Monday, November 23, 2009
Bank rates go down in spite of RBI signal
Bank rates go down in spite of RBI signal
Business Standard, November 23, 2009, Page 1
BS Reporters / Mumbai
The Reserve Bank of India’s second quarter monetary policy review signalled an exit from the central bank’s accommodative stance, leading many to believe that interest rates would move in only one direction – north.
A month on, the rates have actually gone down. A top-rated Indian company could have availed of a six-month loan at 8 per cent or so a month ago; today it can do so at a rate that is 100-150 basis points lower.
Similarly, the cost of one-year loans has declined by about 100 basis points to 7-9 per cent over the last four weeks, while loans for five years, which cost 10 per cent, have become 50-75 basis points cheaper.
ALL IN A MONTH
* Six-month loan rate drops 100-150 basis points; one-year loan rate 100 basis points
* SBI, PNB cut deposit rates
* Many others cut auto, home and farm loan rates
* Yield on 10-year paper drops from 7.35% on October 27 to 7.18%
Within days of the policy, State Bank of India (SBI) and Punjab National Bank (PNB), the two largest in the public sector domain, lowered its deposit rates by 25-50 basis points, besides extending special home loan schemes for few more months.
Axis Bank followed suit and offered home loans at 8 per cent for the first year. A few days ago, HDFC Bank lowered the interest rate on used car loans, while PNB reduced auto loan rates by 50 basis points. The National Bank for Agriculture and Rural Development, too, lowered their refinance rate, while Punjab & Sind Bank cut interest rates on farm loans.
“One of the main reasons for softening of interest rates is weak credit demand. Also, there is adequate liquidity in the system. A bulk of the lending is happening for the short-term,” said Partha Mukherjee, president (Credit), Axis Bank.
The year-on-year growth in bank credit had plummeted to a new 12-year low of 9.8 per cent at the end of October. Similarly, on Friday, banks parked Rs 54,470 crore through the Reserve Bank’s reverse repo window, which is used to suck out excess liquidity, as against over Rs 1,00,000 crore between April and September.
“Short-term interest rates have declined because of low credit flow, excess liquidity and the absence of investment options. But they will go back to the original levels once credit flow improves,” said Canara Bank chairman and managing director A C Mahajan.
With the reverse repo rate at 3.25 per cent and investment in a liquid fund scheme generating an annualised return of 5 per cent, banks found short-term credit at 7 per cent a year the better option. Besides, the Reserve Bank is uncomfortable with banks increasing their exposure to liquid mutual funds.
“The rates are liquidity-based and not market-linked. It has to be compared with a bank’s treasury operations,” said a public sector bank chief.
Bank of India executive director B A Prabhakar said the pressure of government borrowings, intense in the first half, had eased. “This takes away the trigger for bond yields to move northward,” he said.
The yield on 10-year paper dropped from 7.35 per cent on October 27 to 7.18 per cent on Friday. A section of bankers said the signals from the bond markets pointed to easing of rates, but others attributed the lower yields to the completion of nearly 85 per cent of the government’s record borrowings of Rs 4,51,000 crore.
What has also helped is the reduction in deposit rates over the last 12 months. Since April, SBI has lowered deposit rates eight times to lower cost and improve margins.
“If there is no demand for credit, why should banks take deposits at a higher rate of interest? Unless credit expansion takes place, there is no use for deposits at a higher interest... The rate of interest is a function of demand and one of the options is to reduce it,” said Andhra Bank chairman and managing director R S Reddy.
Prabhakar said, with companies able to tap external commercial borrowings and institutional investors raising equity, interest rates would remain low for a few more months.
“A shift from short-term to long-term borrowing will not happen until the fourth quarter, as interest rates are expected to rise once demand picks up,” said an executive with a large private sector bank.
There is also a flip side. “Customers are able to reduce their interest cost, but banks have to worry about the asset quality. At the present rate, the credit risk is not getting factored into the pricing,” said another banker.
Sahara looks to build reputation and brand with realty public offer
Sahara looks to build reputation and brand with realty public offer
The Economic Times, November 21, 2009, Page 1
Abhinaba Das & Kausik Datta MUMBAI
THE forthcoming IPO of the Sahara group’s real estate arm will hopefully help change public perceptions about the group and make it more transparent, Sushanto Roy, the eldest son of group chairman Subrata Roy, said on Friday.
“The Sahara group is seen as a business house that is non-transparent. We are seen to be too closely held. It’s time we show to people that we have nothing to hide,” Mr Roy, who heads the real estate and infrastructure business, toldETin an interview.
In the future, the real estate business will be the group’s flagship as its current mainstay, an activity commonly referred to as parabanking, is in the process of being wound up. Sahara India Financial Corporation (SIFC), the group’s flagship, accepts fixed deposits from the public and invests the money in government bonds and other approved securities.
But the Reserve Bank of India (RBI) has instructed the group to stop accepting any new deposits maturing beyond June 30, 2011. It has also asked Sahara not to accept installments of existing deposit accounts from that date. This would increase the importance of the real estate business. “We know that the listing of our real estate company will open us up to public scrutiny. This is a conscious decision and we are confident that this will take care of the perception issues,” he added.
Subrata Roy built the financial services to real estate empire virtually from scratch, beginning his journey in 1978 in Uttar Pradesh with a small deposit-taking venture. While his hard work and networking helped him build a $12-billion group with interests in a variety of sectors, it also helped generate suspicion about the group’s practices such as alleged lack of transparency and perceptions that it was close to politicians.
The group’s struggling aviation business had to be sold to Jet Airways in a transaction that generated acrimony and mistrust between the two.
Protests against land acquisition boost Naxals
Protests against land acquisition boost Naxals
Business Standard, November 23, 2009, Page 5
Dillip Satapathy / Bhubaneswar
Recently L N Mittal, the world’s top steel maker, announced in London that he may shift his 12-million tonne steel project out of Orissa because of the long delay in land acquisition and local opposition to the project.
Other promoters of mega projects in the state, such as the Tatas and South Korean steel major Posco, confide the same thing.
Orissa may have attracted investment intent of over Rs 6,00,000 crore (one of the highest among all states in the country), but it has the dubious distinction of not being able to realise most of these proposals. The reason is simple. Almost all the new projects are entangled in protests by locals, particularly in the aftermath of the Kalinga Nagar police firing in 2006, which claimed the lives of 14 people who were protesting against land acquisition for a steel project.
The unwillingness of people to give away land for different projects is not without reason. About 1.5 million people were displaced in the state by various development projects (a majority of them being irrigation-dam projects) since 1951, but pre-2006, when a comprehensive rehabilitation and resettlement (R & R) policy was framed in the state, there is hardly any record of their proper resettlement.
Over the past decade, 32,443 families (about 1,60,000 people) have been displaced in the state for various industrial projects. Of these, 26,594 families (about 1,30,000 people) were displaced before the formulation of a R & R policy in 2006. The districts where most of the displacements ocurred were relatively peaceful earlier, but have seen a substantial increase in Naxalite activities in recent years.
Sources said the state government has allotted 28,392 acres of land to 47 industries which have signed a memorandum of understanding (MoU) with it in the past five years.
The allotted land included 9,454 acres of government land and 18,938 acres of private land, taken over by the state-owned Industrial Infrastructure Development Corporation (Idco).
Taken together for both the MoU-signing and non-MoU companies, the state government, through Idco, has so far allotted 43,214 acres (26,971 acres being private land) to 92 units.
In the case of MoU-signing companies, the government is bound by the agreement to allot land for their projects, while the government role in land acquisition is optional for non-MoU companies.
The total allotment of 43,214 acres was made against the requirement of 1,18,715 acres for 171 projects as assessed by the investment facilitating agency, Ipicol, sources said. Out of it, Idco has applied for acquisition of 1,04,754 acres of land.
In 2001-02, the total investment proposed in Orissa was around Rs 1,00,000 crore. Today, it has swelled to Rs 6,00,000 crore. But while eight years before, only three of the 30 districts were affected by Naxalites, their presence is felt in 20 districts now.
A decade before, only three districts, Malkangiri, Rayagada and Gajapati, in the southern tip of the state bordering Andhra Pradesh, were Naxalite-affected. But over the years, the Naxalites have set up and strengthened their base in Jajpur, Keonjhar, Jagatsinghpur, Angul, Sambalpur, Sundergarh and Jharsuguda, where most of the new investments are concentrated.
What has helped them to spread wings is the rising local resentment against land acquisition and displacement for different industrial projects.
Indian economy is resilient and will strengthen further
Indian economy is resilient and will strengthen further
The Economic Times, November 23, 2009, Page 18
Anand Rathi
THE macro-economic data of developed economies (US and Europe) indicate resumption of growth after many quarters of contraction. Global economic environment, however, continues to be challenging. The stock indices globally have gone up too far too soon. Commodity prices also reflect similar trends. While the recession seems to have ended, the unemployment in the US is at its peak, the highest in 26 years. Credit still remains tight as lenders have turned extremely cautious and the pain of wealth destruction caused by the fall in housing prices continues to depress sentiments as the immediate outlook at ground level remains far from rosy. Barring a few economies like Germany and France, the whole euro zone is affected by similar situation. Markets are keenly looking forward to Christmas sales to gauge improvement in consumer sentiment and spending power as the stimulus effect (improved automobile sales) seems to be petering out calling for a need-assessment for another stimulus. Given this situation, it appears that Fed will continue accommodative measures including low-interest rate regime at least till mid 2010 as recovery is likely to be anaemic for a protracted period.
Ample liquidity at near-zero interest rates has resulted in carry trade shifting to US dollar which has depreciated significantly against major currencies because of fundamental weakness of US economy, high deficits and slow recovery prospects. However, some quarters believe that US dollar is technically oversold and any significant turnaround and resultant impact on carry trade could lead to severe and sharp correction in stocks and commodity indices. As a corollary to weak dollar, gold is exhibiting unprecedented strength and is at an all-time high. While gold may correct 5-7% in the short-term, it may regain strength as both institutional and individual investor segment want to increase exposure as a hedge against dollar. The easy global money has been chasing growth story of select emerging market economies leading to appreciation of their currencies including rupee. While Chinese currency remains tightly paired with US dollar so far, it is now under pressure from US to allow it to get market-linked in a gradual manner. Brazil, however, has levied a tax on inflows so as to avoid ‘hot money’ deluge. Debate has also begun in India in this regard.
For India, it was more of a slowdown than a recession. Our GDP growth during this year would have been higher than the projected 6.5% but for the impact of drought/deficient monsoon. We expect growth to hit 7-7.5% in 2010-11 and cross double-digit in next two-three years. Post reforms / liberalisation beginning in 1991, strong performance by private sector, aided by prudential and conservative policies followed by RBI and regulators, our economy has not only grown but has weathered each successive crisis viz., South East Asian crisis in 1997, tech melt-down in 2000 and now the 2008 financial crisis (mother of all crisis) with least damage. This is in addition to a variety of domestic political, social and economic turbulence. This goes to show that Indian economy has become quite resilient and will strengthen further on the back of inclusive growth and infrastructure investment. Both these themes are domestic economy requirement and the projected growth can be achieved if both these themes are excellently executed and implemented. This strength of the economy and its potential has been recognised by the global investors and is demonstrated by 76% increase in their holding of Indian equities since March 2008 and an $18 billion FII inflow during the current year. The FDI inflow is also on an upswing and has reached $24 billion so far in this calendar and projected to reach $50 billion by 2012 and $100 billion by 2017.
World markets have been inching up gradually and both Dow and S&P 500 sustaining at higher psychological levels at over 10000 and 1000 respectively during the last week on hopes of a sustained recovery. Most fund managers are overweight on emerging markets and expect BRIC economies to offer significant returns and reach new highs over 12-18 months. India and China figure high on this list. It is believed that this century belongs to Asia but it will depend on the domestic demand and these economies should reorient export-led growth to domestic demand and investment-driven growth. Intraday volatility has become the order of the day as the markets seek to balance liquidity and valuations. With the results season behind us, any fundamental triggers to drive the markets in the short run are unlikely, except the PSU divestment drive. Metal stocks continue to gain on strengthening underlying prices. Shipping sector has also witnessed buying interest. The leading sector of the previous week, Banking, is cooling off as high inflation worries fan belt-tightening fears. Sectors whose performance is primarily based on domestic demand viz., Auto and FMCG continue to do well. FIIs continue to invest money helping sustain indices. While it is distinctly possible that the markets give away some of its recent gains in the short run, due to year-end profit booking by FIIs, we would recommend that investors use this opportunity to build quality portfolios for the medium and long-term.
(The writer is chairman Anand Rathi)
Profitable firms may have to earmark funds for CSR
Profitable firms may have to earmark funds for CSR
The Economic Times, November 23, 2009, Page 11
Cos Bill To Fix Percentage Of Profit Or Turnover To Be Mandatorily Spent On CSR Work
Souvik Sanyal NEW DELHI
THE MINISTRY of corporate affairs is working on the broad contours of a code that will require all profit-making companies to set aside an amount proportionate to their turnover or profits for corporate social responsibility (CSR) initiatives, a government official said.
The government plans to make the process consultative, rather than prescriptive, on the proportion of funds earmarked for CSR activities to make it acceptable for corporates, he said, requesting anonymity. Once finalised, the code may be woven into the Companies Bill, 2009, that is currently being considered by a parliamentary standing committee.
The proposal, if implemented, will see private companies stepping up their CSR activity. Currently, profit making PSUs across sectors are required to shell out up to 2% of their net profit towards CSR work.
The proposed code may see the government coming up with incentives for companies that spend beyond a limit on CSR activities. The government, which has roped in industry association Ficci to come up with a draft paper, may consider sops for companies doing CSR work.
The matter will be deliberated at the Corporate Week, scheduled to be held next month. The week, which will see a dialogue between the government and corporates, will aim at reaffirming India Inc’s commitment towards inclusive growth and sustainable development.
Minister for corporate affairs Salman Khurshid had recently said that companies may even be extended fiscal relief for their involvement in CSR work.
“Industry has a positive approach for extending their support towards CSR initiatives because of their business interests involved in the same,” said a person familiar with the making of the code.
With the government showing some willingness to incentivise corporates for doing their bit towards social development, companies should not oppose any effort by the government to make profitable companies accountable, he said, requesting anonymity.
The minister had said that one of the ways to attract companies towards CSR work is to develop a system of CSR credits, similar to carbon credits which are given to companies for green initiatives.
While a method for offering incentives has not yet been finalised, the sops could be in the form of fiscal benefits equivalent to the credit points they have earned.
Model law raises concerns
Model law raises concerns
The Hindu Business Line, November 22, 2009, Page 15
Developers see implementation hurdles and cost overruns.
S. Shanker
The Model Real Estate (Regulation of Development) Act has the developers concerned as they believe it poses issues in implementation and cost overruns. The Ministry of Housing and Urban Poverty Alleviation has publicised this model law to provide guidelines for the establishment of a regulatory authority and appellate tribunal at the State level to streamline real-estate transactions. The authority will regulate, control and promote planned, healthy development and construction, sale, transfer and management of colonies, residential buildings, apartments and other similar properties.
Also, project details will be made available on a specific Web site for public information and transparency. It holds the developers accountable for timely delivery of projects and promotion of projects only after all statutory approvals are obtained.
Reacting to the proposal, Mr Niranjan Hiranandani, Chairman, Hiranandani Constructions, said Mumbai builders were as such reeling under the burden of obtaining 52 clearances/sanctions and there was little reason to bring in a licensing procedure in an already over-regulated sector.
Consumer protection
Mr Santosh Rungta, President, Confederation of Real Estate Developers of India, felt if consumer protection was what the Bill wanted to bring in, it was already covered by various laws such as Consumer Protection Act, Transfer of Property Act, Specific Relief Act, Criminal Procedure Act, Registration Act, besides the Town and Country Planning laws. More regulation would only lead to operational delays and cost escalations which, in turn, would be ultimately loaded on property price.
The clause mandating that developers should furnish the time line for integrating municipal services such as sewerage, water supply and electricity was difficult, given the delays by service providers in extending the services. The regulator should, instead, be given active control over the local authorities to oversee timely delivery of these amenities, he said, adding that local authorities should be made more accountable for delivery of services.
Mr Rungta said if all projects require the regulator’s approvals, it could take three-six months, which would increase project cost. Instead of registration of every project, the Government could think in terms of a registration process for builders and frame guidelines for them. In case of violation of the guidelines, the regulator could cancel the registration.
The law envisages registration after project sanctioning, even when the projects have passed through several processes of financing and investment.
The proposal to let the regulatory authority reserve the right to refuse registration at this juncture appears unfair as the business risk is enormous, he said.
The need for a bank guarantee of 5 per cent would increase project costs. The registration validity for three years is ill-conceived as some large projects are slotted for completion in phases. The registration should be valid at least for five years, he said.
Mr Rungta said property rates were governed by demand-supply dynamics. Hence, the rates quoted in any advertisement might not be the same at all times. So every time the rates change, registering the advertisements with the regulator would become a lengthy procedure.
Mr Ashutosh Limaye, Associate Director, Strategic Consulting, Jones Lang LaSalle Meghraj, said some clauses had significant inconsistencies. Under the definition of ‘promoters’, the draft includes developers and service providers but both are separate, as are the liability issues.
Hoping that all real-estate brokers will register themselves is, therefore, unrealistic.
Green buildings gaining acceptance
Green buildings gaining acceptance
The Hindu Business Line, November 22, 2009, Page 15
CII and the Indian Green Building Council are on an eco-friendly drive in Kerala.
V. Sajeev Kumar
The green building concept, spearheaded by CII and the Indian Green Building Council (IGBC), seems to be gaining acceptance in Kerala following the efforts taken up by the Kochi Chapter of IGBC to create awareness among the people on the need for green buildings.
The IGBC, under the guidance of CII, is awarding LEED (Leadership in Energy and Environment Design) ratings to newly constructed buildings based on environmental categories such as sustainable sites, water and energy efficiency, materials and resources, innovations and design process.
LEED Rating
According to Mr B. R. Ajith, Chairman, IGBC, Kochi Chapter, the CDAC (Centre for Development of Advanced Computing) building at the Techno Park Campus in Thiruvananthapuram is the first green building in the government sector in the State to get LEED rating. For villas and apartments, a new LEED rating system, Green Homes, has been introduced. For townships and IT parks, a new LEEDNeighbourhood Development will be introduced soon. Mr Ajith pointed out that the upcoming IT parks at Ambalappuzha and Cherthala will be the first to come under the Neighbourhood Development rating.
Kerala architecture
The ancient architecture of Kerala is a prime example of the green building concept, as most old buildings in the State have a nadumuttam (courtyard) in the centre of building surrounded by verandhas on all four sides. This arrangement will give maximum light, ventilation and cooling to the inhabitants.
The basic idea of a green building is to make it as self-sustainable as possible, by reducing its dependence on non-renewable energy.
By this process, there will be sizeable reduction in the carbon emission resulting in slowing down of environmental degradation, which is responsible for phenomena such as global warming and climate change. The main objective of the IGBC is to give inspirations to the people to construct green buildings with eco-friendly and locally available materials with minimum disturbance to the environment.
The IGBC has also instituted Green Awards to individuals who have taken up major initiatives and done work in implementing green building technology.
Another proposal put forward by the IGBC, in association with the Energy Management Centre, Thiruvanathapuram, is for an Energy Credit Card System. Energy credit cards will be issued to all power consumers in the State and evaluation will be made on a half-yearly basis. Talks are progressing with the State’s Power Department to provide tariff discounts to consumers who bring 25 per cent or more reduction in energy consumption.
Mr Ajith says households could reduce energy consumption by 25 per cent with energy-efficient CFL lamps, which consume only a fifth of the power of an ordinary bulb; and LED lights consume even less power.
Kerala’s power requirement is around 3,000 MW. If the State is able to reduce consumption even by 25 per cent it will become power-surplus, Mr Ajith added.
The rising curve
The rising curve
Hindustan Times, HT Estate, November 21, 2009, Page 1
Santosh Kumar Rai bought a house in Gurgaon in the first quarter this year for Rs 2,000 per sq ft. When his brother, Gangadhar Kumar Rai, decided to get off the fence and buy into the same project this month, he was in for a shock. The prices had gone up 20 per cent.
Yes, the market is definitely looking up, with new launches leading the rising curve in the residential realty segment.
About 33 per cent of projects in this category have recorded a price increase at the panIndia level, suggests data by real estate research firm PropEquity. Talking about Delhi-NCR, the report says the city that showed the maximum price increase between March and October 2009 at 11.1 per cent, was Gurgaon (see table). Faridabad came next at 8.5 per cent, Noida and Greater Noida at 6.5 per cent and Ghaziabad at 5.1 per cent.
According to Samir Jasuja, CEO of PropEquity, Gurgaon and Noida prices had reacted to the slowdown and fallen much lower than established base prices (in the market) when compared to other NCR hubs. Also, out of the four markets, Gurgaon had the maximum number of new launches and since the price correction is led by this category, it has logged the highest price increase too.
The gap between the launch price of new offerings post-slowdown and the established base price in the market was also the widest in Gurgaon. As a result of this influx of supply at lower prices, the established base price underwent downward revision. With markets picking up, the base price in the city is headed towards earlier established levels. And that is why one can see Gurgaon logging the maximum price rise, explains Jasuja.
There was hardly any difference between new launch prices and the established base price in Ghaziabad, and thus there wasn't a significant increase in prices.
Also, in terms of price decline in existing projects due to the downturn, Noida recorded a sharper fall as compared to other NCR hubs, leading to higher prices of old projects there. These were seen as leading the overall increase in Noida instead of the new launches.
But is the increase sustainable? For the new launches it is, because these were launched at corrected price levels post-slowdown, with thin margins for developers.
Projects that were launched before September 2008 (at a high price and equally high margins for the developer) may not be able to sustain any increase in pricing, says Jasuja.
According to Kumar Gera, chairman, Confederation of Real Estate Developers' Association of India (CREDAI), the tightening of the monetary situation, which led to negative sentiments in the market, seems to have improved over the past few quarters. Though prices are nowhere near the 2007-2008 levels, these are gradually inching up. It is hard to say, however, how long these will take to reach the 2007-2008 levels.
The price increase was seen primarily in case of new projects as older projects remained stalled and no sales happened unless clear dates of possession were indicated, points out Vineet Singh of realty portal 99 acres.com.
The quarter also witnessed relaunches of some old projects with around 12 to 18 months handover period. Prices were competitive as builders wanted to sell fast, Singh adds.
Price vs discounts A close analysis of some affordable housing projects data in Delhi NCR region launched in March throws up some interesting facts. A random check of prices across the four hubs shows a minimal 3 per cent hike.
However, if the discounts initially offered to buyers is included, then this rise will add up to 9 per cent.
From the select set of projects within Delhi NCR, Gurgaon has seen an impressive 11 per cent appreciation (inclusive of discounts) and Noida-Greater Noida has seen a mere 3 per cent corresponding increase. Though all projects might not have been studied, it shows that Gurgaon and Ghaziabad markets have seen a better response, points out Priyankar Bhikshu, Associate Director - Consulting and Research, DTZ.
The other side Where ready-to-move-in and secondary residential projects are concerned, Gurgaon again witnessed the highest growth in capital values over the last quarter. According to Cushman & Wakefield's quarterly Marketbeat, the city saw an increase of 19 per cent followed by Noida at 16 per cent.
According to Shweta Jain, head (residential), C & W, "Market sentiment is buoyant right now.
Projects that are available off the shelf and are ready to be occupied are clearly seeing an inching up of capital values. One may see a 5-7 per cent increase in the next few months in this category. One may also see some new projects being launched in established locations at a slightly higher price. But, future launches in emerging locations may not be able to sustain an increase in price."
The future Realty experts, however, are quick to point that a price rise of more that 25 per cent may upset the applecart and the positive momentum that has been building up over the last three quarters.
Concurs Bhikshu, "Going forward, we expect the real estate residential prices in affordable projects to see a steady (approximately 3-5 per cent) increase in prices till April 2010 in the suburban locations of Delhi NCR.
Beyond that, a lot will depend on the macroeconomic and business environment for financial year 2010-11."
However, warns Jasuja, "If developers fail to show progress on the construction front in case of new projects, it may upset the investor's confidence and will have a negative impact on the sales velocity. Besides, a price rise beyond 25 per cent in that scenario would impact the absorption/demand and present considerable challenge to developers catering to the price sensitive market segment."
Clearly, the writing on the wall is: Developers have to keep a check on the prices and deliver on time.
Santosh Kumar Rai bought a house in Gurgaon in the first quarter this year for Rs 2,000 per sq ft. When his brother, Gangadhar Kumar Rai, decided to get off the fence and buy into the same project this month, he was in for a shock. The prices had gone up 20 per cent.
Yes, the market is definitely looking up, with new launches leading the rising curve in the residential realty segment.
About 33 per cent of projects in this category have recorded a price increase at the panIndia level, suggests data by real estate research firm PropEquity. Talking about Delhi-NCR, the report says the city that showed the maximum price increase between March and October 2009 at 11.1 per cent, was Gurgaon (see table). Faridabad came next at 8.5 per cent, Noida and Greater Noida at 6.5 per cent and Ghaziabad at 5.1 per cent.
According to Samir Jasuja, CEO of PropEquity, Gurgaon and Noida prices had reacted to the slowdown and fallen much lower than established base prices (in the market) when compared to other NCR hubs. Also, out of the four markets, Gurgaon had the maximum number of new launches and since the price correction is led by this category, it has logged the highest price increase too.
The gap between the launch price of new offerings post-slowdown and the established base price in the market was also the widest in Gurgaon. As a result of this influx of supply at lower prices, the established base price underwent downward revision. With markets picking up, the base price in the city is headed towards earlier established levels. And that is why one can see Gurgaon logging the maximum price rise, explains Jasuja.
There was hardly any difference between new launch prices and the established base price in Ghaziabad, and thus there wasn't a significant increase in prices.
Also, in terms of price decline in existing projects due to the downturn, Noida recorded a sharper fall as compared to other NCR hubs, leading to higher prices of old projects there. These were seen as leading the overall increase in Noida instead of the new launches.
Projects that were launched before September 2008 (at a high price and equally high margins for the developer) may not be able to sustain any increase in pricing, says Jasuja.
According to Kumar Gera, chairman, Confederation of Real Estate Developers' Association of India (CREDAI), the tightening of the monetary situation, which led to negative sentiments in the market, seems to have improved over the past few quarters. Though prices are nowhere near the 2007-2008 levels, these are gradually inching up. It is hard to say, however, how long these will take to reach the 2007-2008 levels.
The other side Where ready-to-move-in and secondary residential projects are concerned, Gurgaon again witnessed the highest growth in capital values over the last quarter. According to Cushman & Wakefield's quarterly Marketbeat, the city saw an increase of 19 per cent followed by Noida at 16 per cent.
According to Shweta Jain, head (residential), C & W, "Market sentiment is buoyant right now.
Projects that are available off the shelf and are ready to be occupied are clearly seeing an inching up of capital values. One may see a 5-7 per cent increase in the next few months in this category. One may also see some new projects being launched in established locations at a slightly higher price. But, future launches in emerging locations may not be able to sustain an increase in price."
The future Realty experts, however, are quick to point that a price rise of more that 25 per cent may upset the applecart and the positive momentum that has been building up over the last three quarters.
Concurs Bhikshu, "Going forward, we expect the real estate residential prices in affordable projects to see a steady (approximately 3-5 per cent) increase in prices till April 2010 in the suburban locations of Delhi NCR.
Beyond that, a lot will depend on the macroeconomic and business environment for financial year 2010-11."
However, warns Jasuja, "If developers fail to show progress on the construction front in case of new projects, it may upset the investor's confidence and will have a negative impact on the sales velocity. Besides, a price rise beyond 25 per cent in that scenario would impact the absorption/demand and present considerable challenge to developers catering to the price sensitive market segment."
Hindustan Times, HT Estate, November 21, 2009, Page 1
Santosh Kumar Rai bought a house in Gurgaon in the first quarter this year for Rs 2,000 per sq ft. When his brother, Gangadhar Kumar Rai, decided to get off the fence and buy into the same project this month, he was in for a shock. The prices had gone up 20 per cent.
Yes, the market is definitely looking up, with new launches leading the rising curve in the residential realty segment.
About 33 per cent of projects in this category have recorded a price increase at the panIndia level, suggests data by real estate research firm PropEquity. Talking about Delhi-NCR, the report says the city that showed the maximum price increase between March and October 2009 at 11.1 per cent, was Gurgaon (see table). Faridabad came next at 8.5 per cent, Noida and Greater Noida at 6.5 per cent and Ghaziabad at 5.1 per cent.
According to Samir Jasuja, CEO of PropEquity, Gurgaon and Noida prices had reacted to the slowdown and fallen much lower than established base prices (in the market) when compared to other NCR hubs. Also, out of the four markets, Gurgaon had the maximum number of new launches and since the price correction is led by this category, it has logged the highest price increase too.
The gap between the launch price of new offerings post-slowdown and the established base price in the market was also the widest in Gurgaon. As a result of this influx of supply at lower prices, the established base price underwent downward revision. With markets picking up, the base price in the city is headed towards earlier established levels. And that is why one can see Gurgaon logging the maximum price rise, explains Jasuja.
There was hardly any difference between new launch prices and the established base price in Ghaziabad, and thus there wasn't a significant increase in prices.
Also, in terms of price decline in existing projects due to the downturn, Noida recorded a sharper fall as compared to other NCR hubs, leading to higher prices of old projects there. These were seen as leading the overall increase in Noida instead of the new launches.
But is the increase sustainable? For the new launches it is, because these were launched at corrected price levels post-slowdown, with thin margins for developers.
Projects that were launched before September 2008 (at a high price and equally high margins for the developer) may not be able to sustain any increase in pricing, says Jasuja.
According to Kumar Gera, chairman, Confederation of Real Estate Developers' Association of India (CREDAI), the tightening of the monetary situation, which led to negative sentiments in the market, seems to have improved over the past few quarters. Though prices are nowhere near the 2007-2008 levels, these are gradually inching up. It is hard to say, however, how long these will take to reach the 2007-2008 levels.
The price increase was seen primarily in case of new projects as older projects remained stalled and no sales happened unless clear dates of possession were indicated, points out Vineet Singh of realty portal 99 acres.com.
The quarter also witnessed relaunches of some old projects with around 12 to 18 months handover period. Prices were competitive as builders wanted to sell fast, Singh adds.
Price vs discounts A close analysis of some affordable housing projects data in Delhi NCR region launched in March throws up some interesting facts. A random check of prices across the four hubs shows a minimal 3 per cent hike.
However, if the discounts initially offered to buyers is included, then this rise will add up to 9 per cent.
From the select set of projects within Delhi NCR, Gurgaon has seen an impressive 11 per cent appreciation (inclusive of discounts) and Noida-Greater Noida has seen a mere 3 per cent corresponding increase. Though all projects might not have been studied, it shows that Gurgaon and Ghaziabad markets have seen a better response, points out Priyankar Bhikshu, Associate Director - Consulting and Research, DTZ.
The other side Where ready-to-move-in and secondary residential projects are concerned, Gurgaon again witnessed the highest growth in capital values over the last quarter. According to Cushman & Wakefield's quarterly Marketbeat, the city saw an increase of 19 per cent followed by Noida at 16 per cent.
According to Shweta Jain, head (residential), C & W, "Market sentiment is buoyant right now.
Projects that are available off the shelf and are ready to be occupied are clearly seeing an inching up of capital values. One may see a 5-7 per cent increase in the next few months in this category. One may also see some new projects being launched in established locations at a slightly higher price. But, future launches in emerging locations may not be able to sustain an increase in price."
The future Realty experts, however, are quick to point that a price rise of more that 25 per cent may upset the applecart and the positive momentum that has been building up over the last three quarters.
Concurs Bhikshu, "Going forward, we expect the real estate residential prices in affordable projects to see a steady (approximately 3-5 per cent) increase in prices till April 2010 in the suburban locations of Delhi NCR.
Beyond that, a lot will depend on the macroeconomic and business environment for financial year 2010-11."
However, warns Jasuja, "If developers fail to show progress on the construction front in case of new projects, it may upset the investor's confidence and will have a negative impact on the sales velocity. Besides, a price rise beyond 25 per cent in that scenario would impact the absorption/demand and present considerable challenge to developers catering to the price sensitive market segment."
Clearly, the writing on the wall is: Developers have to keep a check on the prices and deliver on time.
Santosh Kumar Rai bought a house in Gurgaon in the first quarter this year for Rs 2,000 per sq ft. When his brother, Gangadhar Kumar Rai, decided to get off the fence and buy into the same project this month, he was in for a shock. The prices had gone up 20 per cent.
Yes, the market is definitely looking up, with new launches leading the rising curve in the residential realty segment.
About 33 per cent of projects in this category have recorded a price increase at the panIndia level, suggests data by real estate research firm PropEquity. Talking about Delhi-NCR, the report says the city that showed the maximum price increase between March and October 2009 at 11.1 per cent, was Gurgaon (see table). Faridabad came next at 8.5 per cent, Noida and Greater Noida at 6.5 per cent and Ghaziabad at 5.1 per cent.
According to Samir Jasuja, CEO of PropEquity, Gurgaon and Noida prices had reacted to the slowdown and fallen much lower than established base prices (in the market) when compared to other NCR hubs. Also, out of the four markets, Gurgaon had the maximum number of new launches and since the price correction is led by this category, it has logged the highest price increase too.
The gap between the launch price of new offerings post-slowdown and the established base price in the market was also the widest in Gurgaon. As a result of this influx of supply at lower prices, the established base price underwent downward revision. With markets picking up, the base price in the city is headed towards earlier established levels. And that is why one can see Gurgaon logging the maximum price rise, explains Jasuja.
There was hardly any difference between new launch prices and the established base price in Ghaziabad, and thus there wasn't a significant increase in prices.
Also, in terms of price decline in existing projects due to the downturn, Noida recorded a sharper fall as compared to other NCR hubs, leading to higher prices of old projects there. These were seen as leading the overall increase in Noida instead of the new launches.
Projects that were launched before September 2008 (at a high price and equally high margins for the developer) may not be able to sustain any increase in pricing, says Jasuja.
According to Kumar Gera, chairman, Confederation of Real Estate Developers' Association of India (CREDAI), the tightening of the monetary situation, which led to negative sentiments in the market, seems to have improved over the past few quarters. Though prices are nowhere near the 2007-2008 levels, these are gradually inching up. It is hard to say, however, how long these will take to reach the 2007-2008 levels.
The other side Where ready-to-move-in and secondary residential projects are concerned, Gurgaon again witnessed the highest growth in capital values over the last quarter. According to Cushman & Wakefield's quarterly Marketbeat, the city saw an increase of 19 per cent followed by Noida at 16 per cent.
According to Shweta Jain, head (residential), C & W, "Market sentiment is buoyant right now.
Projects that are available off the shelf and are ready to be occupied are clearly seeing an inching up of capital values. One may see a 5-7 per cent increase in the next few months in this category. One may also see some new projects being launched in established locations at a slightly higher price. But, future launches in emerging locations may not be able to sustain an increase in price."
The future Realty experts, however, are quick to point that a price rise of more that 25 per cent may upset the applecart and the positive momentum that has been building up over the last three quarters.
Concurs Bhikshu, "Going forward, we expect the real estate residential prices in affordable projects to see a steady (approximately 3-5 per cent) increase in prices till April 2010 in the suburban locations of Delhi NCR.
Beyond that, a lot will depend on the macroeconomic and business environment for financial year 2010-11."
However, warns Jasuja, "If developers fail to show progress on the construction front in case of new projects, it may upset the investor's confidence and will have a negative impact on the sales velocity. Besides, a price rise beyond 25 per cent in that scenario would impact the absorption/demand and present considerable challenge to developers catering to the price sensitive market segment."
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