Real Estate Intelligence Service, Wednesday, December 02, 2009

Economy may grow close to 7%: Rangarajan

Economy may grow close to 7%: Rangarajan
The Hindu Business Line, December 02, 2009, Page 15

PM's council to take a call on farm sector impact.

Our Bureau, New Delhi, Dec. 1

The Indian economy might grow close to 7 per cent this fiscal riding on the back of a good showing in manufacturing and services sectors, Dr C. Rangarajan, Chairman of the Prime Minister's Economic Advisory Council (PMEAC), has said.

The council had in October pegged its GDP growth forecast for the current fiscal at 6.5 per cent. With the Indian economy returning a better-than-expected Q2 GDP growth rate of 7.9 per cent, there are strong indications that it will revise upwards its GDP growth estimate for 2009-10.

“We will review in January our growth estimates. We had earlier said 6.5 per cent. Probably it could be higher…. It could be close to 7 per cent”, Dr Rangarajan told reporters on the sidelines of an event organised by NCAER and Australian Government here on Tuesday.

Dr Rangarajan, however, noted that the council would need to assess the impact of decline in agricultural growth before taking a call on an upward revision in GDP growth outlook for 2009-10.

Agriculture sector grew a modest 0.9 per cent in second quarter this fiscal, lower than growth rate of 2.7 per cent in Q2 last year.

This sector had recorded a lower growth in Q1 too at 2.4 per cent (3 percent).

Asked whether the strong Q2 GDP performance will compel the Government to go in for an early exit of fiscal stimulus, Dr Rangarajan said that the fiscal policy will remain as it is till end March 2010.

“A decision on what to do after March 2010 will be taken at the time of budget”, Dr Rangarajan said.

Monetary policy

On the monetary policy side, Dr Rangarajan said that the RBI's focus will now be on taming inflation.

He highlighted the seasonal decline in prices during November and December and noted that RBI would do well to watch out for this before taking a call on an appropriate policy action.

Montek predicts 7.5% growth in 2010-11

Montek predicts 7.5% growth in 2010-11
The Economic Times, December 02, 2009, Page 6

Our Bureau NEW DELHI

INDIA’S economy could grow at 7.5% in 2010-11 and would breach the 8% mark in the last year of the Eleventh Five Year Plan, said Planning Commission deputy chairman Montek Singh Ahluwalia.

An upward revision of the growth projection of 6.5% for the current year will be done in the mid-term appraisal of the eleventh plan due shortly, he added.

Speaking at the India Infrastructure Summit organised by IDFC on Tuesday, Mr Ahluwalia said because of the good performance of the economy in the second quarter of the fiscal, growth projection would definitely go up.

“But I am not in a position to say at the moment where exactly between 6.5% and 7% it would be,” he said. Mr Ahluwalia pointed out that the prime minister’s vision was to have a 9% GDP growth rate in 2011-12, the last year of the Eleventh Plan period.

“While we cannot have a 9% growth rate for the entire plan period because of the two bad years we have had, if we can end it with a 9% growth rate, it will be outstanding performance,” Mr Ahluwalia said adding that it has to be seen in the context of the global slowdown.

On the issue of inflation, Mr Ahluwalia said that the only problem was the rising food prices, like that of vegetables, which could be seasonal in nature. “By January, we expect food prices to come down,” he said. When asked about continuation of the fiscal stimulus package for the industry, the deputy chairman said that all measures would continue till February.

Dubai crisis may push up cost of overseas credit

Dubai crisis may push up cost of overseas credit
Business Standard, December 02, 2009, Page 1

Abhijit Lele / Mumbai

The Dubai crisis may increase the cost of funds for India companies, particularly those with business interests in West Asia.

Credit risk spreads, reflecting a premium over the benchmark lending rates that companies pay for credit, have moved up in the range of 10 to 18 basis points in the last few days.

Joiel Akilan, chief representative (India) of Spanish bank BBVA, said, “The developments in Dubai have made bankers cautious. They will put deals under the magnifying glass. It will impact the way lender price loans.”

The premium that borrowers would have to pay over the London Inter Bank Offered Rate (Libor) have not, however, shot up the way they did a year ago when spreads had jumped 750 basis points for some Indian companies in the aftermath of the collapse of Lehman Brothers.

The head of treasury with a large Indian bank with branches in West Asia said the situation was evolving and the market was influenced by uncertainty. Although there was no panic, the long holidays in Dubai added to the discomfort.

This was reflected in the rise in risk spreads, he said.

Global rating agencies S&P and Moody's have downgraded the credit ratings for several government-related entities in Dubai. The implications are likely to keep the market on tenterhooks and provide direction to the market risk appetite in the near-term.

A senior State Bank of India official said the risk associated with Indian papers may also go up. A large number of Indians work in Dubai and United Arab Emirates and Indian companies also have exposure due to investment or project business, factors that would increase funding costs going forward. A clearer picture will emerge in 10 or 15 days, he added.

In a note, ING Vysya Bank said though the initial fright in the market has eased, the market was likely to remain cautious in the near term. Credit rating downgrades at places might impact the debt-raising capacity of certain companies.

Rating agency ICRA has downgraded the rating to loans extended to DP World’s (a transport and logistics arm of Dubai World) two containers terminals – Chennai and Nhava Sheva.

Senior executives with public sector and foreign banks said while the cost of funds could go up, the rise would not be substantial and was not expected to hamper the flow of funds to India, they said.

Slum-free India’ plan will add sheen to urban mission

Slum-free India’ plan will add sheen to urban mission
The Financial Express, December 02, 2009, Page 10

Kakoly Chatterjee, New Delhi

Basic services to the urban poor (BSUP) and integrated housing and slum development programme (IHSDP), the two components of Jawaharlal Nehru National Urban Renewal Mission (JNNURM), would be discontinued in their present form. The government plans to merge the two schemes with Rajiv Awas Yojna (RAY), an ambitious programme of the Centre to transform Indian cities by making them slum-free.

“Once Rajiv Awas Yojna (RAY) starts, which is likely to be early next year, BSUP and IHSDP would stop in its present form. In other words, JNNURM stops and RAY starts”, sources in the ministry said.

Rajiv Awas Yojna allows slum dweller to get property rights of a house. This implies that if need be, the dweller can mortgage his house in order to obtain loans. The strategy, as conceived currently, would give states greater flexibility of funds. Loans can be raised from financial institutions in India and abroad and can also help out the urban local bodies (ULB) with their share of payment.

“The centre is looking at involving private developers in a big way to complete this task. In order to encourage public private partnership (PPP), the Centre is ready to give up to 40% viability gap funding along with capital subsidy and interest subsidy. The Centre would also bear the infrastructural costs, which means the developer would have to build the dwelling units some of which would be used to accommodate the slum dwellers and rest would be sold at market price. Other incentives for the private developer include land use changes and increase floor space index. Some states like Gujarat, Rajasthan and Andhra Pradesh have made necessary changes in regulations to encourage more participation from private developers,” ministry sources said.

The housing ministry has worked out the average price of EWS housing at Rs 2.5 lakh. After capital subsidy and interest subsidies, it turns out that the Centre is bearing more than half of the cost of the dwelling unit.

Not only JNNURM but two other schemes running under the housing ministry—Interest Subsidy for Housing the Urban Poor (ISHUP) and affordable housing in partnership— would be dovetailed into RAY.

“Earlier in the ISHUP scheme, the Centre gave 5% interest subsidy for loan upto Rs 1 lakh, now for RAY it would go up to Rs 2 lakh. The Centre also does not want the equated monthly installments (EMI) of the dweller to exceed 25% to 35% of his income. In case the EMI works out to be more, states and ULBs are expected to pick up the entire amount,” sources said.

The dweller can pay EMI for a period of 10 years to 15 years. Housing ministry is also taking a holistic approach towards this scheme. In order to ensure that the borrower who often does not have a regular source of income can access funding, the ministry is exploring possibilities of setting up a micro finance company dedicated only for housing.

Stimulus should continue: Montek

Stimulus should continue: Montek
The Times of India, December 02, 2009, Page 24

New Delhi: The Planning Commission on Tuesday pitched for continuation of the stimulus provided to the industry till the end of March, notwithstanding the robust 7.9% growth recorded in the second quarter.

Describing the 7.9% growth rate as “very good news”, Planning Commission deputy chairman Montek Singh Ahluwalia on Tuesday said: “I don’t believe that at present there is any particular reason to change the policy (concerning stimulus). The policy has worked and I think where it has worked, we should let it have its full effect.” Ahluwalia said the right time for reversing the government’s expansionary stance would be at the time of policy planning for the next fiscal year.

“I have said on many occasions that the right time to consider the exit issue will be when we are preparing the policy framework for next year, that is, 2010-11. So, I think we will see in February what things are like,” he said.

Crediting the country’s success story to the reform process, he said it is important to continue the process. “The reason why we are a success story is that the reform process is working. I think the thrust on reforms would continue, should continue. It has delivered very good results for us. Continuation of the reform process is very important,” the Plan panel head said. “The economy is getting back quicker than we estimated,” Ahluwalia said. PTI.

No proposal to withdraw booster: Govt

No proposal to withdraw booster: Govt
The Times of India, December 02, 2009, Page 24

New Delhi: The government on Tuesday said there is no proposal to withdraw in this financial year the fiscal stimulus packages.

“It has been indicated that at present there is no proposal for withdrawal of stimulus measures in 2009-10,” minister of state for finance Namo Narain Meena told the Rajya Sabha in a written reply. The fiscal measures announced by the government and the monetary measures by the RBI were aimed at mitigating the adverse impact of the global economic downturn. The GDP decelerated to 5.8% in the third quarter of 2008-09 and recovered to 6.1% in the first quarter of this fiscal. PTI

HDFC pits dual-rate loan against SBI’s ‘gimmick’

HDFC pits dual-rate loan against SBI’s ‘gimmick’
The Economic Times, December 02, 2009, Page 1

Scheme Similar To Public Lender’s Popular Home Loan Offer Unveiled Early This Year

Our Bureau MUMBAI

MORTGAGE giant HDFC is trying to beat the country’s largest lender State Bank of India at its own game. In a late communiqué on Tuesday, HDFC announced a dual-rate loan under which a borrower will be charged a fixed rate up to March ’12 and a floating rate thereafter.

In a 20-year loan of Rs 30 lakh, a borrower will pay a fixed rate of 8.25% up to March 2012 and then a floating rate that’s 500 basis points below the prime lending rate (PLR) — the institution’s benchmark rate.

Currently, the PLR is at 13.75%. The scheme is strikingly similar to what SBI launched earlier this year. Under the SBI scheme, the borrower pays a fixed rate of 8% for the first year and 8.5% for the second and third years. From the fourth year, the borrower can opt between a fixed and a floating rate. SBI’s floating rate is 275 basis points less than its benchmark rate, which is 11.75% according to its website.

When SBI launched its popular offer, it was vehemently criticised by HDFC on the grounds that such teaser rates to attract borrowers can cause widespread defaults when rates surge in later years. HDFC chairman Deepak Parekh went on to call the SBI offer “a gimmick”. But thanks to abundant liquidity and fierce competition, HDFC has been forced to come out with a similar scheme. However, it is learnt that the private lender will closely assess a borrower’s eligibility to serve a higher interest rate while disbursing a dual-rate loan.

HDFC joint MD Renu Sud Karnad said in a statement: “There is ample liquidity in the system. The banking system continues to park around Rs 1 trillion with RBI through reverse repo. We have been able to bring down our costs due to improved operational efficiency and a good quality portfolio. Based on current marginal cost of borrowing, a special festive offer is being made to new customers to reduce the cost for the home buyer.”

HDFC’s ‘special’ rate is available to all new customers who apply before January 31, 2010 and avail at least a part-disbursement before March 31, 2010. While the fixed rate will remain the same irrespective of the loan amount, the floating rate will vary with the amount. HDFC now has three slabs — loans up to Rs 30 lakh, between Rs 30 lakh and Rs 50 lakh, and Rs 50 lakh and above. The lender said the product will also be available to NRIs and PIOs.

According to the statement, loan approvals during the six-month period ended September 30, 2009 grew 18% to Rs 28,418 crore compared to Rs 24,180 crore in the same period of last year. Loan disbursements in the same period surged 26% to Rs 22,342 crore compared to Rs 17,788 crore in the same period of last year.

On a sequential quarter basis, the growth in individual loan approvals and disbursements for the second quarter of this financial year has been 26% and 24%, respectively, compared to the first quarter ended June 30, 2009.

“HDFC’s recovery performance continues to be very good. This is the nineteenth consecutive quarter end at which the non-performing loans have been lower than the corresponding quarter end in the previous year,” the statement said.