Real Estate Intelligence Servic, Friday, July 31, 2009

Inflation dips to minus 1.54%; food still dearer

Inflation dips to minus 1.54%; food still dearer
The Financial Express, July 31, 2009, Page 3

fe Bureau, New Delhi

Inflation tumbled to (-) 1.54% for the week ended July 18, as compared to (-) 1.17% in the previous week, but food prices continued to rise.

The wholesale-price index based inflation remained negative for the seventh consecutive week. However, it is widely expected to rise in the coming months.

Among primary articles, the food articles group inflation stood at 1.2% as food prices rose. Minerals group registered a major drop in prices with inflation at (-) 16.8%. Iron ore prices fell by 24% but manganese ore and vermiculite turned costlier by 77% and 86%, respectively. During the week, prices of food items such as mutton rose by 14%, arhar by 9%, gram by 4%, and fruit and vegetables by 2%. Imported edible oil prices also increased by 4%, while coconut oil, sugar, butter, ghee and gur were expensive by 1% each. At its review of the monetary policy on Tuesday, the RBI said negative inflation may not persist beyond a few more months. The central bank did not announce any rate cuts, in line with the expectations. Due to uncertain monsoon and rising global commodity prices, the RBI raised its inflation target to 5% by March, 2010 from 4%. “We are expecting inflation to be around 7-7.25% by end-March, but mostly due to food issues,” said Kotak Mahindra Bank chief economist Indranil Pan.

“Concerns for inflation now come in the form of food items. Manufactured articles index is actually lower for this week. This could indicate that demand-driven inflation could take some time to take hold. Till that moment, RBI could stay on a pause mode,” he said.

Cereal prices rose about 11%, pulses 16.9%, milk by 4.8% and spices by 5.4%. Sugar, khandsari and gur went up about 33.1% while processed fish turned dearer by more than 42.7% over last year.

Inflation rate falls for 7th straight week to 1.54%

Inflation rate falls for 7th straight week to 1.54%
The Hindu Business Line, July 31, 2009, Page 10

Wholesale Price Index of all commodities at 236.8.

Our Bureau, New Delhi

The annual Wholesale Price Index fell for a seventh straight week, declining 1.54 per cent in the week to July 18 after falling 1.17 per cent on a year-on-year basis in the previous week, the Government said on Thursday.

Inflation was recorded at 12.54 per cent during the corresponding week of the previous year. The official WPI for ‘All Commodities’ for the latest reported week rose by 0.04 per cent to 236.8 points from 236.7 points for the previous week.

Primary articles

On a disaggregated basis, the Primary Articles group index rose by 0.3 per cent as the index for the ‘Food Articles’ group rose by 1.2 per cent due to higher inflation in case of mutton (14 per cent), arhar (9 per cent), gram (4 per cent), moong, jowar, fruits and vegetables, and masur (3 per cent each), bajra and urad (2 per cent each) and maize and ragi (1 per cent each). However, the prices of condiments and spices (1 per cent) declined.

Non-food articles

The index for ‘Non-Food Articles’ group rose by 1.7 per cent due to higher prices of logs and timber (35 per cent), copra (3 per cent), raw silk (2 per cent) and rape and mustard seed, raw cotton and gingelly seed (1 per cent each). However, the prices of sunflower (1 per cent) declined.

Minerals

The index for ‘Minerals’ group declined by 16.8 per cent due to lower prices of iron ore (24 per cent) and felspar (3 per cent). However, the prices of vermiculite (86 per cent), manganese ore (77 per cent), silica sand (4 per cent) and barytes (2 per cent) moved up.

Fuel and power

The Fuel and Power group index declined by 0.1 per cent due to lower prices of aviation turbine fuel (7 per cent).

Manufactured products

The Manufactured Products group index declined by 0.1 per cent as the index for ‘Food Products’ group declined by 0.4 per cent due to lower prices of oil cakes (3 per cent) and cottonseed oil (1 per cent). However, the prices of imported edible oil (4 per cent) and rice bran oil, coconut oil, sugar, butter, ghee and gur (1 per cent each) moved up.

Beverages, tobacco…

The index for ‘Beverages Tobacco and Tobacco Products’ group rose marginally due to higher prices of soft drinks (all kinds) (1 per cent). The index for ‘Textiles’ group declined by 0.2 per cent due to lower prices of hessian cloth (3 per cent) and hessian and sacking bags (2 per cent).

Chemicals and products

The index for ‘Chemicals and Chemical Products’ group rose marginally due to higher prices of acid (all kinds) (1 per cent). The index for ‘Non-Metallic Mineral Products’ group declined by 0.1 per cent due to marginal fall in cement prices.

Basic metals…

The index for ‘Base Metals Alloys and Metal Products’ group rose marginally due to higher prices of foundry pig iron and basic pig iron (1 per cent each). However, the prices of other iron steel, steel ingots and lead ingots (1 per cent each) declined.

For the week ended May 23, the final WPI for ‘All Commodities’ stood at 234.3 points compared with the provisional estimate of 232.3 points and the annual rate of inflation based on final index, calculated on point-to-point basis, stood at 1.34 per cent compared with 0.48 per cent.

DLF net crumbles 79% to Rs 396 cr

DLF net crumbles 79% to Rs 396 cr
The Economic Times, July 31, 2009, Page 10

Our Bureau NEW DELHI

DLF, the country’s largest property firm, has reported a 79% decline in its net profit for the quarter ended June 2009 to Rs 396 crore on poor demand for homes, offices and shops as well as higher interest costs.

The company, however, said the activity in the real estate sector has picked up, indicating that the worst may be over. “The construction activity has gained momentum and response to new launches has been encouraging,” DLF vice chairman Rajiv Singh said.

DLF said it had sold 2.5 million sqft of home space in Delhi and Bangalore in June quarter.

The company’s sales were down 57% to Rs 1,650 crore for the quarter. The results are in line with market expectations.

An ET NOW poll of 15 analysts expected company’s profit at Rs 400 crore and sales at Rs 1,452 crore. The company said it was continuing with its deleveraging exercise and had cut down its net debt by Rs 2000 crore. This has resulted in its debt-equity ratio going down to 0.5 from 0.6 as on March 31. The company had a net debt of Rs 14,000 crore at the beginning of the June quarter, causing its interest cost to shoot up 432% year-on-year to Rs 287 crore in the quarter. DLF plans to further reduce its debt-equity ratio to 0.3 by the end of this fiscal.

DLF's Q1 profit drops 80% as debt cutting continues

DLF's Q1 profit drops 80% as debt cutting continues
Business Standard, July 31, 2009, Page 4

BS Reporter / New Delhi

DLF Ltd, the country’s largest real estate developer, today reported a decline of 79 percent in its consolidated net profit for the first quarter of 2009-10.

Profit dropped to Rs 396 crore for the three months ended June 30, as compared with a profit of Rs 1,864 crore for the corresponding period last year. This follows a drop of 93 per cent in the fourth quarter profit for the previous fiscal year.

Revenue for the first quarter of FY10 came down by 57 per cent to Rs 1,649.9 crore, as compared with Rs 3,810.6 crore for the corresponding period last year. The company vice chairman, Rajiv Singh, said: “After a few difficult quarters last fiscal, we have seen a fairly good first quarter of the current fiscal. The construction activity has gained momentum and response to new launches has been encouraging.”

Parsvnath Q1 net plunges 81%, co in talks to raise $100-150m

Parsvnath Q1 net plunges 81%, co in talks to raise $100-150m
The Economic Times, July 31, 2009, Page 4

Our Bureau NEW DELHI

DELHI-BASED Parsvnath Developers on Thursday said it is in talks with investors to raise $100-150 million in fresh equity through qualified institutional placement (QIP) within the next two months. The company said that the real estate sector had seen off the worst after its net profit for the June quarter increased 20% on a sequential basis over the March quarter even as it fell as much as 81% over the same quarter last year.

“We see things improving from here on in the property market. With better sentiment and the government announcing a number of measures, including tax benefits for developers of affordable homes and interest subsidy for homebuyers, we think real estate market will bounce back soon,” Parsvnath Developers chairman Pradeep Jain said, adding that demand has slowly started picking up.

The company reported a net profit of Rs 14 crore on revenues of Rs 113 crore for the June quarter. Revenue declined 70% from the year-ago quarter. The company attributed lower sales and profits to poor demand for homes as homebuyers, worried about their personal economic future, stayed away from the residential market last quarter.

Mr Jain said the company planned to raise $100-150 million (approx. Rs 500-700 crore) via QIP, “We will use 60% of QIP fund to repay debt and rest to strengthen our business.”

The company has been able to reduce its debt by Rs 400 crore to Rs 1,600 crore in nine months since September ‘08, he added. Parsvnath’s scrip closed 1.5% up at Rs 116.95 on Thursday. The company’s earnings were announced after the market hours.

IT outsourcing to pick up next year: Study

IT outsourcing to pick up next year: Study
The Economic Times, July 31, 2009, Page 20

Our Bureau BANGALORE

MIRRORING the global trend, India’s IT outsourcing is expected to remain subdued this year, though it’s likely to pick up during the second half of the next year. Springboard Research in its latest study, ‘Inside the End-Users’ Mind - India IT services demand side analysis’ said most enterprises have reported an impact on their IT budgets because of the economic slowdown, with nearly a third of them slowing their ITrelated investments

“For CIOs, the economic slowdown is clearly an opportunity to manage their costs and they have shown an open-minded approach towards IT outsourcing, further accelerated by an emerging emphasis on improving business performance,” said Sudip Saha, senior research analyst for IT Services at Springboard Research.

According to the research body, the Indian IT services market is expected to grow from $4.1 billion in 2007 to $8.1 billion in 2011, recording a CAGR of 18.6%.

The study said that 65% of the IT decision makers in Indian enterprises expect an increase in their investment in IT outsourcing by their company in the next two years, with 29% expecting investment to remain constant.

Mr Saha said many of the Indian companies will not be able to cut down on costs with their internal IT teams and would be looking at outsourcing for budgetary controls.

Fundraising ceremony for developers again

Fundraising ceremony for developers again
The Economic Times, July 31, 2009, Page 15

Private equity players are building up funds for small companies in the realty business

Anirvan GHOSH

SMALL AND medium businesses (SMBs), especially in the real estate sector, have reasons to cheer. Private equity firms say they will raise more than $300 million by October, most of which will be used to fund SMBs in the infrastructure and realty space.

Mumbai-based Sage Capital is raising $100 million by September. The funds will be used exclusively to fund SMBs in the areas of infrastructure, real estate and energy. The fund will be looking at small firms, which have a topline of Rs 50 crore or above. It plans to invest from Rs 30 crore to a maximum of Rs 70 crore in each of these firms. Sage Capital’s managing director Manish Kanchan confirmed his fund’s plans but refused to name the companies he is zeroing on. “It has been easier to raise funds in the second half of this year, and we can get cheaper valuations,” he says about Sage’s decision to raise fund at this point in time.

Saffron Asset Advisors plans to raise $105 million by October. “We are looking at smaller players in the real estate sector with serious growth potential,” says managing director Ajoy Veer Kapoor. Saffron has already lined up a few projects for investment through the new fund, and will be announcing these shortly, he adds. The firm eventually plans to raise $500 million over eight years. Standard Life will invest $75 million in fund, which will invest in projects across India, and in SMBs in Tier 2 and 3 cities. Saffron earlier raised 220 million euros through its Euronextlisted Yatra Capital for investing in the Indian real estate market. Venture capital firms invested $117 million over 27 deals during the first six months of 2009, according to a joint study by Venture Intelligence and Global India Venture Capital Association. That was substantially lower as compared to $413 million invested in 67 deals during the first half of 2008 and $402 million invested in 75 deals in the second half.

Things seem to be getting rosier this second half. ASK Investment Holdings is raising $100 million this year, and intends to pick up between 26% and 50% stake in residential projects. “We are into just a notch above low-cost homes,” says managing director Sunil Rohokale.

CSC Group, which is building affordable housing in Bangalore, is in talks for a $15 million funding from such PE players. “We have the model to scale up fast, and are in talks with them,” says CSC’s CEO PC Sukanand.

Most property project delays in Ghaziabad, Gurgaon: Study

Most property project delays in Ghaziabad, Gurgaon: Study
Business Standard, July 31, 2009, Page 2

BS Reporter / Mumbai

Ghaziabad and Gurgaon, the satellite towns in the National Capital Region (NCR), led in terms of the highest proportion of property projects delayed in the country, which were scheduled for completion in 2008 and onwards, a new study has found.

Both these suburbs have 71 per cent of projects delayed, as against the total number of projects scheduled for completion in 2008 and onwards, a study by real estate research firm PropEquity said.

Ghaziabad had 84 projects delayed out of 118 and Gurgaon had 78 of 110. In absolute terms, Bangalore, the country’s IT hub, witnessed the highest number of delays among projects scheduled for completion in 2008 and onwards, while Pune came second.

In Bangalore, 309 of the 575 projects were delayed and the average delay in these projects was nine months. In Pune, 305 of 665 projects were delayed, with an average of eight months. Mumbai came third, with 233 of 501 projects, with an average delay of nine months, the study said.

“A lot of developers were diverting funds meant for a project to other projects, hence cash flow was an issue. Their order book was more than what they could actually execute. Many smaller developers jumped into the property sector and they could not complete the projects, resulting in delays,” said Samir Jasuja, founder and chief executive of PropEquity.

In terms of unsold properties in the 10 cities, Pune, Mumbai and Hyderabad came first, second and third, respectively. Pune, Mumbai and Hyderabad had 36,435 units, 32,120 and 31,536 units unsold in June 2009. In terms of regions, the East had 5 per cent of properties unsold between January to June 2009, and the North, West and South had 23 per cent, 40 per cent and 31 per cent of properties unsold respectively in the period, the study found.

Thane, Mumbai and Gurgaon ranked first, second and third, respectively, in terms of percentage price drop in apartments in the country, as economic downturn and dwindling incomes of home buyers impacted property sales and led to a drop in prices. Between May of 2008 and 2009, Thane (a far eastern suburb of Mumbai), Mumbai and Gurgaon witnessed a drop of 22 per cent, 20 per cent and 19 per cent, respectively.

But in terms of absorption of projects during January-June 2009, Mumbai came the highest with 17,689 units, while Pune and Noida came second and third with 13,899 and 6,808, respectively.

“These cities had a lot of new launches and witnessed high absorption. Mumbai is driven by end-users, while Pune had a mix of end-users and investors,” said Jasuja.

Jasuja feels absorption will improve and unsold portions come down as developers increasingly launch affordable projects. “Delays will continue, as execution is becoming a challenge for developers who are finding it difficult to arrange finances,” he said.

Realty developers seek more sops

Realty developers seek more sops
The Hindu Business Line, July 31, 2009, Page 14

Our Bureau, Mumbai

The Confederation of Real Estate Developers Associations of India, while welcoming the subsidising of home loans and extension of tax holidays for projects by the Government, said incentives to developers were disappointing.

Mr. Santosh Rungta, President, CREDAI, said the tax holiday under 80 I B (10) for a mere year to projects approved by March 2008 would not bring about any significant impact on the real estate market and could, at best, benefit a few micro markets.

Moreover, it would create unequal competition among developers as projects approved after March 2008 would not qualify for the incentive.

The real estate sector would only benefit if the tax holiday was extended up to March 2012, he said, adding that it would encourage developers to take up new projects and expedite ongoing ones.

The interest subsidy of one per cent to home loan borrowers for Rs 20 lakh home loans was not adequate.

construction cost

Taking into account the escalation of construction cost, which have resulted in higher property value, it should be hiked by one or two per cent and the scheme extended for loans up to Rs 30 lakh.

Mr Rungta said the housing and real estate sector could substantially contribute to growth rate if more incentives were given for purchase of affordable homes.

Referring to the focus on slum development, he said expectations were that the Government would exempt (slum redevelopment) projects from direct and indirect taxes.