial year from the sale of assets, the official said.
As on March 2009, Unitech had Rs 8,900 crore worth of debt on its books.
“We have charted our strategy and will repay Rs 1,000 crore debt by the end of June,” the official said.
The company is also looking to sell its school and hospital plots. “We have around 20 school and hospital plots in the national capital region (NCR) and are negotiating with prospective buyers,” the official added.
The company claims to have received bookings for 2,000 residential units in the past 45 days in its Gurgaon and Chennai-based mid-income housing projects. In April 2009, the company raised Rs 1,625 crore from the sale of shares to select investors, as part of a plan to repay debt and invest in affordable housing projects.
“The target of generating 1,600 crore by the end of this fiscal should not be a problem. However, bringing the debt level down to Rs 4,000-5,000 crore by the second quarter of FY11 would depend on the company’s ability to market its projects aggressively,” said a Mumbai-based analyst.
The promoters of the company have pledged 38 per cent shares with the institutional lenders.
Why CBEC should appeal against Delhi high court judgment on service tax on rented property
Why CBEC should appeal against Delhi high court judgment on service tax on rented property
Business standard, May 18, 2009, Page 10
Sukumar Mukhopadhyay / New Delhi
Conceptual clear thinking is at stake. Also at stake is substantial revenue. A very recent judgement of the Delhi High Court holding that renting of immovable property is not service is now of great importance since it will set precedence for other services to get similar judgment that they are not service.
Section 65(105)(zzzz) of Finance Act 1994 reads “to any person, by any other person in relation to renting of immovable property for use in the course or furtherance of business or commerce”. The High Court has held that service tax is value-added tax and since there is no value-added in renting of property it is not service. And it is not service independently also the terms of Section 65(105)(zzzz)”.
There are four good reasons why appeal should be filed against this judgement.
(a) Renting of immovable property is a service. And service tax is a tax on rent. It is not a property tax. It is a tax on the service given by the property for the time being when it remains in the possession of the person who has taken it on rent. It is just like the service of pandal, or shamiana or modem or telephone in telecommunication service or similar material objects whose services are taken on payment for the time being. The distinction that has been made with the judgment in the Kalyan Mandapam case is really not valid. For this reason also it should be brought once again before the Supreme Court. This aspect needs to be settled as it will affect all cases of material-based service.
(b) There is no need of value-addition at all since all that is necessary is the turn over from the service. Since it is not a value added tax, the question of value addition does not arise.
(c ) It is not correct to say that the Supreme Court has called service tax a value-added tax in the case of All India Federation of Tax Practitioners vs. UOI. Actually the Supreme Court has said that while discussing the background. It is not a judgement itself. The judgement is that profession tax is not a service tax. The Constitution calls excise a tax on manufacture and service tax a tax on service. VAT is just a mechanism or design for imposing an indirect tax in a particular manner.
Excise or Service tax can be value-added tax or turnover tax depending on whether the credit for the input duty is allowed or not. I may also point out that before 1986 there was excise duty which was not VAT. Even now all items which pay excise don’t follow the VAT design. And State Excise is not VAT at all.
(d) The High Court contends that the expression 'service in relation to renting of property' does not in terms include 'service in renting of property'. This proposition, however, is a matter of interpretation. Renting of property also can be taken as in relation to property. This is a very crucial point because if (zzzz) does not in terms include renting of property, then it just cannot be a service. The High Court has not laid much emphasis on this point but has mainly depended on the proposition about value addition.
It is very important to settle the issues involved here in the interest of conceptual clarity. Therefore, it would be immediately necessary that the CBEC examines the issues taking into consideration the points mentioned by me above for the purpose of filing an appeal in the Supreme Court within the period of limitation.
Business standard, May 18, 2009, Page 10
Sukumar Mukhopadhyay / New Delhi
Conceptual clear thinking is at stake. Also at stake is substantial revenue. A very recent judgement of the Delhi High Court holding that renting of immovable property is not service is now of great importance since it will set precedence for other services to get similar judgment that they are not service.
Section 65(105)(zzzz) of Finance Act 1994 reads “to any person, by any other person in relation to renting of immovable property for use in the course or furtherance of business or commerce”. The High Court has held that service tax is value-added tax and since there is no value-added in renting of property it is not service. And it is not service independently also the terms of Section 65(105)(zzzz)”.
There are four good reasons why appeal should be filed against this judgement.
(a) Renting of immovable property is a service. And service tax is a tax on rent. It is not a property tax. It is a tax on the service given by the property for the time being when it remains in the possession of the person who has taken it on rent. It is just like the service of pandal, or shamiana or modem or telephone in telecommunication service or similar material objects whose services are taken on payment for the time being. The distinction that has been made with the judgment in the Kalyan Mandapam case is really not valid. For this reason also it should be brought once again before the Supreme Court. This aspect needs to be settled as it will affect all cases of material-based service.
(b) There is no need of value-addition at all since all that is necessary is the turn over from the service. Since it is not a value added tax, the question of value addition does not arise.
(c ) It is not correct to say that the Supreme Court has called service tax a value-added tax in the case of All India Federation of Tax Practitioners vs. UOI. Actually the Supreme Court has said that while discussing the background. It is not a judgement itself. The judgement is that profession tax is not a service tax. The Constitution calls excise a tax on manufacture and service tax a tax on service. VAT is just a mechanism or design for imposing an indirect tax in a particular manner.
Excise or Service tax can be value-added tax or turnover tax depending on whether the credit for the input duty is allowed or not. I may also point out that before 1986 there was excise duty which was not VAT. Even now all items which pay excise don’t follow the VAT design. And State Excise is not VAT at all.
(d) The High Court contends that the expression 'service in relation to renting of property' does not in terms include 'service in renting of property'. This proposition, however, is a matter of interpretation. Renting of property also can be taken as in relation to property. This is a very crucial point because if (zzzz) does not in terms include renting of property, then it just cannot be a service. The High Court has not laid much emphasis on this point but has mainly depended on the proposition about value addition.
It is very important to settle the issues involved here in the interest of conceptual clarity. Therefore, it would be immediately necessary that the CBEC examines the issues taking into consideration the points mentioned by me above for the purpose of filing an appeal in the Supreme Court within the period of limitation.
We won’t cut prices, say steel makers
We won’t cut prices, say steel makers
Business Standard, May 16, 2009, Page 1
Ishita Ayan Dutt / Kolkata
Raw material prices are above 2007 levels whereas finished product prices have fallen, they argue.
Domestic producers of hot rolled (HR) steel, the intermediate that is used by automobile and consumer durables manufacturers, have emphatically ruled out the possibility of dropping prices ahead of the imposition of a safeguard duty on imports.
Last week, Commerce Secretary Gopal Pillai had said HR producers needed to cut prices before the government would consider their demand for a safeguard duty against cheaper imports.
The producers, however, said there was no scope to cut because raw material costs hadn't fallen as sharply as prices of the finished product.
“We should take 2007 as the benchmark since it was a normal year, as 2008 was the year when prices peaked. If we look at 2007, then the current raw material prices are higher than 2007 prices, while finished steel prices are lower in the same period,” said an HR producer (see table).
Seshagiri Rao, joint managing director and group chief financial officer, JSW Steel, added that although production and consumption had come down, imports had not declined to the same extent.
“It’s not a question of imports, steel is being dumped in India because the demand is better here than other countries. There should be a level playing field. Corrective measures need to be taken because there are huge orders being booked for imported HR steel,” he said.
This is not the first time the government has intervened in steel pricing, because the metal is a component of the wholesale price index. In May 2008, with inflation ruling at around 8 per cent, steel makers gave Prime Minister Manmohan Singh an undertaking that prices would not be increased for three months, following successive increases and some partial rollbacks at the behest of the steel ministry.
Steel makers, however, said this time there was no direct communication from the government to reduce prices, just an oral suggestion.
The Standing Board on Safeguards, which met on May 11, had asked the Directorate General of Safeguards (DGS) to examine the issue further and seek the views of the parties concerned, including consumers.
In April, the DGS had recommended a 25 per cent safeguard duty on imported HR coils (HRC) below $600 a tonne to protect domestic industry from cheap imports.
The recommendation followed an application by Essar Steel and Ispat Industries, supported by JSW Steel and state-owned Steel Authority of India Ltd (SAIL), after international prices fell sharply.
Global HRC prices have collapsed to $410-$415 a tonne from a peak of $1,070 a tonne between July and September last year. Today, some importers are even quoting prices between $360 and $380 a tonne.
Business Standard, May 16, 2009, Page 1
Ishita Ayan Dutt / Kolkata
Raw material prices are above 2007 levels whereas finished product prices have fallen, they argue.
Domestic producers of hot rolled (HR) steel, the intermediate that is used by automobile and consumer durables manufacturers, have emphatically ruled out the possibility of dropping prices ahead of the imposition of a safeguard duty on imports.
Last week, Commerce Secretary Gopal Pillai had said HR producers needed to cut prices before the government would consider their demand for a safeguard duty against cheaper imports.
The producers, however, said there was no scope to cut because raw material costs hadn't fallen as sharply as prices of the finished product.
“We should take 2007 as the benchmark since it was a normal year, as 2008 was the year when prices peaked. If we look at 2007, then the current raw material prices are higher than 2007 prices, while finished steel prices are lower in the same period,” said an HR producer (see table).
Seshagiri Rao, joint managing director and group chief financial officer, JSW Steel, added that although production and consumption had come down, imports had not declined to the same extent.
“It’s not a question of imports, steel is being dumped in India because the demand is better here than other countries. There should be a level playing field. Corrective measures need to be taken because there are huge orders being booked for imported HR steel,” he said.
This is not the first time the government has intervened in steel pricing, because the metal is a component of the wholesale price index. In May 2008, with inflation ruling at around 8 per cent, steel makers gave Prime Minister Manmohan Singh an undertaking that prices would not be increased for three months, following successive increases and some partial rollbacks at the behest of the steel ministry.
Steel makers, however, said this time there was no direct communication from the government to reduce prices, just an oral suggestion.
The Standing Board on Safeguards, which met on May 11, had asked the Directorate General of Safeguards (DGS) to examine the issue further and seek the views of the parties concerned, including consumers.
In April, the DGS had recommended a 25 per cent safeguard duty on imported HR coils (HRC) below $600 a tonne to protect domestic industry from cheap imports.
The recommendation followed an application by Essar Steel and Ispat Industries, supported by JSW Steel and state-owned Steel Authority of India Ltd (SAIL), after international prices fell sharply.
Global HRC prices have collapsed to $410-$415 a tonne from a peak of $1,070 a tonne between July and September last year. Today, some importers are even quoting prices between $360 and $380 a tonne.
Builders claim increase in demand for housing; banks feel otherwise
Builders claim increase in demand for housing; banks feel otherwise
The Hindu Business Line, May 16, 2009, Page 1
--------------------------------------------------------------------------------
Positive cues?
Builders seem to have reset their price expectation and it is starting to reflect in the new stock entering the market
Banks say that they have not seen any change in either loan disbursement or loan applications
--------------------------------------------------------------------------------
Moumita Bakshi Chatterjee
Priyanka Vyas
New Delhi, May 15 Is it a case of early signs of demand recovery or just tall claims by realtors?
After six to eight months of a dry spell in the real estate space, builders are claiming that there has been a pick up in the residential property market over the last one month.
Uptick in demand
The slump in the market had forced developers to cut prices, offer discounts and dangle the “affordability” tag in hope of luring buyers. Brokers and developers are now saying that April and May have turned out to be far better in terms of serious enquiries and bookings, particularly in Mumbai and Delhi NCR.
Banks, however, have a different story to tell. Admitting that they do see some momentum building up, they are saying that this demand is yet to translate into actual loan applications.
According to the real estate industry, potential buyers, who were earlier waiting on the sidelines, are now seriously scouting the market for deals. This, combined with project discounts, is pulling customers to booking counters, they said.
“The realty market had witnessed a near standstill in the last six months but that changed in April… We have seen transactions and booking confirmations in the last few weeks,” said Mr Samarjit Singh, Managing Director of property broking firm Agni Group.
Market observers said buyer’s interest in select projects in select locations is back.
DLF recently booked 1,356 apartments (two million square feet) in a single day in a project, Capital Greens, in New Delhi. Unitech, too, said the market has seen some cheer lately. It claims to have sold nearly two million square feet of space in April alone. These bookings are spread across projects in NCR, Mumbai, Kolkata and Chennai, according to a senior Unitech executive.
Bookings
“April has seen a major spurt in sales. This is largely due to the affordable products that have hit the market. In the last three to four years, the builders were focusing on high-end projects but now there is a demand for products of smaller ticket sizes,” the official pointed out.
Indiabulls Group – which recently launched an affordable housing project in Gurgaon – said it has already closed 100 bookings. It has launched about 200 apartments in the first phase while the project has nearly 800 units.
“We are also seeing buyers come in groups to negotiate for better rates,” said the President-Marketing, Mr Nitesh Kumar.
Builders seem to have reset their price expectation and that is starting to reflect in the new stock entering the market. “This is a positive cue for end users, who had held back purchases for the last six to eight months,” said Ms Shveta Jain, National Head, Marketing & Investments, Residential Services, Cushman & Wakefield India.
Bankers’ view
But bankers do not see a demand revival yet.
They admitted that they see some momentum building up but added that this demand is yet to translate into loan applications.
An official of Punjab National Bank told Business Line that while they did foresee a market revival in the coming months, there has not been any material change in either disbursements or in the number of loan applications on a month-on-month basis.
“This could be hype that is being created by real estate companies. But even if the market is recovering, for it to translate into an increase in loan applications will take time, as it takes nearly a month for it to get processed,” said another official.
A representative of another public sector bank said with incentives such as free insurance on home loans below Rs 20 lakh, there has been a rise in loan applications in the semi-urban and rural areas. “But in the metros, the demand is still sluggish,” he added.
The Hindu Business Line, May 16, 2009, Page 1
--------------------------------------------------------------------------------
Positive cues?
Builders seem to have reset their price expectation and it is starting to reflect in the new stock entering the market
Banks say that they have not seen any change in either loan disbursement or loan applications
--------------------------------------------------------------------------------
Moumita Bakshi Chatterjee
Priyanka Vyas
New Delhi, May 15 Is it a case of early signs of demand recovery or just tall claims by realtors?
After six to eight months of a dry spell in the real estate space, builders are claiming that there has been a pick up in the residential property market over the last one month.
Uptick in demand
The slump in the market had forced developers to cut prices, offer discounts and dangle the “affordability” tag in hope of luring buyers. Brokers and developers are now saying that April and May have turned out to be far better in terms of serious enquiries and bookings, particularly in Mumbai and Delhi NCR.
Banks, however, have a different story to tell. Admitting that they do see some momentum building up, they are saying that this demand is yet to translate into actual loan applications.
According to the real estate industry, potential buyers, who were earlier waiting on the sidelines, are now seriously scouting the market for deals. This, combined with project discounts, is pulling customers to booking counters, they said.
“The realty market had witnessed a near standstill in the last six months but that changed in April… We have seen transactions and booking confirmations in the last few weeks,” said Mr Samarjit Singh, Managing Director of property broking firm Agni Group.
Market observers said buyer’s interest in select projects in select locations is back.
DLF recently booked 1,356 apartments (two million square feet) in a single day in a project, Capital Greens, in New Delhi. Unitech, too, said the market has seen some cheer lately. It claims to have sold nearly two million square feet of space in April alone. These bookings are spread across projects in NCR, Mumbai, Kolkata and Chennai, according to a senior Unitech executive.
Bookings
“April has seen a major spurt in sales. This is largely due to the affordable products that have hit the market. In the last three to four years, the builders were focusing on high-end projects but now there is a demand for products of smaller ticket sizes,” the official pointed out.
Indiabulls Group – which recently launched an affordable housing project in Gurgaon – said it has already closed 100 bookings. It has launched about 200 apartments in the first phase while the project has nearly 800 units.
“We are also seeing buyers come in groups to negotiate for better rates,” said the President-Marketing, Mr Nitesh Kumar.
Builders seem to have reset their price expectation and that is starting to reflect in the new stock entering the market. “This is a positive cue for end users, who had held back purchases for the last six to eight months,” said Ms Shveta Jain, National Head, Marketing & Investments, Residential Services, Cushman & Wakefield India.
Bankers’ view
But bankers do not see a demand revival yet.
They admitted that they see some momentum building up but added that this demand is yet to translate into loan applications.
An official of Punjab National Bank told Business Line that while they did foresee a market revival in the coming months, there has not been any material change in either disbursements or in the number of loan applications on a month-on-month basis.
“This could be hype that is being created by real estate companies. But even if the market is recovering, for it to translate into an increase in loan applications will take time, as it takes nearly a month for it to get processed,” said another official.
A representative of another public sector bank said with incentives such as free insurance on home loans below Rs 20 lakh, there has been a rise in loan applications in the semi-urban and rural areas. “But in the metros, the demand is still sluggish,” he added.
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