Thursday, August 27, 2009
FM sees inflationary pressures rising
FM sees inflationary pressures rising
The Financial Express, August 27, 2009, Page 1
fe Bureaus, New Delhi
Finance minister Pranab Mukherjee on Wednesday ruled out any further fiscal stimulus, but said inflation pressures would return by the end of the year. Mukherjee also admitted for the first time that the goods & services tax (GST) rollout planned for April 1 next year may be d
ifficult to achieve unless all states came on board.
“As far as fiscal stimulus is concerned, we have practically stretched ourselves to the maximum. We will know fully only at the end of the second quarter whether it has had some effect,” Mukherjee said at an Idea Exchange programme hosted by The Express Group on Wednesday.
While the government is tackling the slowdown and the drought, Mukherjee saw other dark clouds on the economic horizon “By end of the year, there should be some inflationary pressures. They are already having some effect,” he said. The finance minister is also apprehensive about oil prices shooting up after December, when demand in the US and Europe is expected to pick up.
Inflation rose to -0.95% for week ended August 15 from -1.53% the previous week, according to data released on Wednesday. Analysts expect inflation to touch 7% by March.
Mukherjee said managing the government’s borrowing programme and the fiscal deficit posed challenges, especially since buoyancy in tax collections is missing this year due to the slowdown. The government plans to borrow a total of Rs 4.51 lakh crore in 2009-10, taking the fiscal deficit to 6.8% of GDP. The Reserve Bank of India and the government have to ensure those borrowings do not crowd out the private sector, the minister stressed.
“There will be pressure on the fiscal deficit and issues of how to manage and prevent (it). I can’t take the responsibility of creating additional fiscal deficit. I will have to bring it back. I have fixed targets for 2010-11 and 2012-13, but I don’t know how it will be managed. So far this year, I have taken an extra Rs 1,000 crore on diesel subsidy,” he said.
Contraction in indirect tax collections and the slow pace of direct tax growth have aggravated the government’s fiscal management programme. “The buoyancy is not there in indirect taxes. Direct taxes are going on more or less at par. We can’t have buoyancy in indirect taxes unless there is production,” he reiterated.
Indirect tax collections fell by 28% to Rs 63,623 crore in April-July 2009 from Rs 88,395 crore in the same period last year. Direct taxes rose 3% to Rs 73,990 crore in the same period.
Deflecting a question on whether RBI could cut rates further in light of the limited fiscal space, Mukherjee said he would urge banks to keep some headroom and provide credit to the private sector, especially in sectors like housing. “(Banks) are simply not going to keep (liquidity) with themselves, and I would discourage them to put it entirely in government securities,” he said.
On the GST, Mukherjee said though there is consensus among most political parties at the Centre, opposition in the states could hit its implementation. “There has been substantial convergence of views, but there has been divergence also. I am hoping to manage the divergence of views. Most political parties on the floor of the House have agreed to GST. This will aid the legislative aspect,” he said.
The Financial Express, August 27, 2009, Page 1
fe Bureaus, New Delhi
Finance minister Pranab Mukherjee on Wednesday ruled out any further fiscal stimulus, but said inflation pressures would return by the end of the year. Mukherjee also admitted for the first time that the goods & services tax (GST) rollout planned for April 1 next year may be d
ifficult to achieve unless all states came on board.“As far as fiscal stimulus is concerned, we have practically stretched ourselves to the maximum. We will know fully only at the end of the second quarter whether it has had some effect,” Mukherjee said at an Idea Exchange programme hosted by The Express Group on Wednesday.
While the government is tackling the slowdown and the drought, Mukherjee saw other dark clouds on the economic horizon “By end of the year, there should be some inflationary pressures. They are already having some effect,” he said. The finance minister is also apprehensive about oil prices shooting up after December, when demand in the US and Europe is expected to pick up.
Inflation rose to -0.95% for week ended August 15 from -1.53% the previous week, according to data released on Wednesday. Analysts expect inflation to touch 7% by March.
Mukherjee said managing the government’s borrowing programme and the fiscal deficit posed challenges, especially since buoyancy in tax collections is missing this year due to the slowdown. The government plans to borrow a total of Rs 4.51 lakh crore in 2009-10, taking the fiscal deficit to 6.8% of GDP. The Reserve Bank of India and the government have to ensure those borrowings do not crowd out the private sector, the minister stressed.
“There will be pressure on the fiscal deficit and issues of how to manage and prevent (it). I can’t take the responsibility of creating additional fiscal deficit. I will have to bring it back. I have fixed targets for 2010-11 and 2012-13, but I don’t know how it will be managed. So far this year, I have taken an extra Rs 1,000 crore on diesel subsidy,” he said.
Contraction in indirect tax collections and the slow pace of direct tax growth have aggravated the government’s fiscal management programme. “The buoyancy is not there in indirect taxes. Direct taxes are going on more or less at par. We can’t have buoyancy in indirect taxes unless there is production,” he reiterated.
Indirect tax collections fell by 28% to Rs 63,623 crore in April-July 2009 from Rs 88,395 crore in the same period last year. Direct taxes rose 3% to Rs 73,990 crore in the same period.
Deflecting a question on whether RBI could cut rates further in light of the limited fiscal space, Mukherjee said he would urge banks to keep some headroom and provide credit to the private sector, especially in sectors like housing. “(Banks) are simply not going to keep (liquidity) with themselves, and I would discourage them to put it entirely in government securities,” he said.
On the GST, Mukherjee said though there is consensus among most political parties at the Centre, opposition in the states could hit its implementation. “There has been substantial convergence of views, but there has been divergence also. I am hoping to manage the divergence of views. Most political parties on the floor of the House have agreed to GST. This will aid the legislative aspect,” he said.
PM: corruption holding back economic growth, investors
PM: corruption holding back economic growth, investors
The Financial Express, August 27, 2009, Page 1
fe Bureaus, New Delhi
Prime Minister Manmohan Singh on Wednesday announced a war on corruption in India’s public life. Corruption, he said, hurts economic growth and wastes precious national resources, besides scaring away foreign investors who expect fair treatment and transparent dealings.
Calling for more transparency and accountability in development programmes, the PM said systems and procedures should be more decentralised and less discretionary.
Promising to launch a multi-pronged attack on corruption, the PM, in one of his most hard-hitting speeches, said the government would soon decide on the Second Administrative Reforms Commission’s recommendations on ‘Ethics in Governance.’
Admitting that corruption is hampering India’s efforts to integrate with the world economy, the PM said, “The world respects India’s democracy, our plural and secular values, our independent judiciary and free press… but pervasive corruption in our country tarnishes our image. It also discourages investors, who expect fair treatment and transparent dealings when dealing with public authorities.” He was addressing the biennial conference of the Central Bureau of Investigation and state anti-corruption bureaus here.
India has been ranked a lowly 74 among 180 countries on Transparecny International’s Corruption Perceptions Index for 2008.
“Corruption distorts the rule of law and weakens institutions of governance. It hurts our economic growth in a variety of ways, apart from hindering our efforts to build a just, fair and equitable society,” Singh said, pointing out that though the Centre has ambitious programmes to help the poor and the marginalised, the ‘constant refrain in public discourse is that much of what the government provides never reaches the intended beneficiaries.’
“The design of development programmes should provide for more transparency and accountability. Systems and procedures which are opaque, complicated, centralised and discretionary are a fertile breeding ground for the evil of corruption. They should be made more transparent, simpler, decentralised and less discretionary,” the PM asserted.
At a time when India needs to spend billions on development and infrastructure projects, Singh flagged his concerns about delays in completion of projects and the quality of execution. “Important projects, which have huge externalities for growth, do not get implemented in time, and when they do get finished, they are often of a poor quality.
Asking anti-corruption agencies to aggressively pursue high-level corruption, the PM said, “There is a pervasive feeling today in our country that while petty cases get tackled quickly, the big fish often escape punishment. This has to change. Rapid, fair and accurate investigation of allegations of corruption in high places should remain your utmost priority.”
He told agencies to acquire new skills ‘to stay one step ahead of the corrupt’, noting that the ever evolving levels of sophistication and complexity in corruption cases present new challenges for the enforcement agencies. Singh also asked state agencies to set targets for investigation of cases like the CBI has done at the Centre this year.
Quick investigations, however, are not enough to bring the guilty to book.
“Trials must be conducted expeditiously and judgements must be delivered quickly. To begin with, the aim should be to conclude the trial in two years,” the PM said, declaring the government’s decision to set up 71 new CBI courts as model courts.
The PM asked anti-corruption agencies to allay fears of harassment among public officials. “Officials have to be encouraged to take decision, to accept responsibility, to show initiative and, whenever required, to take risks if our bureaucracy is to shed its slothful and lethargic image. Very often, the fear of harassment and damage to reputation makes officials unduly timid and slow and the whole government machinery becomes ineffectual,” Singh concluded.
The Financial Express, August 27, 2009, Page 1
fe Bureaus, New Delhi
Prime Minister Manmohan Singh on Wednesday announced a war on corruption in India’s public life. Corruption, he said, hurts economic growth and wastes precious national resources, besides scaring away foreign investors who expect fair treatment and transparent dealings.
Calling for more transparency and accountability in development programmes, the PM said systems and procedures should be more decentralised and less discretionary.
Promising to launch a multi-pronged attack on corruption, the PM, in one of his most hard-hitting speeches, said the government would soon decide on the Second Administrative Reforms Commission’s recommendations on ‘Ethics in Governance.’
Admitting that corruption is hampering India’s efforts to integrate with the world economy, the PM said, “The world respects India’s democracy, our plural and secular values, our independent judiciary and free press… but pervasive corruption in our country tarnishes our image. It also discourages investors, who expect fair treatment and transparent dealings when dealing with public authorities.” He was addressing the biennial conference of the Central Bureau of Investigation and state anti-corruption bureaus here.
India has been ranked a lowly 74 among 180 countries on Transparecny International’s Corruption Perceptions Index for 2008.
“Corruption distorts the rule of law and weakens institutions of governance. It hurts our economic growth in a variety of ways, apart from hindering our efforts to build a just, fair and equitable society,” Singh said, pointing out that though the Centre has ambitious programmes to help the poor and the marginalised, the ‘constant refrain in public discourse is that much of what the government provides never reaches the intended beneficiaries.’
“The design of development programmes should provide for more transparency and accountability. Systems and procedures which are opaque, complicated, centralised and discretionary are a fertile breeding ground for the evil of corruption. They should be made more transparent, simpler, decentralised and less discretionary,” the PM asserted.
At a time when India needs to spend billions on development and infrastructure projects, Singh flagged his concerns about delays in completion of projects and the quality of execution. “Important projects, which have huge externalities for growth, do not get implemented in time, and when they do get finished, they are often of a poor quality.
Asking anti-corruption agencies to aggressively pursue high-level corruption, the PM said, “There is a pervasive feeling today in our country that while petty cases get tackled quickly, the big fish often escape punishment. This has to change. Rapid, fair and accurate investigation of allegations of corruption in high places should remain your utmost priority.”
He told agencies to acquire new skills ‘to stay one step ahead of the corrupt’, noting that the ever evolving levels of sophistication and complexity in corruption cases present new challenges for the enforcement agencies. Singh also asked state agencies to set targets for investigation of cases like the CBI has done at the Centre this year.
Quick investigations, however, are not enough to bring the guilty to book.
“Trials must be conducted expeditiously and judgements must be delivered quickly. To begin with, the aim should be to conclude the trial in two years,” the PM said, declaring the government’s decision to set up 71 new CBI courts as model courts.
The PM asked anti-corruption agencies to allay fears of harassment among public officials. “Officials have to be encouraged to take decision, to accept responsibility, to show initiative and, whenever required, to take risks if our bureaucracy is to shed its slothful and lethargic image. Very often, the fear of harassment and damage to reputation makes officials unduly timid and slow and the whole government machinery becomes ineffectual,” Singh concluded.
India Inc takes to ECB, FCCB routes amid credit slump
India Inc takes to ECB, FCCB routes amid credit slump
The Financial Express, August 27, 2009, Page 13
fe Bureaus, Mumbai
The domestic credit offtake may be slipping but the Indian companies are raising funds heavily through external commercial borrowings (ECBs) and foreign currency convertible bonds (FCCBs) routes.
According to data on ECBs and FCCBs released by the Reserve Bank of India (RBI) on Wednesday, during July 2009, Indian corporates have raised a total of $ 2.01 billion as against $1.9 billion in June 2009, and $494 million in May 2009, through the ECB and FCCB route.
Suzlon Energy has been the only FCCB issuer for $ 90 million for the purpose of overseas acquisition for a maturity of five years. Vedanta Aluminium has been the largest ECB issuer for $500 million for rupee expenditure with a maturity period of five years and six months.
There are 46 deals done in July 2009 as against 50 in June 2009.
The budget estimates (BE) for 2009-10 on the resources raised by public enterprises by bonds, ECBs is also shown up by 12% at Rs 2,07,241 crore as against the revised estimates (RE) of Rs 1,83,949 crore for 2008-09.
The expenditure budget for 2009-10 depicts that BE for 2009-10 on the ECB side is nearly up 35% to Rs 16,440 crore as against Rs 12,191 crore in the RE for 2008-09.
In June 2009, Indian corporates raised a total of $1.9 billion through the ECB route as against $494 million in May 2009, thereby depicting more than a three-fold increase in the funds raised.
National Aviation Company of India Ltd has been the largest issuer of ECB bonds in June, through the approval route, to the tune of $830 million for the import of capital goods with a maturity period of five months.
In June 2008, $1.58 billion was raised through the ECB window. During July 2008, Indian companies raised $2.47 billion, through ECBs.
Experts say that since there has been an improvement in the liquidity conditions globally, the ECB market will now open up. More and more Indian banks and corporates will now rush in to raise funds through the ECB window, they say.
No room for lending rate cut now, says Kamath
No room for lending rate cut now, says Kamath
Business Standard, August 27, 2009, Section II, Page 2
Newswire18 / New Delhi
Banks didn’t have room to further cut lending rates as of now and, in fact, they might look at raising them once credit offtake picked up, ICICI Bank’s Chairman KV Kamath said today.
“There is no scope (for more rate cuts) left any more,” Kamath told reporters on the sidelines of an event here.
“Credit offtake is expected to pick up (in October-March), and then there will be a case for rates to harden,” he said in reply to a question.
According to him, the home loan segment has shown a recovery. “I will say home loans are better, and are back to where they were last year,” he said.
On Tuesday, OP Bhatt, head of the country’s largest lender State Bank of India, had said the bank’s new 8 per cent home loan scheme had evoked an “excellent” response.
Typically, banks witness lacklustre credit offtake at the beginning of a financial year, which picks up around the festive season post-September.
However, there is concern that a weak monsoon this year may dent rural income and banks’ credit offtake may fall short of the Reserve Bank of India’s (RBI’s) estimate of about 20 per cent growth for 2009-10.
Kamath said it was difficult to say whether RBI would reverse its easy monetary policy stance this financial year.
“There are lot of indicators that need to be seen such as inflation. It’s difficult, therefore, to say whether RBI will change its stance,” he said.
Since October, RBI has cut its benchmark repo rate by 425 basis points (bps), reverse repo by 275 bps and cash reserve ratio by 400 bps in a bid to infuse liquidity and fuel demand.
Bank credit growth slips below 15 per cent
Bank credit growth slips below 15 per cent
Business Standard, August 27, 2009, Section II, Page 2
BS Reporter / Mumbai
A high-base effect due to strong credit growth in the year-ago period is the main reason.
Bank credit growth slipped below 15 per cent as total credit outstanding fell by Rs 5,062 crore to Rs 28,01,970 crore during the fortnight ended August 14, data by the Reserve Bank of India (RBI) showed. While bankers said the credit demand remained weak, a part of the decline was attributed to repayment by oil companies and low disbursals of sanctioned loans to the infrastructure sector. On a year-on-year basis, bank credit growth fell to 14.89 per cent in the 15 days to August 14, compared with 15.74 per cent in the previous fortnight.
Bankers said a high-base effect due to strong credit growth in the year-ago period was behind the low figure. In the fortnight ended August 15, 2008, total credit outstanding had grown 25.9 per cent over the corresponding period in the previous year.
A senior executive with a public sector bank said there was a decline in demand for working capital loans, though economic activity was picking up.
“The figures do not surprise me because overall credit growth is sluggish. It will take some more time for credit growth to pick up. Sanctions have begun to roll but disbursals should take time,” said Partha Mukherjee, president, corporate banking at Axis Bank.
Bankers expect credit growth to pick up significantly from September. “There are huge sanctions in the pipeline and when these loans get disbursed post-September, credit growth will pick up strongly,” said a senior executive of a public sector bank.
RBI has projected a 20 per cent growth in non-food credit during FY10.
During the 14-day period, bank deposits shrank by Rs 9,338 crore to Rs 40,60,052 crore. On a year-on-year basis, bank deposits grew 21.8 per cent. Time deposits fell Rs 13,957 crore, while demand deposits, or deposits with tenures of less than a year, grew by Rs 4,619 crore. The fall in deposits is due to banks shedding high-cost deposits acquired earlier. Since credit off-take is still subdued, banks feel it unnecessary to acquire fresh deposits.
In its first quarter review, RBI had revised the deposit projection to 19 per cent, from 20 per cent estimated earlier.
Core sector growth slumps to 1.8%
Core sector growth slumps to 1.8%
Business Standard, August 27, 2009, Page 1
BS Reporter / New Delhi
Hopes of a recovery waned today, with data for output growth of six core industries dropping to 1.8 per cent in July, the lowest in the current financial year, and significantly behind a 6.8 per cent growth in June and 5.1 per cent in July last year.
July's disappointing performance was mainly on account of a steep fall in the output of petroleum products. On a cumulative basis, however, the core sector grew 4 per cent against 3.5 per cent in the same period last year.
The core sector accounts for 26.68 per cent of the index of industrial production (IIP) and analysts widely expect July's IIP numbers to be lower after a 7.8 per cent expansion in June.
Although industry data for July is buoyant, with two-wheelers up 18.2 per cent, cars up 29.1 per cent, commercial vehicle up 5.1 per cent, we expect the July IIP to be at 5 per cent levels versus the surprisingly high 7.8 per cent reading in June,” said Rohini Malkani, economist, Citi India.
Jyotinder Kaur, economist with HDFC Bank, sees IIP stabilising at 3 to 4 per cent in the next two months. The July numbers are expected to be out on September 11.
Experts, however, say the June growth figures were unsustainable. “The slower growth is not very alarming though it is a steep dip, because a growth of 6.8 per cent in June was guided by various factors like fiscal support and an accommodative monetary policy. The factors might have been mitigated by drought. However, they are still in place, so the recovery will continue,” said Kaur.
She added that the sharp decline in the production of petroleum products was part of the commodity cycle, since inventory stocking was coming to an end and this would pull back industrial growth and stabilise it from the high levels of 6-7 per cent growth.
Also, private refiner Reliance Industries Ltd took a 20-day maintenance shut-down of its refinery during the month, resulting in 40 per cent fall in production.
Overall, petroleum refinery production fell 14.4 per cent in July, compared to 11.8 per cent growth during the corresponding period in 2008. Crude oil production, after registering positive growth of 4 per cent for the first time this fiscal in June, shrank 0.4 per cent in July. Crude oil production had contracted by 3 per cent in July 2008.
Despite a high base, both cement and coal posted strong growth, up 10.6 per cent and 9.7 per cent, respectively. “This could be attributed to the weak monsoon, which resulted in a delay in maintenance shutdowns,” said Malkani.
1.8 per cent infra growth taunts rebound story
1.8 per cent infra growth taunts rebound story
HT Business, Hindustan Times, August 27, 2009, Page 23
Hopes of a strong industrial rebound received a major jolt on Wednesday with the country’s infrastructure sector output clocking a mere 1.8 per cent year-on-year growth in July, as refinery products and steel output recorded a dismal performance.
The six infrastructure industries — crude oil, petroleum refining, coal, cement, finished steel and coal — account for 26.68 per cent of the total industrial production.
Petroleum and refinery products showed a 14.4 per cent dip as opposed to an 11.8 per cent growth a year ago.
Poor infrastructure output growth could have a bearing on the overall industrial output that has shown signs of strong recovery in recent months.
Factory output had risen 7.8 percent in June, the strongest growth in 16 months triggering hopes of a strong economic rebound in the coming months.
Data published earlier, including that of automobile production, had already indicated industrial output would expand in June, even though exports faltered.
The key question is whether this trend can be sustained.
“There are both tailwinds and headwinds to industrial output growth. On the positive side, the global economy is gradually recovering. On the downside, the risk of a deficient monsoon hurting industrial output growth through lower rural demand for consumer goods is real,” said Sonal Varma, analyst with Nomura Financial Adivosry Securities.
The government has identified infrastructure as the major growth engine and will soon launch a public private partnership programme in the world to build more than 15,000 km of highways involving an investment of over $70 billion.
HT Business, Hindustan Times, August 27, 2009, Page 23
Hopes of a strong industrial rebound received a major jolt on Wednesday with the country’s infrastructure sector output clocking a mere 1.8 per cent year-on-year growth in July, as refinery products and steel output recorded a dismal performance.
The six infrastructure industries — crude oil, petroleum refining, coal, cement, finished steel and coal — account for 26.68 per cent of the total industrial production.
Petroleum and refinery products showed a 14.4 per cent dip as opposed to an 11.8 per cent growth a year ago.
Poor infrastructure output growth could have a bearing on the overall industrial output that has shown signs of strong recovery in recent months.
Factory output had risen 7.8 percent in June, the strongest growth in 16 months triggering hopes of a strong economic rebound in the coming months.
Data published earlier, including that of automobile production, had already indicated industrial output would expand in June, even though exports faltered.
The key question is whether this trend can be sustained.
“There are both tailwinds and headwinds to industrial output growth. On the positive side, the global economy is gradually recovering. On the downside, the risk of a deficient monsoon hurting industrial output growth through lower rural demand for consumer goods is real,” said Sonal Varma, analyst with Nomura Financial Adivosry Securities.
The government has identified infrastructure as the major growth engine and will soon launch a public private partnership programme in the world to build more than 15,000 km of highways involving an investment of over $70 billion.
Investor interest in land deals set to touch new highs
Investor interest in land deals set to touch new highs
The Financial Express, August 27, 2009, Page 4
Mona Mehta, Mumbai
The Indian realty sector may witness better investor interest in land acquisitions during Q3 FY10 comprising up to 20% of the foreign direct investment (FDI), according to industry experts. In comparison, Q3 FY09 witnessed 12% of FDI being invested in land acquisition, thanks to the global meltdown during Q3 and Q4 of FY09. Currently, residential real estate constitutes 80% of the Rs 10,000 crore overall realty market.
According to Suman Memani, associate vice-president, Religare Securities Ltd, “During the first half of 2008, 54% of the Rs 11,345-crore FDI was invested in land acquisition. With FDI in land acquisition in metros expected to grow by 12% to 20% in the third quarter of financial year 2009-10, the remaining investments by FDI would be made towards infrastructure projects, property projects and construction costs.”
FDI’s expected growth in land acquisitions comes at a time when top builders in metros are in the process of acquiring distressed assets. Delhi-based Anant Raj Industries, with Rs 750 crore cash surplus, is in the process of acquiring distressed assets in the form of land acquisition as well as properties in National Capital Region (NCR), its president-finance, Yogesh Sharma told FE. According to Sharma, “Our talks are currently on with NCR-based developers. Post acquisition of distressed assets, we plan to develop residential and commercial buildings, for which we are also open to joint ventures.”
Mumbai-based National Textile Corporation (NTC) mills need surplus cash to revive their textile mills and are in talks with 16 top developers to sell their mills. NTC’s Kohinoor Mills, Poddar Mills, Finlay Mills and Digvijay Mills are likely to be auctioned, according to an industry source.
Residential real estate is all set to see a revival since a high point of its slump during Q4 FY09, when the realty sector saw a significant dip in overall FDI investment into residential real estate due to economic slowdown and developers were forced to reduce realty prices by 25% to 40%. This is evident in the rise in value of property registrations post-Diwali this year.
With the pick-up within investors and end users, realtors are witnessing buyers booking affordable apartments. Religare Securities has recently released a realty sector report that states that affordable housing (AH) is witnessing a steady increase nationally. DLF recently booked 1,356 apartments in a single day at its project, Capital Greens, in New Delhi.
Indiabulls Group which recently launched an AH project in Gurgaon, has already closed 100 bookings. Mumbai-based Kalpataru project on LBS Marg in Ghatkopar witnessed a sudden sale of 50 flats after the rate for a two-and-a-half bedroom apartment was reduced from Rs 98 lakh to Rs 82 lakh.
Kalpataru’s residential project in Thane saw 110 flats sold in 10 days in February after the rate was fixed at Rs 3,100 per sq ft. HDIL’s Kurla project, priced at Rs 5,300 per sq ft, has seen 400 flats being snapped up even though the actual construction is still to commence. Meanwhile, DB Realty’s Dahisar project has registered bookings for 1,400 flats. Its other project at Kandivali (West) registered a sale of 400 apartments at a reduced rate of Rs 5,700 per sq ft, as mentioned in the report.
The Financial Express, August 27, 2009, Page 4
Mona Mehta, Mumbai
The Indian realty sector may witness better investor interest in land acquisitions during Q3 FY10 comprising up to 20% of the foreign direct investment (FDI), according to industry experts. In comparison, Q3 FY09 witnessed 12% of FDI being invested in land acquisition, thanks to the global meltdown during Q3 and Q4 of FY09. Currently, residential real estate constitutes 80% of the Rs 10,000 crore overall realty market.
According to Suman Memani, associate vice-president, Religare Securities Ltd, “During the first half of 2008, 54% of the Rs 11,345-crore FDI was invested in land acquisition. With FDI in land acquisition in metros expected to grow by 12% to 20% in the third quarter of financial year 2009-10, the remaining investments by FDI would be made towards infrastructure projects, property projects and construction costs.”
FDI’s expected growth in land acquisitions comes at a time when top builders in metros are in the process of acquiring distressed assets. Delhi-based Anant Raj Industries, with Rs 750 crore cash surplus, is in the process of acquiring distressed assets in the form of land acquisition as well as properties in National Capital Region (NCR), its president-finance, Yogesh Sharma told FE. According to Sharma, “Our talks are currently on with NCR-based developers. Post acquisition of distressed assets, we plan to develop residential and commercial buildings, for which we are also open to joint ventures.”
Mumbai-based National Textile Corporation (NTC) mills need surplus cash to revive their textile mills and are in talks with 16 top developers to sell their mills. NTC’s Kohinoor Mills, Poddar Mills, Finlay Mills and Digvijay Mills are likely to be auctioned, according to an industry source.
Residential real estate is all set to see a revival since a high point of its slump during Q4 FY09, when the realty sector saw a significant dip in overall FDI investment into residential real estate due to economic slowdown and developers were forced to reduce realty prices by 25% to 40%. This is evident in the rise in value of property registrations post-Diwali this year.
With the pick-up within investors and end users, realtors are witnessing buyers booking affordable apartments. Religare Securities has recently released a realty sector report that states that affordable housing (AH) is witnessing a steady increase nationally. DLF recently booked 1,356 apartments in a single day at its project, Capital Greens, in New Delhi.
Indiabulls Group which recently launched an AH project in Gurgaon, has already closed 100 bookings. Mumbai-based Kalpataru project on LBS Marg in Ghatkopar witnessed a sudden sale of 50 flats after the rate for a two-and-a-half bedroom apartment was reduced from Rs 98 lakh to Rs 82 lakh.
Kalpataru’s residential project in Thane saw 110 flats sold in 10 days in February after the rate was fixed at Rs 3,100 per sq ft. HDIL’s Kurla project, priced at Rs 5,300 per sq ft, has seen 400 flats being snapped up even though the actual construction is still to commence. Meanwhile, DB Realty’s Dahisar project has registered bookings for 1,400 flats. Its other project at Kandivali (West) registered a sale of 400 apartments at a reduced rate of Rs 5,700 per sq ft, as mentioned in the report.
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