Real Estate Intelligence Service, Monday, November 09, 2009

PM beats stimulus retreat... But To Keep Reforms Offensive Going

PM beats stimulus retreat
... But To Keep Reforms Offensive Going
The Economic Times, November 9, 2009, Page 1

Our Bureau NEW DELHI

THE government will start rolling back from next year the stimulus measures it announced to boost demand after the global economic downturn started affecting growth in the world’s fastest growing economy after China, just as it will give momentum to the stalled reforms in the financial sector.

“There are clear signals of an upturn in the economy... We resorted to a significant stimulus and we will take appropriate action next year to wind this down,” Prime Minister Manmohan Singh said in his keynote address at the India Economic Summit on Sunday.

The prime minister also reiterated the government’s resolve to push ahead with reforms, indicating that the global crisis is unlikely to derail the process of opening up of financial markets.

Mr Singh said the broad agenda for reform was driven by the thinking that the country’s financial system should be able to provide the finance needed for infrastructure development.

“We need to develop a longterm debt market and deepen the corporate bond market. This, in turn, calls for strong insurance and pensions sub-sectors,” he said, adding that government will strive to build political consensus needed for legislative changes in these areas.

The United Progressive Alliance government in its previous term could not effect reforms such as further opening up of the insurance sector and dilution of its stakes in public sector firms to its liking due to pressure from its Left allies. The government in its second term looks more confident to carry out its plans on the reforms front as it no longer needs the Left’s support.

“All these issues will be addressed through gradual but steady progress in financial sector reforms to make the sector more competitive...,” Mr Singh said.

The PM’s statement on stimulus comes even as the G-20 finance ministers on Saturday resolved in Scotland to continue with stimulus measures as they found the current recovery uneven and “dependent on policy support”.

MEASURES ON HIS MIND

THE PM THINKS INDIA NEEDS TO:

Develop long-term debt markets, Deepen corporate bond markets, Strengthen insurance and pensions sectors, Improve futures markets for better price discovery and regulation And accelerate the sale of stakes in state-run companies

GROWTH FORECAST

In the PM’s eyes, growth in the next fiscal, assuming a normal monsoon season, is expected to be over 7% compared to a 6.5% forecast for 2009-10.

Changing mood in realty

Changing mood in realty
The Hindu Business Line, November 8, 2009, Page 15

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The industry continues to display a year-on-year fall in revenue, but at least sequentially, the tide seems to be turning. For instance, Parsvnath and DLF have logged some increase in revenue on a quarter-on-quarter basis.
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Moumita Bakshi Chatterjee

From aggressive fund-raising drives to alluring festival offers, sequential rise in sales volumes to frenzied hiring spree — the mood in the real-estate industry has suddenly turned.

Over the past few months, there has been a marked increase in consumer enquiries for residential property, and builders — quick to recognise this — are wasting no time to cash-in on a buoyant market sentiment. A month ago, in a gap of a week, companies — the likes of Sahara Prime City, Emaar MGF Land, Ambience Ltd, DB Realty and Kumar Urban Development — announced plans for public offerings. Together, these would translate into mobilisation of over Rs 13,000 crore. And that excludes the potential public offers in the pipeline — BPTP, Godrej Properties and Oberoi Construction, among others.

That’s not all. Consumers who had deserted the property market for nearly four quarters are now returning with enquiries largely around affordable housing, and even luxury products in Mumbai and Delhi — if claims of realtors are anything to go by. “There are signs of revival in the luxury housing segment,” real-estate major DLF said while announcing its results for the quarter ended September.

Mr Shailesh Kanani, research analyst (Infrastructure) at Angel Broking, believes that with the global economy coming back on track, there are visible signs of recovery across sectors. “In real-estate particularly, we have seen volumes pick up and the confidence is back. Even though the retail and commercial office realty segments are yet to recover, companies are of the view that FY11 will be a better year,” he says.

Then and now

Last year this time, the consumer response to property market was testing new lows. The demand had completely vanished from the market, loans from banks dried up, and debt-laden builders ended up delaying or deferring projects. In fact, the sudden turn of events in the market had forced Emaar MGF Land to withdraw its Rs 7,072-crore IPO in February 2008.

BPTP too had sensed the nervousness of the markets, and pulled back its IPO plans last year. Now Emaar MGF is seeking SEBI nod for a Rs 3,850-crore public issue, and there is also a buzz around BPTP gearing up for an IPO in the coming months.

True, a fourth of the IPO proceeds that builders hope to raise overall will go towards debt-repayment or prepayment. Nevertheless, companies will use part of the proceeds to kick-start construction of new projects, as well as existing ones that had come to a halt with market downturn.

“A year ago the global markets, fresh from the Lehman crisis, were taking a turn for the worse. Back home, Diwali sales were down and people realised that the India-US decoupling concept was a misnomer. Between November-February, the real-estate market came to a complete standstill,” recounts Mr Anuj Puri, country head of Jones Lang LaSalle-Meghraj.

Cut to this year. Prices, especially residential, have corrected by over 30 per cent, and home loan rates too have softened, igniting consumer interest. The liquidity position of builders has improved — there has been a string of QIP issues by the realty pack, and occasional PE deals.

Also, the hiring freeze has started to thaw. In the last two months or so companies, including Unitech, Ansal API, BPTP, Parsvnath, CHD Developers and Mahagun, have flagged off recruitment drives for civil engineers and sales and marketing professionals.

Positive numbers

More importantly, though the industry continues to display a year-on-year fall in revenue, sequentially at least, the tide seems to be turning. In Q2, Parsvnath saw total revenue rise 69.16 per cent quarter-on-quarter. The company said it has sold 400-500 residential units in Q2 against 70-80 units in the last quarter this fiscal. Ditto for its larger rival DLF, which has logged 4 per cent increase in its revenue on a quarter on quarter basis.

“As the demand has recovered, sales in homes have picked up considerably. Keeping in line with this pick-up in demand, we will continue to launch a mix of attractive products across locations,” Mr Rajiv Singh, Vice-Chairman, DLF Ltd, said.

The realtors remain optimistic for now, but market watchers caution that despite the encouraging signs, it may be too early to pop the bubbly. For one, much would depend upon the fate of the public issues or investor appetite for the large number of realty IPOs that are waiting in the wings. Remember, companies such as Unitech, DLF Ltd, Indiabulls Real Estate and Parsvnath Developers have already raised funds from the market over the last few months.

“There is an influx of public offerings and one will have to see just how many of them actually sail through. Another worry sign is that real-estate prices have started to climb a little. If prices rise rapidly, it could lead to a slump in demand as the property market is not robust enough to take huge escalation in rates,” an industry watcher pointed out. Yet another issue would be delivery of projects that have been aggressively marketed and sold over the last few months.

“The booking numbers have been stacking up, but delivery could be a challenge,” he added.

'India to lead IPO recovery by year-end'

'India to lead IPO recovery by year-end'
Business Standard, November 8, 2009, Page 5

BS Reporter / Mumbai

India could be among the first markets to see a recovery in the initial public offer (IPO) space, according to a survey by Ernst & Young (E&Y), a global financial advisor. The survey’s findings point out that recovery is expected by the end of 2009 in emerging markets which include China and Brazil.

The survey was based on the responses from over 300 institutional investors across the world. Out of them, 57 per cent of the respondents highlighted that India will show recovery in IPO markets. About 75 per cent respondents backed China, whereas Brazil emerged at par with India with the same percentage of respondents betting for it.

Around 38 per cent of the respondents in India, according to the survey, felt that mid-cap companies will make the first move. And, companies in sectors such as power, real estate, infrastructure and PSU disinvestment, in particular, will lead the recovery.

However, on the global front, investors are bullish on technology sector to lead IPO recovery followed by sectors such as financial services and oil & gas.

In the first two quarters of the current financial year, the Indian market already has seen an early recovery with around a dozen IPOs. Though successful in terms of subscriptions, there was no frenzied response from retail investors as was witnessed back in 2007 and early 2008.

Moreover, a series of qualified institutional placements (QIPs) were also among the first signals of recovery in the capital markets here.

“A stable government and the booming Sensex has lead to the revival of IPO activity. There was a pent-up demand for capital and Indian corporates were quick to realise that investors were looking for fresh avenues to deploy funds, said R Balachander, partner and IPO leader at Ernst & Young. Going forward, companies needed to be less aggressive on pricing and should consider leaving a little more on the table for investors, he added.

The survey revealed investors were looking for less risky investments as factor of debt-to-equity was the top priority influencing the IPO investment decision-making process. Interestingly, in the last year’s institutional investor survey, debt-to-equity was the 9th most important financial factor.

Among the developed markets, investors bid for the US (31 per cent) and Singapore (30 per cent). For other developed markets including the UK, Australia, Germany and Canada, investors believed that respective domestic markets would start to recover between Q1 2010 and Q2 2011. Whereas, for markets such as France and Japan, investors felt that recovery could be more than 18 months away.

PM looks West on emission cuts

PM looks West on emission cuts
Hindustan Times, HT Business, November 9, 2009, Page 21

Prime Minister Manmohan Singh on Sunday asked developed countries to contribute more for limiting carbon emissions, even as he assured India’s cooperation for arriving a purposeful outcome at the conference on climate change to be held in Copenhagen next month.

India has been arguing that on a per-capita basis, it ranks low in greenhouse gas emissions that need to be cut down to contain harmful climate change, but has been a keen to participate under what the government calls a “common, but differentiated” approach to sharing the burden of reducing emissions.

“We will work with all like-minded countries to promote a purposeful outcome of the (December 6-18) Copenhagen Conference,” Singh said at the India Economic Summit, organised jointly by the World Economic Forum (WEF) and the Confederation of Indian Industry (CII) here. Singh also called for green technologies at affordable prices from develoeped countries.

“In recognition of common but differentiative capabilities, it is our hope that while all the countries will be required to contribute according to their capacities and abilities, the world's major economies will be prepared to ...(ensure that) large capital flows become available for integration for adaptation measures,” Singh said at the summit, which was attended by top global corporate leaders.

The debate on climate change has seen a growing rift between developing and developed nations. The Copenhagen Conference is aimed at establishing a mid-term emission reduction targets for countries.

Developing countries, led by India, have consistently said rich countries will have to make larger allocations. Their argument is that the rich nations were largely responsible for accumulation of carbon-di-oxide (CO2) in the atmosphere with their industrialisation of more than 150 years.

At a summit last week, the finance ministers of European Union nations estimated that about 100 billion euros ($ 150 billion or Rs 7 lakh crore) would be needed every yeara to tackle global warming. Developed countries are now pressing large emerging economies such as India to commit for a 15 per cent reduction in emissions by 2020.

Realty firms on hiring spree again

Realty firms on hiring spree again
The Financial Express, November 9, 2009, Page 4

Smita Joshi Saha, Mona Mehta, Mumbai

Improved market conditions and better end-buyer sentiments are finally ensuring a hiring spree for top builders across metros. Real estate players have started hiring across-the-board, from top-level executives, including, CEOs and COOs to middle-level executives in execution and sales departments.

However, pay packages have not reached the peak levels of 2008 yet. Industry experts say the blood bath that the real estate industry witnessed during the slowdown has made employers more cautious and salaries are likely to remain 30-35% lower than what those offered at the peak of growth last year. LS Vaidyanathan, executive director, Nitesh Estates, says, “Pay packages at present are about 85% of the 2008 peak level. It dropped by about 35% during Q3 and Q4 of FY 09 due to the slowdown.

However, compared to that period, salaries have increased. We are hiring people with a hike of 25%, against the third and fourth quarter in the last fiscal. We have recently hired Ashwini Kumar as COO at Nitesh Estates,” he adds.

The Lodha Group has hired 30 to 40 people every month for the past seven months in sales and marketing, the people coming from firms like IBM and McKinsey. “Since Lodha is a technologically advanced company, we believe in hiring people to handle challenges. As for pay packages, we are at par with the best in the industry and hike pay packages by almost 25% to 30% based on performances,” said Abhisheck Lodha, director, Lodha Group.

The real estate revival story in India is being driven by the residential segment, with real estate consultants saying the investors, not just developers, are driving the current demand. Real estate players have also started ramping up their projects and hence, are looking out for capable candidates to handle these operations. While Bangalore-based Nitesh Estates is planning to increase its work force from about 115 employees four months ago to 180 employees in the next two quarters, Ackruti City, which has witnessed an increase in the sale of affordable apartments, is contemplating plans to hire an additional 10% in the next two quarters across departments like engineering, sales and architecture.

According to Hemant Shah, chairman, Ackruti City, “The hiring will take place mainly from the real estate sector. We had seen 15% of our entire workforce leaving our organisation during Q3 and Q4 of the financial year 2008-09.”

A few firms, while talking to FE , said, September saw a turnaround and positions kept on hold have started opening up. However, the companies are still cautious in offering very high salaries. Shiv Agrawal, CEO, ABC Consultant said, “Action on the hiring front is evident in the real estate sector for the past couple of months. However, companies are still cautious on hiring and job seekers are also apprehensive on moving back in the real estate sector immediately, owing to the downturn that the industry witnessed. Also, the salaries will not be the same as before the slowdown. In fact, it is likely to fall significantly across the board. At the top level, pay packages are expected to dip by about 30-35% of what they were earlier.”

“During the third and the fourth quarter of 2008-09, when the economy was reeling, we had stopped hiring people and the attrition rate was less than 10%. But now, since Nitesh Estates is coming up with six new residential projects across Goa, Bangalore south, Bangalore north and Kochi, it becomes imperative to have a larger workforce in the execution and sales departments,” Vaidyanathan said.

Along with sales and marketing executives, top level positions like those of CEO, MD and vice-president are opening up with salaries over Rs 1-2 crore.

Along with real estate, salaries in sectors like IT, BPO, financial services, investment and corporate banking also took a beating during the slowdown. Media firms and retail sector companies were being cautious on hiring and offering high salaries. Many companies had also kept their top level positions on hold. Pranab Dutta, vice-chairman and managing director, Knight Frank says, “The real estate sector has just been out of a sharp slump, in which developers suspended recruitments apart from shedding employees. Moreover, residential real estate activity has picked up and there would be an increase in the number of volumes. As a result, affordable residential properties will see a turnaround very fast.”

PM bets on domestic demand to spur growth

PM bets on domestic demand to spur growth
The Hindu Business Line, November 9, 2009, Page 1

Reforms to be put on fast track; fiscal stimulus till next year.

Our Bureau, New Delhi

The Prime Minister, Dr Manmohan Singh, on Sunday promised the World Economic Forum’s India Economic Summit to speed up economic reforms, while announcing that the fiscal stimulus would be wound down only next year.

“Our policy will be guided by the desire to make India even more attractive for foreign direct investment (FDI). We are particularly keen to rationalise and simplify procedures so as to create an investor-friendly environment,” Dr Singh said in his inaugural address at the India Economic Summit (IES) 2009 here.

The Prime Minister also said that investments in all key infrastructure sectors would be stepped up in the coming months. This is part of a strategy to return to a higher growth trajectory of 9 per cent on the back of strong domestic demand.

Domestic demand focus

Increased emphasis will now be placed on tapping the strong domestic demand to boost economic growth as the Government is of the view that world demand will pick up “only slowly” in the wake of the global economic downturn.

Dr Singh told the gathering that the Government would make gradual but steady progress in financial sector reforms to make the sector more competitive while ensuring an efficient regulatory and oversight system.

“We need to develop long-term debt markets and to deepen corporate bond markets. This, in turn, calls for a strong insurance and pension sub-sectors. Some of the reforms needed, especially in insurance, involve legislative changes.

“We have taken initiatives in this area and will strive to build the political consensus needed for these legislative actions to be completed. We need to improve futures markets for better price discovery and regulation. We also need to remove institutional hurdles to facilitate better intermediation,” Dr Singh said.

The Prime Minister also said that the financial sector reforms are needed to ensure that the country’s financial system provided the required finance for infrastructure development.

Dr Singh said that the accumulation of FDI inflow of $121 billion since 2001-02 was not a large number given the scale of the Indian economy.

There are now clear signs of an upturn in the economy and the country is better placed than any time in the recent past to push the reform process forward, Dr Singh said. He said that the economy was expected to grow 6.5 per cent this fiscal and with a normal monsoon next year likely to achieve a growth rate of over 7 per cent in 2010-11.

Over 600 delegates, including CEOs of a number of multinational companies, are participating in IES 2009, which is being considered special as it marked the 25th anniversary of the first India Economic Summit in 1985.