Real Estate Intelligence Service, Wednesday, August 26, 2009

Growth on track, reforms to take it back to 9%: FM

Growth on track, reforms to take it back to 9%: FM
The Economic Times, August 26, 2009, Page 1

At a power gathering of 100 top CEOs and policymakers, Pranab Mukherjee confirms that green shoots have indeed sprouted across industry & Q2 will likely bear more fruit

‘Govt Borrowings Won’t Push Up Interest Rates’

Team ET

WHEN the big guns of business and economy sit down for a power breakfast, what do they munch on? A platter of issues—from India’s growth gumption to public-private partnership with some reform relish on the side.

Finance minister Pranab Mukherjee joined a distinguished panel, 100 CEOs, senior bureaucrats and policymakers on Tuesday to thrash out ‘Mission 2010: The Reform Road Map’. Driving the debate was the question—will the government indeed step on the gas? And will the growth count hold up? Both Mr Mukherjee and C Rangarajan, chief of the Prime Minister‘s Economic Advisory Council, pegged the GDP growth for this fiscal at 6-6.5%. That too after factoring in the drought damage.

Mr Mukherjee told the packed gathering that reforms would continue “in right earnest” to get the economy back to its 9% clip. The good news, he said, was the green shoots in industry with basic goods, intermediates and consumer durables doing better in the first quarter.

Mr Rangarajan, a former Reserve Bank of India governor, said growth should pick up speed to hit 7-8% next fiscal. To accelerate to 9%, though, it was vital to boost domestic consumption, he added.

Brainstorming with Mr Mukherjee and Mr Rangarajan were three CEOs representing India’s bellwether segments—SBI chairman OP Bhatt, Genpact president and CEO Pramod Bhasin, and Future Group CEO Kishore Biyani. The event, hosted by ET, was sponsored by MCX-SX.

But, for the audience, the sweetest music was the FM’s assurance on government borrowings. Mr Mukherjee made it clear that public spending won’t push interest rates higher. Nor would the government’s huge debt appetite leave private industry high and dry. But do Indian banks have a pool big enough for the party?

Mr Bhatt said banks would have to raise more capital, especially tier-1 variety, to keep up with India’s growth drive. “Indian banks are just above well-capitalised. But they should have more capital at their disposal,” he added.

9% GDP growth a long way off, says Pranab

9% GDP growth a long way off, says Pranab
The Financial Express, August 26, 2009, Page 2

fe Bureaus, New Delhi

"Reforms are needed to steer the economy back towards 9% growth, but it would take longer due to the global slowdown and drought in the country," finance minister Pranab Mukherjee said on Tuesday.

Speaking at a function organised by a TV channel on Tuesday, Mukherjee said the government is moving ahead with setting up an autonomous debt management office and efforts are being made to implement goods and services tax from next year.

"The new tax reform Bill will be presented in Parliament after public debate and the government would soon introduce repos in the corporate debt market," he said.

A repo, or "repurchase agreement", is a transaction that allows a holder to sell a bond for a short period to another investor with an agreement to buy it back at a higher price at a later date. Presently, repos are allowed only in the government bond market.

"Permitting repos in corporate bonds has been proposed. We are also moving ahead to set up an autonomous debt management office," he said. Mukherjee said the country can clock over 6% growth this fiscal. "Despite the global economic crisis, we grew by 6.7% last year. This year, we are getting mixed signals. We will have over 6% growth," he said.

Push economic goals: PM to envoys

Push economic goals: PM to envoys
The Economic Times, August 26, 2009, Page 2

Diplomats Should Supplement Domestic Efforts In Investment And Energy Security: Manmohan Singh

Our Political Bureau NEW DELHI

THE government is set to give a big push to economic diplomacy for attracting investment and identifying opportunities in the energy sector. Prime Minister Manmohan Singh on Tuesday told Indian envoys at the head of missions conference that foreign policy was closely linked to economic policy and urged top diplomats to further the country’s economic goals in the international economy.

Mr Singh said Indian diplomats should supplement domestic efforts, particularly in the area of investment and energy security. He identified three areas as “pillars of India’s global engagement”, including sustaining capital inflows to supplement India’s investment efforts, taking advantage of rapid scientific and technological developments and ensuring the country’s growth is not constrained by scarcity of natural resources.

“All these required active engagement by India in all multilateral fora, and in the shaping of the world order, whether in the field of trade, international finance or international economy,” the prime minister told the heads of missions, according to a statement.

He further said insularity was no longer an option for India which had to play an active role not just in economic diplomacy but also in coming up with a solution for climate change and trade talks. “... India should play a role in the international arena in a manner that makes a positive contribution to finding solutions to major global challenges, whether in the field of trade or climate change,” he said.

Though the government has identified economic diplomacy as a key area, it is still to come up with a coherent policy. Economic diplomacy largely depends on the individual missions. But investment and energy security have been identified as key areas of India’s engagement with the world.

To illustrate his point, PM also emphasised the link between India’s foreign policy and domestic policies. He noted that the country’s foreign policy should be aimed at addressing the challenges of mass poverty. Noting that India’s economy was still the secondfastest growing economy in the world in spite of the global economic slowdown, he said that effort was required from all quarters to put the economy back on a sustained high rate of growth.

The prime minister also touched on the issue of terrorism in his address to the envoys. Without naming Pakistan, the prime minister said India would continue to resolve differences through peaceful means. “India has a stake in the prosperity and stability of all our South Asian neighbours. We should strive to engage our neighbours constructively and resolve differences through peaceful means and negotiations,” he said. External affairs minister S M Krishna had said on Monday that meaningful dialogue could only take place if Pakistan took steps to stop infiltration and dismantled the terror infrastructure.

On demand spur, Rangarajan sees FY11 GROWTH AT 7-8%

On demand spur, Rangarajan sees FY11 GROWTH AT 7-8%
The Economic Times, August 26, 2009, Page 13

Export recovery key to logging 9% growth

Akey advisor to Prime Minister Manmohan Singh on Tuesday forecast a 6-6.5% growth for the economy this fiscal year.

Higher domestic demand could see the growth rise to 7-8% in the next fiscal year, 2010-11, said Mr C Rangarajan, who took over as the chairman of prime minister’s top economic advisory council for a second term last week.

However, only a recovery in exports will see the economy returning to 9% growth, which is possible if developed countries are able to come out of recession, he said. Exports account for about a fifth of the total economic output of the country.

Mr Rangarajan’s forecast of the country’s economic growth has factored in the poor monsoon rains. Though he did not see agriculture—which accounts for 18-20% of the economy—impacting the overall growth significantly, he felt that distress in the drought-hit districts will be severe.

Two hundred forty-six districts of the 626 districts have been declared drought-hit.

The general impression is that the recession has bottomed out but the recovery will be slow, Mr Rangarajan told a gathering of CEOs at ET’s Power Breakfast with finance minister Pranab Mukherjee.

The finance minister said that mitigating the impact of deficient monsoon was a priority for the government. Despite difficulties in agriculture and export markets, the country would grow by over 6%, he said.

The answer to unbridled financial innovation that brought the Western financial markets to their knees was not putting a lid on innovation in financial markets altogether, Mr Rangarajan said. The country needs new products, but innovation should not become too complex to fathom where risks lie.

“Regulators should achieve a balance between promoting innovation and regulation in the sector to achieve a sound financial system,” he said. Financial regulators such as Sebi and RBI are in the process of introducing new products and providing depth to the fledgling corporate bonds market that would fund infrastructure projects.

On the shortfall in power generation, Mr Rangarajan said that the authorities needed to raise power output to provide impetus to growth. “It’s extremely important that power generation should match the rate of growth in the economy,” Mr Rangarajan said.

The 50,000 mw target seems a stiff one considering that the country has added only about 20,000 mw capacity in the three years to 2008-09.

Emphasising on the need for adequate power to fire up economic growth, which dropped to 6.7% in the last fiscal year from 9% or more in the preceding three years, he said, “China is adding power generating capacity each year that we achieve in five years.”

Electricity generation growth has generally lagged the nominal GDP growth, suggesting that businesses were relying on off-grid captive power. The growth in power generation by power utilities in 2008-09 was only 2.7%.

Mr Rangarajan said that considering the slow pace in building power production capacity, the country needed to add additional 50,000 mw capacity in the last two years of the Eleventh Five Year Plan ending 2011-12. The authorities should improve the availability of coal for the thermal power plants to achieve the target, he argued.

Leading economists have stressed on the need to reform the coal sector to address the shortage of fuel. The Economic Survey of 2009-10 had highlighted this point, saying that private entry into coal mining was needed to reverse the substitution of domestic coal by imported oil and coal.

Now, low-cost housing with parking in Haryana

Now, low-cost housing with parking in Haryana
The Financial Express, August 26, 2009, Page 3

Preeti Parashar, Chandigarh

Dreaming of owning a parking space along with a low-cost flat? A recent policy initiative by the Haryana government for low cost and affordable dwelling units makes it possible.

According to the new policy for providing sustainable housing to lower and middle income category, a minimum of 10% of the total parking in the building would be provided to the low cost housing category flats. The parking space would be provided based on one equivalent car space.

The government has fixed prices of the flats between Rs 4 lakh and Rs 16 lakh in Gurgaon, Faridabad, Panchkula and will allow 50% ground coverage area extending it from 35% to the private developers.

Interestingly, as per the zoning plan there would be no restriction on height of the buildings. Haryana is the first state to introduce the policy and is yet to see whether it will attract huge investment by private developers. The scheme is open for private developers till November 20.

“Under the policy private colonisers applying for licences in the state will have to follow the guidelines of this policy. The developers will have to set aside 10% of the total dwelling units in the project for the economically weaker section (EWS), 20% for the group housing and 10% for the low cost housing segment,” a senior official of HUDA told FE.

The policy features a relaxed density norm which allows more units per acre. A 10-acre plot will be able to house over 1,200 dwelling units as against 450 units at present.

About 20,000 flats will be developed in Gurgaon-Manesar urban complex and 5,000 flats in urban estate of Faridabad.

Under the affordable housing category, Rs 16 lakh per flat has been fixed for Gurgaon-Manesar Urban Complex and Rs 14 lakh in periphery controlled area of Panchkula and Faridabad-Ballabgarh Complex. Flats will be available at a selling price of Rs.12.50 lakh for the rest. This price will be inclusive of land cost, construction cost and all other levies and charges like external development charges and infrastructure development charges.

Despite of the sector-wise priority the allotment of flats for EWS will not be less than 15% of the total number of dwelling units. Moreover, the minimum area will not be less than 25 square metres (carpet area) for EWS flat and 48 square metres (carpet area) for affordable unit. The EWS flats will be for below poverty line (BPL) families.

However, Class-IV employees of Haryana government departments, its boards and corporations and autonomous organisations will also be eligible for allotment under this category.

However the policy puts a restriction on reselling of the allotted flats within five years of getting the possession and the breach of this will attract penalty equivalent to 100% of selling price of the flat.

U.S. housing data show seeds of recovery

U.S. housing data show seeds of recovery
Business Standard, August 26, 2009, Page 11

Reuters, Chicago

Larger-than-expected improvements in U.S. housing prices and consumer confidence on Tuesday lent new weight to signs the economy is emerging from the longest and deepest recession since the 1930s.

U.S. home prices rose for the second month in a row in June, according to a closely watched S&P index, and consumer confidence jumped in August.

In addition, President Barack Obama nominated Ben Bernanke to a second term as chairman of the Federal Reserve, removing some niggling doubt from investors' minds as the decision promised a consistent approach to monetary policy in the years ahead.

The developments helped buffer the blow of projections for the U.S. budget deficit to reach its highest level in 2009, relative to the total economy, since World War Two.

"The recession appears to be over, with consumer attitudes lagging behind broad economic developments," said Steven Wood, chief economist at Insight Economics in Danville, California.

Major U.S. equities indexes climbed to new 2009 highs on the day's events, while bond prices fell as signs of a resurgent economy reduced interest in safer investments.

The Conference Board, an industry group, said consumer confidence climbed to a reading of 54.1 in August from 47.4 in July, handily outpacing forecasts, on an improved outlook for the job market and the overall economy.

The rise sent the index to its highest level since May. Still, some analysts warned not to get carried away.

"Confidence remains well below its historical average of 95 and it has not even regained the level of 61 seen before the collapse of Lehman almost a year ago," said Paul Dales, U.S. economist at Capital Economics in Toronto.

The weak labor market remains a sticking point to recovery, and especially a revival in consumer spending. Even the Fed has conceded the likelihood of a "jobless recovery," with the unemployment rate staying high long after growth resumes.

Americans saying that jobs were "hard to get" in August dropped to 45.1 percent from 48.5 percent but those saying jobs were plentiful were just 4.2 percent.

"Most of the strength was in the 'expectations' component, so it looks like even though the near-term conditions are still a bit rocky, there is hope for the future," said Kim Rupert, managing director, global fixed income analysis, Action Economics LLC in San Francisco.

Other data supporting recovery hopes came from the Standard & Poor's/Case-Shiller index, with prices of U.S. single family homes rising by 1.4 percent in June from May, after creeping up by 0.5 percent in April.

The data gave fresh evidence that the three-year housing slump is finally easing. The housing market is considered a critical component to a broad economic recovery.

Emaar MGF in 2nd attempt to float IPO

Emaar MGF in 2nd attempt to float IPO
Financial Cronical, August 26, 2009

By Vivek Sinha & Sanjeev Sharma

After last year's aborted move to go public, Emaar MGF is now seriously considering a second attempt to to raise around Rs 3,500 crore through an initial public offering, reports Financial Chronicle.

The real estate company, which is a joint venture between the Dubai-based Emaar Properties and Delhi-based MGF Development, is in advanced discussions with investment bankers about the contours of the issue, the report added.

Citing sources close to the development, the report said the company is considering to go in for a smaller IPO, sometime in October, wherein it would dilute around 10-15 per cent of its equity.

Kotak, JP Morgan Chase, DSP Merrill Lynch, Deuts-che Bank, Enam Securities are among investment ban-kers holding discussions for the mandate, the sources said.

"Emaar MGF continues to evaluate various funding options to meet its growth plans. However, we are not in a position to comment on the specifics of any of our fund raising plans,” quoted Emmar spokesperson in the report.

According to the report, the firm plans to utilise the proceeds from the IPO to develop projects on various land parcels it owns. At December-end 2007, Emaar MGF owned around 13,000 acres across the country, it added.

Real estate firms have been aggressively raising funds following the liquidity crunch and balance sheet stress last year.

Another real estate major Ansal API announced its plans to discuss various fund raising initiatives at its board meeting on the August 28 of this month. When contacted, Anil Kumar CEO of Ansal API said, "The board will discuss all possible options to raise funds."

In February 2008, Emaar MGF had attempted to raise around Rs 7,000 crore through an IPO. It aborted its plans to sell 102.6 million shares after receiving a weak response to the issue.

It had to reduce its price band and push back the closing date by five days but finally decided to call off the offer when subscriptions fell from 83 per cent to 43 per cent of the shares offered.

The original price band was Rs 610-690, which was revised to Rs 530-560.

Realty Cos Back in Demand as Investors see Opportunity

Realty Cos Back in Demand as Investors see Opportunity
The Economic Times

Never mind the fact that the smartest of investors on Dalal Street lost a fortune on their investments in realty stocks when the market nose dived last year. Shares of property developers are back in demand with market operators, who feel there is a good trading opportunity in this segment for the next couple of weeks. First quarter numbers of most realty firms were dismal, and any improvement in the current quarter, could only be incremental, say brokers.

On their part, the bulls are peddling anecdotal evidence pointing to an improvement in demand and pricing power. Some of the early birds in the sector seem to be using the current frenzy to book profits. The fund manager of one of the largest long only India-dedicated funds, who shares his first name with the actor who played the role of Thakur in Sholay, is said have been cutting exposure to some of the realty stocks that he had picked up in March this year.

Commercial Real Estate rentals seem to be bottoming out

Commercial Real Estate rentals seem to be bottoming out
The Economic Times

Verma Mishra

Mumbai continues to be the second costliest city in Asia Pacific in terms of prime rental rates. With rent of about USD 800 per sq metre per annum, Mumbai is ahead of the likes of Tokyo (USD 750 per sq metre p.a.) and Singapore (USD 625 per sq metre p.a.) as per the latest report of real estate consultancy firm Jones Lang LaSalle. This is despite a 40 percent drop in rentals from its peak values. Delhi comes fourth in the ranking with USD 725 per sq metre per annum.

With GDP growth expected to bounce back in 2010, India and China would outperform the global markets with a 7-10 percent growth rate. The early signs of recovery are visible in Delhi and Mumbai markets. Having dropped by 24 percent in March’09 quarter over the preceding quarter, Mumbai’s decline in June’09 was well below 10 percent. Delhi followed with an 8 percent decline, which was half of what it was in the quarter before.

The average decline for India in June’09 was 8.3 percent as against 19 percent in the quarter prior to that. This showed that the rate of decline in rentals has also slowed down in the June’09 quarter as compared to March’09 quarter. It is believed that rents in these cities have bottomed out. Pune outperformed with just about a 4 percent decline.

This trend is likely to improve by 2011 when the absorption rate would overcome the supply. With 57 million sq feet of office space expected to be operational by the end of 2009, vacancy rate would continue to be high at 27 percent in 2010 till it comes down to a little above 20 percent in 2011.

Talking city wise position, Bangalore is expected to relatively outperform other cities with a low vacancy rate as it has received good response for pre leasing properties.

Companies form telecom and pharma sector seem to be fast taking advantage of the low rentals and expanding their geographic reach. For example recently Aircel and Telenor Unitech wireless signed more than 50000 sq feet of real estate space. As rents become more affordable, we could see more companies scaling up their expansion plans.