Real Estate Intelligence Service, Friday, November 27, 2009

Sensex falls 344 pts on global cues

Sensex falls 344 pts on global cues
Business Standard, November 27, 2009, Section II, Page 1

BS Reporter / Mumbai

Derivatives expiry, higher food inflation and lower earnings also weigh on indices.

Indian stock indices tumbled as investors booked profit in banks, FMCG and real estate stocks today, the expiry day for November derivatives.

The Bombay Stock Exchange (BSE) Sensitive Index, or Sensex, had a flat start at 17,199.05 on the back of weak global cues. The index exhibited lacklustre movement till late-morning trades. Then, taking cues from Asian markets, which were battered badly, the index began to extend losses.

The Shanghai Composite Index slumped 3.62 per cent on fear of government intervention to arrest surging asset prices while the Jakarta Composite Index slipped 2.76 per cent.

Heavy selling due to derivatives’ unwinding and weak cues from European markets further dampened the sentiment in late-noon deals. The Sensex plunged to a low of 16,809 and finally closed at 16,854.93, down 344 points, or 2 per cent. The NSE Nifty settled at 5,005.55, down 102.60 points.

Shares of Reliance Industries were in focus as they were trading ex-bonus for the first day today. The company had announced bonus shares in the ratio of 1:1 in early October, for which November 27 was set as the record date. The stock closed at Rs 1,065, down nearly 3 per cent on adjusted prices.

All sectoral indices exhibited weakness. The Bankex shed 2.64 per cent, the oil & gas index slipped 2.3 per cent and the realty index was down 2.11 per cent.

The market breadth was negative. Out of 2,817 shares traded, 1,877 (66.63 per cent) declined and 864 (30.67 per cent) advanced on the BSE. ICICI Bank was among the major losers on the BSE, down 3.74 per cent. Tata Steel slumped 3.34 per cent after the company reported a net loss of Rs 2,719.80 crore.

Mahindra & Mahindra (3.1 per cent) and State Bank of India (3.01 per cent) were some of the prominent draggers. ITC, Maruti, Reliance Infrastructure, HDFC Bank, Wipro, TCS and DLF declined 2-3 per cent.

Hindustan Unilever, Sun Pharma , ACC and Hero Honda were marginal gainers (up about 0.5 per cent).

Other stocks in which major movement took place were EIH, which strengthened on news that ITC is mulling a counter offer or a stake sale. It closed up 4.5 per cent. Mahindra Satyam, which opened 8 per cent lower for the fourth consecutive day on concerns that losses due to the alleged fraud might stretch further, erased its losses to end 2.5 per cent higher at Rs 93.

Tata Steel topped the value charts, clocking a turnover of Rs 252.33 crore, and IFCI saw 12.12 million shares change hands on the BSE.

“The weakness is attributed to the F&O expiry day,” said Bhavin Desai, manager, derivatives, Motilal Oswal Financial Services. Desai said the market had been cautious since last week. He expects cement to do well because of the build-up through the month.

Bhavin sees the Nifty moving in the band of 4,900-5,200 in the December series.

Sensex dips below 17,000 on global cues, talk of check on FII flows

Sensex dips below 17,000 on global cues, talk of check on FII flows
The Hindu Business Line, November 27, 2009, Page 1

Chinese, European markets weak; heavy selling in pivotals.

Our Bureau, Mumbai

Market indices fell sharply due to heavy selling pressure as signs of weakness in the international financial markets surfaced again. The Sensex slipped below the 17,000-mark on Thursday.

The benchmark index tanked 2 per cent, shedding over 340 points. It touched the day’s high at 17,202, and a low of 16,808 before closing at 16,854. The broader Nifty too fell over 2 per cent, but managed to keep its head above the 5,000-mark, to close at 5,005.

Concerns over debt repayment delays by a Dubai government-owned investment company made global markets nervous.

“This also led to selling pressure in India,” said Mr Gopal Agrawal, Senior Fund Manager, Mirae Asset AMC.

Also, there was some amount of profit booking as investors unwound positions due to the expiry of futures and options today, he said.

P-notes check

Brokers said the selling pressure was due to various reasons, including news that the Government has called for checking Foreign Institutional Investment flows through Participatory-Notes.

“A lot of money comes into Indian stocks from free and unregulated markets through the P-Note route,” said a broker.

On Thursday, FIIS were net sellers for Rs 70 crore; domestic institutions were net buyers of equity for Rs 150 crore, according to data on the NSE.

FII activity has been lacklustre over the last few trading sessions, said brokers.

Brokers said that Indian stocks also slid owing to negative cues from the Chinese market where banking stocks fell sharply. Asian markets too were weak; the Hang Seng was down 1.75 per cent, Nikkei fell by 0.62 per cent.

Concerns arose globally after a Government-owned investment company in Dubai asked for six more months for repaying its debts. Dubai World is asking creditors if it can postpone its forthcoming payments until May next year.

European markets were trading weak with the key benchmark indices in the UK, France and Germany down in the range of 1.86 per cent and 2.05 per cent.

There was heavy selling in the index heavyweights including Reliance Industries, which went ex-bonus today, said another broker.

From the announcement date of the bonus to the record date there had been heavy buying in RIL, he added. In fact the stock had moved up during the past couple of days due to this, he added.

Major losers

The major losers on the BSE included Reliance Industries (4.5 per cent)post bonus, ICICI Bank (3.47 per cent), Tata Steel (3.34 per cent), Mahindra & Mahindra (3.10 per cent), SBI (3.01 per cent).

All this negative news means that confidence is dwindling as even the Asian countries are in trouble, said Mr Vishwas Agarwal, an independent analyst. Mutual funds were not very active, but some selling was noticed due to redemption fears, said a broker.

They were exiting capital goods, engineering and real estate stocks and increasing their exposure to energy, pharma, IT and financial sector stocks, said Mr Agrawal.

Retail participation

Retail investors on the other hand were either not participating in the markets or were booking losses. There was almost no retail activity, said a broker.

“I did not participate in the market today as it was F&O expiry,” said Mr Ajay Patel, a retail investor. “I would rather wait for the markets to set a trend in the coming days and then decide on my investments,” he added.

Govt land reforms report says SEZ concept enormously destructive

Govt land reforms report says SEZ concept enormously destructive
Business Standard, November 27, 2009, Page 12

Sreelatha Menon / New Delhi

Special Economic Zones are nothing but special exemption zones and there is no reason to exempt these from all law. Hence, scrap these, is the recommendation of the Committee on Land Reforms and Agrarian Relations set up by the Union government to advise it on issues ranging from land reforms and land acquisition to measures to stop conversion of farm lands.

It says the SEZs should be scrapped in the interest of both ecology and food security. While the loss of revenue in the form of taxes as well as its effect on agricultural production are not being studied, the law is silent on the ecological and environmental concerns of areas thse would apply to, the committee says.

According to the SEZ Act, 2005, there is no upper limit for land acquisition by state governments. It also allows acquisition of wasteland and single-crop land, putting negative impact on common property resources like land, forest and water bodies. The committee cites the Raigarh SEZ which Reliance wishes to develop in Maharashtra on 12,000 hectares of land cultivated by tribals for decades.

It also questions the claims of investments for SEZs. It says the projected investment in 63 SEZs is Rs 166,785 crore. It says Rs 67,500 crore is accounted for just by one 10 sq km multi-product SEZ in Kakinada. Locationally, 92 per cent of this proposed investment is in Andhra Pradesh and Gujarat (46 per cent each). The proposed investment in units is therefore extremely skewed.

It also challenges the claim about the SEZs being a new avenue of job generation, saying the information available about proposed direct employment for 110 SEZs is a total of 2.14 million. Of this, 61 per cent is in the IT/ITeS sector, exceeding the entire current employment in that sector. And, 85 per cent of this proposed employment is in just five states, with 40 per cent in Andhra Pradesh alone.

The 200,00 hectares proposed to go for SEZs is, says the report, predominantly agricultural and typically multi-cropped land, capable of producing close to one million tonnes of foodgrain. And, that close to 114,000 farming households (each household comprising five members) and an additional 82,000 farm-worker families will be displaced. That means a million people face eviction.

Almost 80 per cent of the agricultural population owns only about 17 per cent of the total agriculture land, making them near-landless farmers. Far more families and communities depend on a piece of land (for work, grazing) than those who simply own it, it notes. It also questioned the procedure to value the land taken over. It further points out that it is not bound by environmental laws and the EIA notification, 2006, issued by the ministry of environment, leaves out SEZs.

Moreover, the SEZ developer and units would also be exempted from taxes levied by the local bodies. It further says the SEZ Act of various states gives a blank cheque to the water requirement for the zones. For example, the Gujarat Act says, “The SEZ developers will be granted approval for development of water supply and distribution system to ensure the provision of adequate water supply for SEZ units.” It has given examples of the diversion proposed from hydro projects for SEZs, and for other major industrial projects coming up on acquired land, such as Posco mammoth steel project in Orissa — the daily water requirement, it says, is 286 million litres per day, to be procured from the Jobra barrage on the Mahanadi, from the upstream Hirakud dam. There is already an agitation against reservation of water from the Hirakud dam for industrial purposes, the report notes.

Property firesale possible as Dubai stares down default

Property firesale possible as Dubai stares down default
The Economic Times, November 27, 2009, Page 8

Sinead Cruise LONDON

THE DUBAI government could be forced to hold a firesale of its international real estate if creditors to two of its flagship companies reject proposals to put near-term debt obligations on ice until May 2010.

International property advisers are bracing for a potential slew of instructions to revalue and sell trophy assets owned by Dubai World and its many property-owning units as the emirate struggles to shrink its $59 billion debt pile.

“We do expect the Dubai government to step up efforts to raise capital via real estate sales, and sales of their UK assets in particular,” James Lewis, a member of the Gulf capital markets team at property consultant Knight Frank told Reuters.

Lewis said Dubai had a better chance of denting its massive financial liabilities if it raided its group portfolio, which comprises international landmarks such as the Grand Buildings close to London’s Trafalgar Square, the Mandarin Oriental hotel in New York and the Victoria & Albert Waterfront complex in Cape Town, South Africa.

“The simple supply and demand imbalance (in Dubai) is horrific, which begs the question of why you would want to buy commercial and residential property there if you couldn’t be sure of letting it,” Lewis said. “Some of their properties are interesting and in the fullness of time will look very clever. But they will have to sell their better stock, no one is in the market to buy the poorer grade kit. International assets on the other hand will move,” he added.

Average commercial real estate prices in the UK have risen 3.2% in the three months to end-October as investors chase property bargains offering higher yields than bonds or cash deposits.

“With the capital flooding London right now, there’s probably no better place to sell property if you had to raise some quick money,” Alistair Hilton, a partner at property consultant Cushman & Wakefield said.—Reuters

GMR in talks with PEs to raise $450 m from airport biz stake

GMR in talks with PEs to raise $450 m from airport biz stake
The Economic Times, November 27, 2009, Page 35

Mohit Bhalla ET NOW

INFRASTRUCTURE conglomerate GMR group is in talks with private equity funds 3i Investments and Macquarie-SBI Infrastructure to raise $450 million in GMR Airport Holdings, a person familiar with the company’s plans told ET NOW.

GMR wants to sell a minority stake in the airport subsidiary to raise cash for investments in infrastructure and power. The airports business, which includes the Hyderabad and Delhi airports, account for 45% of the group’s revenues.

A spokesperson for GMR said in an emailed statement to ET NOW that as a corporation they pursue various options for raising funds and cannot comment on this specific query. Fiona McDonald, a spokesperson for Macquarie Group in Singapore termed the queries from ET NOW as market speculation. Emailed queries to Jennifer Letki, a spokesperson for 3i Investments in London, elicited a similar response.

GMR’s Group chief financial officer, A Subbarao, said in a media statement two days ago that the company plans to invest $650 million in its various businesses over the next two years. He also said that the company was talking to various private equity investors for buying stake in its infrastructure and power businesses.

According to information available on its website, the London-headquartered 3i Investments manages a portfolio of $920 million in investments in India across media, automotives, construction, power, ports and manufacturing amongst others. Amongst its major investments is a $272 million investment in Adani Power.

Other Investments include stakes in International Tractors, OOH Media, Krishnapatnam Port Company and Vijai Electricals. 3i also closed out a $1.2 billion India Infrastructure fund in April 2008 of which it has already deployed $330 million.

Macquarie and SBI announced the launch of their $1billion infrastructure fund in April this year. GMR Infrastructure leads a consortium that is rebuilding the New Delhi airport, has developed the international airport at Hyderabad in southern India, and also holds a 40% stake at the second airport at Istanbul in Turkey.

The company has also signed a Memorandum of Understanding (MoU) with the government of Maldives for preparing a feasibility study for a new airport project there and is also bidding for the privatization of the existing airport project in that country.

Realty rebound on cards with over 3 lakh houses to come up by 2011

Realty rebound on cards with over 3 lakh houses to come up by 2011
The Financial Express, November 27, 2009, Page 12

fe Bureaus, Chennai

Leading independent global property consultancy, Knight Frank India, said its latest research on the country’s residential market found that 3,67,000 housing units will be available by 2011, across seven Indian cities of which 25% will come up in the National Capital Region (NCR) alone. The NCR will be the largest contributor with 92,202 housing units equating to 160.16 million sq ft of fresh supply of residential space followed by Mumbai with 72,906 units equating to approximately 80.61 million sq.ft by the end of 2011.

With the resurgence witnessed in the global economy, particularly the real estate sector, Knight Frank’s report further said 75% of the present and future residential supply will focus on the 2 and 3-BHK housing units being built. The report closely examines potential residential supply across several key cities by the end of 2011.

“Our research has shown that during the slump there has been a price correction across several cities from 10% to as much as 40%. Since March 2009, residential property prices have again increased by 10% to 30%, but this phenomenon is limited to cities like Mumbai and Bengaluru. It is not a countrywide phenomenon. Many developers are targeting the mid-income group in key metros with housing units that are priced to suit their needs,” said Gulam Zia, national director, research and advisory services, Knight Frank India.

Commenting on the residential research report, Anand Narayanan, national director, residential agency, Knight Frank India said, “Our research has revealed several interesting trends with regard to the residential sector. One of the most important trends emerging is the increased focus of developers on 2 and 3-BHK housing units from the 4 and 5-BHK and penthouses witnessed few years back.”

Customer loyalty a thing of the past

Customer loyalty a thing of the past
The Financial Express, November 27, 2009, Page 12

fe Bureaus, Thiruvananthapuram

Customer loyalty is dead, long live cluster loyalty! This was the conclusion arrived at during UST Global’s Retail Razzmatazz. It has also been seen that clients are no longer faithful to particular brand because of a loyalty incentive, since other brands of similar products or services may offer same services too.

An airline’s loyalty scores or a bank’s fancy credit card add-ons, to cite examples, tempt the client to keep returning to the same brand only when they are the only ones offering this kind of an incentive. “Research has shown that customer loyalty is dead”, says Harish Bijjor, brand expert and CEO, Harish Bijoor Consults Inc, Bangalore, while speaking at the UST Global’s Retail Razzmatazz in Thiruvananthapuram, which had customer loyalty as its theme.

Bijoor also argued that there could be a new trend called `cluster loyalty’, where the client is faithful to a select cluster of brands, which offer him the best experience. An airlines multiple interfaces with a client from one airport to the next could perhaps be an outsourced portion of the service that could cause the airline brand to fall off the client’s favoured cluster.

UST Global, a leading provider of end-to-end IT services and solutions for the Global 1000 market, held second annual Retail Razzmatazz with a week of concurrent events. According to Arun Narayanan, COO, UST Global, Retail Week provides a robust platform for discussion and learning, on both strategic and tactical levels. The theme being customer loyalty, the event presented a comprehensive view of the 2010 consumer who shops, spends, and thinks differently than in the past.

Marsha Blakeslee, GM, Industry Practices, UST Global spoke on the opportunities before social media to enhance customer loyalty in retail and the opportunities for IT players like UST in emerging markets like India. Arun Gupta, Group CIO, Shoppers Stop, said, “IT should demystify itself and become more ubiquitous to make its presence felt to the customer. It should seep unassumingly into the daily lives of people to ensure its longevity.”

Realty may see no FDI lock-in

Realty may see no FDI lock-in
The Times of India, November 27, 2009, Page 25

Pradeep Thakur & Sanjay Dutta, TNN, NEW DELHI

The commerce ministry has moved a proposal to remove the condition of the minimum lock-in period for repatriation of FDI in construction industry. According to a note circulated among pertinent ministries for their comments, the move is aimed at further easing FDI flow in construction of housing projects, hotels and townships etc.

The proposal is to remove the clause that bars such investors from repatriating their investments before three years from completion of minimum capitalisation of a project. The government had put the lock-in clause while allowing 100% FDI in the sector in 2005. The Press Note 2, which had notified permission for 100% FDI, however, said an investor could be permitted to exit earlier with prior approval of the FIPB.

The commerce ministry’s proposal is expected to spur overseas funds flow into real estate and infrastructure projects. Both these areas are experiencing funds crunch and many housing projects have either stalled or failed to take off as investors closed their purse-strings in the wake of the slowdown.

A revival in this sector is expected to have a multiplier effect on the economy and create jobs for not only unskilled and skilled workers such as labourers and artisans but also for engineers and architects etc. who are involved in developing real estate projects. A resumption of construction development is also expected to boost manufacturing sector by raising demand for such items as steel and cement.

At present, 100% FDI is allowed in the sector under the automatic route in townships, housing, built-up infrastructure and construction-development projects that include housing and commercial premises, hotels, resorts, hospitals, educational institutions, recreational facilities, city and regional level infrastructure.

The FDI permision is subject to a minimum capitalization of $10 million for wholly-owned subsidiaries and $5 million for joint ventures with Indian partners. The foreign investor has to bring in the money within six months of setting shop here. Besides, norms also stipulate that at least half of the project must be developed within a period of five years from the date of obtaining all statutory clearances. An investor is also not allowed to sell undeveloped plots.

Projects with FDI also need to adhere to some other conditions. For serviced housing plots, the project has to be spread over a minimum land area of 10 hectares.