Friday, January 22, 2010
Sensex tanks 423 on FII selling
Sensex tanks 423 on FII selling
Times of India, January 21, 2010, Page 25
Chinese jitters, MUMBAI
Chinese jitters, fresh weakness in markets around the globe and investors’ disappointment with government's divestment plan pulled the sensex down to its lowest close in over a month.
After opening flat, the index slid through the day and ended at 17,051, down 423 points. It was the biggest single-session loss for the sensex this year and third-biggest in the last six months as foreign funds continued selling.
Going forward, market players expect foreign cues and results from domestic heavyweights like RIL and SBI to dictate market's direction. On Thursday, following the 122-point loss in Dow Jones in US the previous night, the sensex opened flat and as selling picked up through the session, touched an intra-day low at 17,025 and closed just a tad higher.
‘‘Markets were looking weak and were vulnerable for the last few sessions. Today when the market broke the key technical support level at about 5,190 on the Nifty (the index closed at 5,094), it appeared as if there was no tomorrow,'' said Arun Kejriwal, director, KRIS, an investment advisory firm.
Selling was across-the-board with all the 30 sensex stocks closing in the red. On the sectoral front, capital goods, power and realty stocks led the slide and all the BSE sectoral indices ended in the red. Among the sensex stocks, L&T was the top loser. L&T results, which were in line with expectation, with top line lower but margins higher, was not liked by the markets, and hence the selling, which led to a 6.9% loss in the stock to Rs 1,524.
The Chinese government's decision on Wednesday to curb lending to cool down a overheated economy also affected market sentiments, especially among the foreign funds. BSE data showed that FIIs have been net sellers during the last few days and on Thursday they had a net selling figure of Rs 854 crore. The day's losses also made investors poorer by Rs 1.6 lakh crore with BSE's market capitalisation now at Rs 61.8 lakh crore.
With a key technical support level broken, the market could slide further, chartists said. “Going forward, markets will look to foreign markets and results from heavyweight companies for further cues,'' said Kejriwal. Fund managers feel there could be some more slide and most are disappointed with the way government is going ahead with divestment. A fall-out of Thursday's slide was that some of the QIPs which have been lined up, did not generate expected response, giving merchant bankers some tough time.
Times of India, January 21, 2010, Page 25
Chinese jitters, MUMBAI
Chinese jitters, fresh weakness in markets around the globe and investors’ disappointment with government's divestment plan pulled the sensex down to its lowest close in over a month.
After opening flat, the index slid through the day and ended at 17,051, down 423 points. It was the biggest single-session loss for the sensex this year and third-biggest in the last six months as foreign funds continued selling.
Going forward, market players expect foreign cues and results from domestic heavyweights like RIL and SBI to dictate market's direction. On Thursday, following the 122-point loss in Dow Jones in US the previous night, the sensex opened flat and as selling picked up through the session, touched an intra-day low at 17,025 and closed just a tad higher.
‘‘Markets were looking weak and were vulnerable for the last few sessions. Today when the market broke the key technical support level at about 5,190 on the Nifty (the index closed at 5,094), it appeared as if there was no tomorrow,'' said Arun Kejriwal, director, KRIS, an investment advisory firm.
Selling was across-the-board with all the 30 sensex stocks closing in the red. On the sectoral front, capital goods, power and realty stocks led the slide and all the BSE sectoral indices ended in the red. Among the sensex stocks, L&T was the top loser. L&T results, which were in line with expectation, with top line lower but margins higher, was not liked by the markets, and hence the selling, which led to a 6.9% loss in the stock to Rs 1,524.
The Chinese government's decision on Wednesday to curb lending to cool down a overheated economy also affected market sentiments, especially among the foreign funds. BSE data showed that FIIs have been net sellers during the last few days and on Thursday they had a net selling figure of Rs 854 crore. The day's losses also made investors poorer by Rs 1.6 lakh crore with BSE's market capitalisation now at Rs 61.8 lakh crore.
With a key technical support level broken, the market could slide further, chartists said. “Going forward, markets will look to foreign markets and results from heavyweight companies for further cues,'' said Kejriwal. Fund managers feel there could be some more slide and most are disappointed with the way government is going ahead with divestment. A fall-out of Thursday's slide was that some of the QIPs which have been lined up, did not generate expected response, giving merchant bankers some tough time.
ICICI Q3 net profit dips 13% to Rs 1101cr
ICICI Q3 net profit dips 13% to Rs 1101cr
Times of India, January 21, 2010, Page 25
MUMBAI: ICICI Bank, the country's largest private sector bank, reported a 13.4% drop in net profit for the quarter ended December 2009 to Rs 1,101 crore from Rs 1,272 crore it earned during the corresponding quarter in the previous year. The bank's total income too dropped about 25% to Rs 7,762 crore during Q3FY10 from Rs 10,350 crore a year earlier.
The drop in net profit as well as in total income were largely attributed to fall in treasury income for the bank as yields in the debt market rose. For most companies in the financial services business, the lower rate of interest in the economy led to lower interest income.
ICICI Bank's loan and deposit books contracted during 2009 but top officials said credit demand was expected to pick up as the economy revives. It also said quality of its loans were improving because of conservative lending policies and revival in economic activities had slowed the rise in loan defaults.
‘‘The home loan registrations are going up month-on-month and car sales are going up month-on-month,'' Chanda Kochhar, CEO & MD, ICICI Bank, said during a conference call on Thursday. ‘‘Both these activities are seeing huge increase. So obviously, even the loans against homes or cars will see a good increase,'' Kochhar said.
In Thursday's weak market, ICICI Bank shares on the Bombay Stock Exchange ended 2.7% lower at Rs 853.
Times of India, January 21, 2010, Page 25
MUMBAI: ICICI Bank, the country's largest private sector bank, reported a 13.4% drop in net profit for the quarter ended December 2009 to Rs 1,101 crore from Rs 1,272 crore it earned during the corresponding quarter in the previous year. The bank's total income too dropped about 25% to Rs 7,762 crore during Q3FY10 from Rs 10,350 crore a year earlier.
The drop in net profit as well as in total income were largely attributed to fall in treasury income for the bank as yields in the debt market rose. For most companies in the financial services business, the lower rate of interest in the economy led to lower interest income.
ICICI Bank's loan and deposit books contracted during 2009 but top officials said credit demand was expected to pick up as the economy revives. It also said quality of its loans were improving because of conservative lending policies and revival in economic activities had slowed the rise in loan defaults.
‘‘The home loan registrations are going up month-on-month and car sales are going up month-on-month,'' Chanda Kochhar, CEO & MD, ICICI Bank, said during a conference call on Thursday. ‘‘Both these activities are seeing huge increase. So obviously, even the loans against homes or cars will see a good increase,'' Kochhar said.
In Thursday's weak market, ICICI Bank shares on the Bombay Stock Exchange ended 2.7% lower at Rs 853.
Food inflation softens marginally to 16.81%
Food inflation softens marginally to 16.81%
Financial Express, January 21, 2010, Page 2
fe Bureau
New DelhiOn a day when the government announced measures to shield poor families from the rise in food prices, the country’s food inflation marginally fell to 16.81% during the week ended January 9.
Food inflation stood at 17.28% a week ago. Despite the decline in food inflation, the rate is still higher, compared with last year’s level of 11.59% during the same period.
Cereal prices rose 14.18%, with wheat rising 15% and rice 12.64%. As reported by FE earlier, although potato prices have softened during the last few weeks, current prices rose by close to 50% y-o-y, while pulses turned dearer by 47.90% owing to higher imports cost. Milk prices rose by 13.95% over last year and are expected to surge further on lower availability, indicated by agriculture minister Sharad Pawar on Wednesday.
Pawar’s comment that states need to take a decision on the demand for hiking milk prices triggered a sharp reaction from political parties protesting against the rising prices of food products. The Cabinet Committee on Prices also announced that an ‘ad-hoc’ allocation of 10 kg per family, per month, over and above the existing allocation of foodgrain, mainly wheat and rice, would be made during January-February, 2010 and is slated to cover all poor families.
According to official data, the rise in fruit prices was moderate at 3.73%. Onion prices rose by over 15%, while vegetable prices were up 7.95%. This is mainly because of drought-like conditions prevailing in most of the onion and vegetable-growing regions of the country. Meanwhile, Sharad Pawar has said Prime Minister Manmohan Singh’s meeting with various state chief ministers on price rise, scheduled for January 27, has now been postponed and is likely to be slated for February 6.
The meeting is intended to devise a combined strategy to deal with rising food prices. Economists have said rising food prices will force RBI to tighten money supply, but will not lead to a rise in lending rates, owing to excess liquidity in the system.
Financial Express, January 21, 2010, Page 2
fe Bureau
New DelhiOn a day when the government announced measures to shield poor families from the rise in food prices, the country’s food inflation marginally fell to 16.81% during the week ended January 9.
Food inflation stood at 17.28% a week ago. Despite the decline in food inflation, the rate is still higher, compared with last year’s level of 11.59% during the same period.
Cereal prices rose 14.18%, with wheat rising 15% and rice 12.64%. As reported by FE earlier, although potato prices have softened during the last few weeks, current prices rose by close to 50% y-o-y, while pulses turned dearer by 47.90% owing to higher imports cost. Milk prices rose by 13.95% over last year and are expected to surge further on lower availability, indicated by agriculture minister Sharad Pawar on Wednesday.
Pawar’s comment that states need to take a decision on the demand for hiking milk prices triggered a sharp reaction from political parties protesting against the rising prices of food products. The Cabinet Committee on Prices also announced that an ‘ad-hoc’ allocation of 10 kg per family, per month, over and above the existing allocation of foodgrain, mainly wheat and rice, would be made during January-February, 2010 and is slated to cover all poor families.
According to official data, the rise in fruit prices was moderate at 3.73%. Onion prices rose by over 15%, while vegetable prices were up 7.95%. This is mainly because of drought-like conditions prevailing in most of the onion and vegetable-growing regions of the country. Meanwhile, Sharad Pawar has said Prime Minister Manmohan Singh’s meeting with various state chief ministers on price rise, scheduled for January 27, has now been postponed and is likely to be slated for February 6.
The meeting is intended to devise a combined strategy to deal with rising food prices. Economists have said rising food prices will force RBI to tighten money supply, but will not lead to a rise in lending rates, owing to excess liquidity in the system.
Food inflation eases marginally to 16.81%
Food inflation eases marginally to 16.81%
Business Standard, January 21, 2010, Page 1
BS Reporter / Mumbai
Food inflation softened to 16.81 per cent for the week ended January 9, led by lower fruit and vegetable prices, although pulses and potatoes continued to cost dearer.
For the week ending January 2, food inflation (prices of non-processed food articles) stood at 17.28 per cent.
According to the government data, on year-over-year basis prices of vegetables rose by 7.95 per cent and that of fruits by only 3.73 per cent.
While milk prices soared by 13.95 per cent over last year and is expected to surge further on lower availability.
"We are facing insufficient availability of milk, specially in northern India. In October, we had taken a decision to raise the price. Today, there is a demand that we should hike the price," Agricultural Minister Sharad Pawar had said yesterday.
Potato remained expensive during the period rising as much as 49.31 per cent from last year, followed by prices of pulses which jumped by 47.90 per cent.
The inflation for primary articles, which include food and non-food items, stood at 13.93 per cent in the reporting week over the previous year.
On weekly basis, the price index for food articles fell marginally by 0.1 per cent on account of decline in prices of vegetables (2.6 per cent) and other food articles (2 per cent).
Business Standard, January 21, 2010, Page 1
BS Reporter / Mumbai
Food inflation softened to 16.81 per cent for the week ended January 9, led by lower fruit and vegetable prices, although pulses and potatoes continued to cost dearer.
For the week ending January 2, food inflation (prices of non-processed food articles) stood at 17.28 per cent.
According to the government data, on year-over-year basis prices of vegetables rose by 7.95 per cent and that of fruits by only 3.73 per cent.
While milk prices soared by 13.95 per cent over last year and is expected to surge further on lower availability.
"We are facing insufficient availability of milk, specially in northern India. In October, we had taken a decision to raise the price. Today, there is a demand that we should hike the price," Agricultural Minister Sharad Pawar had said yesterday.
Potato remained expensive during the period rising as much as 49.31 per cent from last year, followed by prices of pulses which jumped by 47.90 per cent.
The inflation for primary articles, which include food and non-food items, stood at 13.93 per cent in the reporting week over the previous year.
On weekly basis, the price index for food articles fell marginally by 0.1 per cent on account of decline in prices of vegetables (2.6 per cent) and other food articles (2 per cent).
Inflation to exceed 9% by March: Pronab Sen
Inflation to exceed 9% by March: Pronab Sen
Financial Express, January 21, 2010, Page 2
Press Trust of India, New Delhi
The government on Thursday said inflation could exceed 9% by March end with the impact of crop failure becoming visible by the close of the fiscal.
“Unless something dramatic happens on agri prices, it (inflation) would probably be over 9%,” said Pronab Sen, chief Statistician of India and secretary, ministry of statistics and programme Implementation. Wholesale price-based inflation, which dipped to sub-zero levels following the impact of the global crisis, has started firming up and rose to 7.3%in December, 2009.
When asked whether easy money policy was also fueling inflation, Sen said, “I don’t think that is really the case. There is large undisbursed balance with the banks. However, it could become a problem going forward.”
On the steps that RBI could take in its forthcoming monetary policy review on January 29 to tame inflation, Sen said, the central bank has to take many other factors while changing the key policy rates and ratios.
Overheating China melts Indian market
Overheating China melts Indian market
Business Standard, January 22, 2010, Page 1
BS Reporter / Mumbai
Domestic 3rd quarter news weigh on sentiment.
Indian stock market indices fell to their lowest close in a month over concerns that China will take more measures to temper growth after reporting its fastest quarterly growth in two years.
Subdued world equities weighed on the sentiment as all Asian markets other than Japan closed in the red. The lowering of revenue forecast by Larsen & Toubro (L&T) pushed equities down further, with the Bombay Stock Exchange Sensitive Index falling for the third straight session by 2.4 per cent on Thursday.
Analysts, however, saw some silver lining with European markets trading higher.
China’s economy expanded 10.7 per cent in 2009, exceeding even the government’s own initial expectations. Consumer inflation rose to 1.9 per cent in December from 0.6 per cent in the previous month.
“There is a concern of overheating China,” said Vikram Kotak, chief investment officer at Birla Sunlife Insurance. He said the fall in the regional markets also pulled down the broader market.
The BSE 30-share index Sensex was down 423 points to 17,051.14 and the S&P CNX Nifty on NSE declined 127.55 points (2.44 per cent) to 5,094.15.
“Tightening of the monetary policy in China is a matter of time and there is also concern of higher inflation,” said V K Sharma, head of private broking and wealth management at HDFC Securities.
THE BLOW
# China’s GDP surges 10.7% between Oct & Dec, compared with a year earlier
# Consumer inflation rises to 1.9% in Dec from 0.6% previous month
IMPLICATION
# Beijing expected to lift interest rates in next few months
RIPPLE EFFECTS
# Dollar rises to its highest in 4 months
# Asian markets other than Japan close in the red
# Sensex down 423 points to 17,051.14
Analysts said the country’s largest engineering and construction conglomerate, L&T, which lowered its full-year revenue guidance citing project delays, affected the market sentiments badly. L&T said its revenue would grow 10 per cent for the year to March, slower than 15 per cent projected earlier, but maintained its order growth target at 30 per cent.
“L&T was a big dampener on the index,” said a dealer with a domestic brokerage who declined to be named. L&T share fell almost 7 per cent to Rs 1,524.35. ICICI Bank, whose net profit fell by 13.4 per cent was the other dampener.
Traders said absence of the biggest domestic institutional investor Life Insurance Corporation of India (LIC) from the market also had its impact. They said, had LIC been there in the market, such fall would not have happened. Due to the local strike at its corporate office, trading activities were minimal.
Bharat Heavy Electricals declined 4.1 per cent to Rs 2,297 on broad market declines, even as it reported a 5.4 per cent rise in its December quarter net profit, in line with street view. Oil & Natural Gas Corporation fell for the fifth straight session and closed nearly 2 per cent lower at Rs 1,140, ahead of its quarterly earnings release. ONGC reported a 23 per cent rise in third quarter net profit, its second straight quarterly rise, helped by firmer oil prices, but lagged market estimates. Reliance Industries, which has the highest weight on the Sensex, dropped 2.2 per cent to Rs 1,053.80, ahead of its quarterly results tomorrow.
In the broader market, four shares declined for every one share that advanced in a volume of 510 million shares, lower than last week’s daily average of 651 million shares.
Business Standard, January 22, 2010, Page 1
BS Reporter / Mumbai
Domestic 3rd quarter news weigh on sentiment.
Indian stock market indices fell to their lowest close in a month over concerns that China will take more measures to temper growth after reporting its fastest quarterly growth in two years.
Subdued world equities weighed on the sentiment as all Asian markets other than Japan closed in the red. The lowering of revenue forecast by Larsen & Toubro (L&T) pushed equities down further, with the Bombay Stock Exchange Sensitive Index falling for the third straight session by 2.4 per cent on Thursday.
Analysts, however, saw some silver lining with European markets trading higher.
China’s economy expanded 10.7 per cent in 2009, exceeding even the government’s own initial expectations. Consumer inflation rose to 1.9 per cent in December from 0.6 per cent in the previous month.
“There is a concern of overheating China,” said Vikram Kotak, chief investment officer at Birla Sunlife Insurance. He said the fall in the regional markets also pulled down the broader market.
The BSE 30-share index Sensex was down 423 points to 17,051.14 and the S&P CNX Nifty on NSE declined 127.55 points (2.44 per cent) to 5,094.15.
“Tightening of the monetary policy in China is a matter of time and there is also concern of higher inflation,” said V K Sharma, head of private broking and wealth management at HDFC Securities.
THE BLOW
# China’s GDP surges 10.7% between Oct & Dec, compared with a year earlier
# Consumer inflation rises to 1.9% in Dec from 0.6% previous month
IMPLICATION
# Beijing expected to lift interest rates in next few months
RIPPLE EFFECTS
# Dollar rises to its highest in 4 months
# Asian markets other than Japan close in the red
# Sensex down 423 points to 17,051.14
Analysts said the country’s largest engineering and construction conglomerate, L&T, which lowered its full-year revenue guidance citing project delays, affected the market sentiments badly. L&T said its revenue would grow 10 per cent for the year to March, slower than 15 per cent projected earlier, but maintained its order growth target at 30 per cent.
“L&T was a big dampener on the index,” said a dealer with a domestic brokerage who declined to be named. L&T share fell almost 7 per cent to Rs 1,524.35. ICICI Bank, whose net profit fell by 13.4 per cent was the other dampener.
Traders said absence of the biggest domestic institutional investor Life Insurance Corporation of India (LIC) from the market also had its impact. They said, had LIC been there in the market, such fall would not have happened. Due to the local strike at its corporate office, trading activities were minimal.
Bharat Heavy Electricals declined 4.1 per cent to Rs 2,297 on broad market declines, even as it reported a 5.4 per cent rise in its December quarter net profit, in line with street view. Oil & Natural Gas Corporation fell for the fifth straight session and closed nearly 2 per cent lower at Rs 1,140, ahead of its quarterly earnings release. ONGC reported a 23 per cent rise in third quarter net profit, its second straight quarterly rise, helped by firmer oil prices, but lagged market estimates. Reliance Industries, which has the highest weight on the Sensex, dropped 2.2 per cent to Rs 1,053.80, ahead of its quarterly results tomorrow.
In the broader market, four shares declined for every one share that advanced in a volume of 510 million shares, lower than last week’s daily average of 651 million shares.
Home prices almost back to 2007-08 levels
Home prices almost back to 2007-08 levels
Business Standard, January 22, 2010, Page 2
Raghavendra Kamath / Mumbai
Developers say the rise reflects a rebound in demand and isn’t irrational
Apartment prices at Planet Godrej, a premium residential property developed by Godrej Properties in the tony Mahalaxmi area of Mumbai, had come down to as low as Rs 17,000 to Rs 18,000 a sq ft in the property market slowdown last year.
The flats now sell at Rs 27,000 to Rs 30,000 a sq ft — just short of the peak rate of Rs 32,000 a sq ft in 2007-08.
It’s not the commercial capital alone that has seen real estate prices on fire. Last week, the Jaypee group sold 600 plots on the Greater Noida Expressway, near Delhi, within three days at Rs 36,000 a sq yd (one sq yd equals nine sq ft). Brokers say the plots are now available for only Rs 39,000 a sq yard and will touch Rs 42,000 a sq yard within a few days.
On Pune’s posh Bhandarkar Road, apartment prices have risen 80 per cent in just five months. For example, flats at local developer Avaneesh Construction’s housing project are now available at Rs 9,000 a sq ft, compared to Rs 5,000 in August.
Welcome back to the era of crazy rises in home prices. After a year of sanity, when property developers were reducing rates even in premium areas, it’s a rewind to 2007-08, when prices had more than doubled in as many years on the back of strong buyer and investor demand, as the stock markets boomed.
Then, apartment prices had gone down by 30 per cent from their peak, as home sales had almost come to a standstill in the last few quarters of 2008-09, reflecting a worldwide economic slowing.
Pranay Vakil, chairman of Knight Frank India, a leading property consultant, says: “We have seen an up to 30 per cent rise in home prices in the last six months. A lot of pent-up demand came into the market around Diwali. That, coupled with strong NRI (non-resident Indian) interest, has led to the rebound in prices. Most NRIs have invested in Mumbai property this time, instead of Dubai.''
The NRIs were absent from the property market in 2008-09. Vakil says prices have mostly risen in prime areas, where new projects are being sold out within days and where supply is limited.
For instance, in the Prabhadevi area of Mumbai, if the delivery is three years away, prices have gone up to Rs 21,000 a sq ft. If the project completion is two-three months away, prices are Rs 25,000-Rs 27,000 a sq ft. But, if a house is ready to be moved into, it could go for Rs 30,000 a sq ft, Vakil adds.
The Maharashtra government has been quick to cash in on the rise in property prices and has increased stamp duty and registrations charges by 15 to 20 per cent in Mumbai, depending on the locality in the city. Last year, it did not revise these rates, as the property market was down.
Analysts clearly see the return of investors in the residential market as stock markets have started booming. In the slowdown of 2008-09, investors had vanished from markets such as the National Capital Region.
Religare Capital Markets’ Associate Vice-President P Suman Memani attributes the rebound in property rates to the stock market boom. “Till August 2009, the price rise was moderate. But, after September, when indices shot up, investor and speculative interest returned to the real estate market. Sale prices have gone up by 50 per cent in some cases. It hurts genuine buyers and is not good for the market,’’ Memani says.
Take Parsvnath Developers’ premium project, La Tropicana, in the Civil Lines area of Delhi. Brokers say prices have risen to Rs 12,000 a sq ft, from Rs 8,000 a sq ft in April 2009, a rise of 50 per cent. The developer has sold 415 apartments out of the 450 they have planned. The project is nearing completion.
In Mumbai, in the Oberoi Woods project in Goregaon East, prices have risen 50 per cent in the past nine months, from Rs 10,000 a sq ft in April to Rs 14,000-15,000 a sq ft now. “It is dangerous if prices go up from Rs 2,700 a sq ft to Rs 4,000 a sq ft even if the delivery is four years away,’’ Memani adds.
Realty research firm Liases Foras’ Managing Director, Pankaj Kapoor, is also not happy. “The government is helping the developers to increase prices. They allowed restructuring of loans,” he adds.
Some developers do not agree and say price increases are just a function of the market. “We will go along with interest rates. If the annual interest rate is 10 per cent, we will raise it by 10 per cent. Customers will run away if you increase it irrationally. You have to increase it only to the level where it does not affect your sales,” says Unitech MD Sanjay Chandra.
Adds Hiranandani Constructions’ Managing Director Niranjan Hiranandani: “I think such an increase is only in some isolated cases. If prices are reasonable, volumes will be good. If they are too high, volumes will come down.’’
So, where are the prices headed from now on? "The acid test for the property market will come in March, when the pent-up demand goes away and NRIs pull back. If stock markets continue to do well, demand will sustain. Otherwise, it will not,'' says Vakil of Knight Frank.
(With inputs from Pravda Godbole)
Business Standard, January 22, 2010, Page 2
Raghavendra Kamath / Mumbai
Developers say the rise reflects a rebound in demand and isn’t irrational
Apartment prices at Planet Godrej, a premium residential property developed by Godrej Properties in the tony Mahalaxmi area of Mumbai, had come down to as low as Rs 17,000 to Rs 18,000 a sq ft in the property market slowdown last year.
The flats now sell at Rs 27,000 to Rs 30,000 a sq ft — just short of the peak rate of Rs 32,000 a sq ft in 2007-08.
It’s not the commercial capital alone that has seen real estate prices on fire. Last week, the Jaypee group sold 600 plots on the Greater Noida Expressway, near Delhi, within three days at Rs 36,000 a sq yd (one sq yd equals nine sq ft). Brokers say the plots are now available for only Rs 39,000 a sq yard and will touch Rs 42,000 a sq yard within a few days.
On Pune’s posh Bhandarkar Road, apartment prices have risen 80 per cent in just five months. For example, flats at local developer Avaneesh Construction’s housing project are now available at Rs 9,000 a sq ft, compared to Rs 5,000 in August.
Welcome back to the era of crazy rises in home prices. After a year of sanity, when property developers were reducing rates even in premium areas, it’s a rewind to 2007-08, when prices had more than doubled in as many years on the back of strong buyer and investor demand, as the stock markets boomed.
Then, apartment prices had gone down by 30 per cent from their peak, as home sales had almost come to a standstill in the last few quarters of 2008-09, reflecting a worldwide economic slowing.
Pranay Vakil, chairman of Knight Frank India, a leading property consultant, says: “We have seen an up to 30 per cent rise in home prices in the last six months. A lot of pent-up demand came into the market around Diwali. That, coupled with strong NRI (non-resident Indian) interest, has led to the rebound in prices. Most NRIs have invested in Mumbai property this time, instead of Dubai.''
The NRIs were absent from the property market in 2008-09. Vakil says prices have mostly risen in prime areas, where new projects are being sold out within days and where supply is limited.
For instance, in the Prabhadevi area of Mumbai, if the delivery is three years away, prices have gone up to Rs 21,000 a sq ft. If the project completion is two-three months away, prices are Rs 25,000-Rs 27,000 a sq ft. But, if a house is ready to be moved into, it could go for Rs 30,000 a sq ft, Vakil adds.
The Maharashtra government has been quick to cash in on the rise in property prices and has increased stamp duty and registrations charges by 15 to 20 per cent in Mumbai, depending on the locality in the city. Last year, it did not revise these rates, as the property market was down.
Analysts clearly see the return of investors in the residential market as stock markets have started booming. In the slowdown of 2008-09, investors had vanished from markets such as the National Capital Region.
Religare Capital Markets’ Associate Vice-President P Suman Memani attributes the rebound in property rates to the stock market boom. “Till August 2009, the price rise was moderate. But, after September, when indices shot up, investor and speculative interest returned to the real estate market. Sale prices have gone up by 50 per cent in some cases. It hurts genuine buyers and is not good for the market,’’ Memani says.
Take Parsvnath Developers’ premium project, La Tropicana, in the Civil Lines area of Delhi. Brokers say prices have risen to Rs 12,000 a sq ft, from Rs 8,000 a sq ft in April 2009, a rise of 50 per cent. The developer has sold 415 apartments out of the 450 they have planned. The project is nearing completion.
In Mumbai, in the Oberoi Woods project in Goregaon East, prices have risen 50 per cent in the past nine months, from Rs 10,000 a sq ft in April to Rs 14,000-15,000 a sq ft now. “It is dangerous if prices go up from Rs 2,700 a sq ft to Rs 4,000 a sq ft even if the delivery is four years away,’’ Memani adds.
Realty research firm Liases Foras’ Managing Director, Pankaj Kapoor, is also not happy. “The government is helping the developers to increase prices. They allowed restructuring of loans,” he adds.
Some developers do not agree and say price increases are just a function of the market. “We will go along with interest rates. If the annual interest rate is 10 per cent, we will raise it by 10 per cent. Customers will run away if you increase it irrationally. You have to increase it only to the level where it does not affect your sales,” says Unitech MD Sanjay Chandra.
Adds Hiranandani Constructions’ Managing Director Niranjan Hiranandani: “I think such an increase is only in some isolated cases. If prices are reasonable, volumes will be good. If they are too high, volumes will come down.’’
So, where are the prices headed from now on? "The acid test for the property market will come in March, when the pent-up demand goes away and NRIs pull back. If stock markets continue to do well, demand will sustain. Otherwise, it will not,'' says Vakil of Knight Frank.
(With inputs from Pravda Godbole)
A small hike in CRR will not hurt
A small hike in CRR will not hurt
Hindu Business Line, January 22, 2010, Page 6
Will reduce liquidity, ease inflation concerns: Naina Lal Kidwai.
Our Bureau, New Delhi
Pointing to the high inflation and sufficient liquidity in the system, HSBC India Country Head, Ms Naina Lal Kidwai, said on Thursday that the Reserve Bank of India has room to increase the cash reserve ratio (CRR) by 25 basis points. CRR is the amount of money that banks have to keep with the RBI. The central bank is expected to make its monetary policy review announcement on January 29.
Ms Kidwai, however, cautioned against withdrawing the stimulus in a hurry as it was important to sustain the growth momentum. She also said according to HSBC research, the country would grow by over 7.5 per cent this fiscal and 8.5 per cent in the coming one.
“There is a lot of liquidity in banks, over Rs 80,000 crore. It may be needed in the longer term as projects and credit off-take go up. But there is room for some of it to be mopped up in the near term. A small CRR hike of 0.25 per cent would mean just about Rs 8,000 crores going out of the system. It doesn't hurt anybody or destroy the growth momentum,” Ms Kidwai told presspersons here on the sidelines of a Ficci-event on microfinance.
Noting that high inflation is a concern, she said a CRR hike would signal an important change, but may not upset the applecart.
Asked about the possibility of withdrawal of the stimulus announced by the Government and the RBI to counter the economic slowdown, she said, “The desire of our policy makers has to be to ensure that India stays on its growth trajectory. I don't think we should be in a hurry to withdraw the stimulus because it is carrying growth forward.”
Ms Kidwai said in due course of time, the stimulus will have to be rolled back bearing in mind the fiscal deficit.
On interest rates, she said, “I don't think interest rates are going to go up hugely in a hurry. But it might increase in the next six months.”
On the banks' credit growth, Ms Kidwai said it will definitely be lower than that of last year. “Last year companies had no other recourse to funds than the banks. But every corporate has turned to the capital markets in the last six months,” she said
“However, I believe corporates will begin to turn back to the banks. There is every indication that companies are looking at capacity addition,” she added.
Hindu Business Line, January 22, 2010, Page 6
Will reduce liquidity, ease inflation concerns: Naina Lal Kidwai.
Our Bureau, New Delhi
Pointing to the high inflation and sufficient liquidity in the system, HSBC India Country Head, Ms Naina Lal Kidwai, said on Thursday that the Reserve Bank of India has room to increase the cash reserve ratio (CRR) by 25 basis points. CRR is the amount of money that banks have to keep with the RBI. The central bank is expected to make its monetary policy review announcement on January 29.
Ms Kidwai, however, cautioned against withdrawing the stimulus in a hurry as it was important to sustain the growth momentum. She also said according to HSBC research, the country would grow by over 7.5 per cent this fiscal and 8.5 per cent in the coming one.
“There is a lot of liquidity in banks, over Rs 80,000 crore. It may be needed in the longer term as projects and credit off-take go up. But there is room for some of it to be mopped up in the near term. A small CRR hike of 0.25 per cent would mean just about Rs 8,000 crores going out of the system. It doesn't hurt anybody or destroy the growth momentum,” Ms Kidwai told presspersons here on the sidelines of a Ficci-event on microfinance.
Noting that high inflation is a concern, she said a CRR hike would signal an important change, but may not upset the applecart.
Asked about the possibility of withdrawal of the stimulus announced by the Government and the RBI to counter the economic slowdown, she said, “The desire of our policy makers has to be to ensure that India stays on its growth trajectory. I don't think we should be in a hurry to withdraw the stimulus because it is carrying growth forward.”
Ms Kidwai said in due course of time, the stimulus will have to be rolled back bearing in mind the fiscal deficit.
On interest rates, she said, “I don't think interest rates are going to go up hugely in a hurry. But it might increase in the next six months.”
On the banks' credit growth, Ms Kidwai said it will definitely be lower than that of last year. “Last year companies had no other recourse to funds than the banks. But every corporate has turned to the capital markets in the last six months,” she said
“However, I believe corporates will begin to turn back to the banks. There is every indication that companies are looking at capacity addition,” she added.
ICICI Bank sees 25% rise in home, auto loans disbursals
ICICI Bank sees 25% rise in home, auto loans disbursals
Hindu Business Line, January 22, 2010, Page 7
Our Bureau, Mumbai
In the third quarter ICICI Bank earned a profit of Rs 202 crore from the sale of 81 per cent stake in its Point-of-Sales terminals business to First Data Corporation. This boosted its other income.
The home and auto loan segments have seen a pick up with disbursements increasing by 25 per cent. The retail loan book now accounts for 45 per cent of the total asset portfolio, said Ms Chanda Kochhar, Managing Director and Chief Executive Officer, ICICI Bank.
Though the ratio of non-performing assets to total assets increased, the provisioning is lower, which is an indication of the improvement in asset quality, Ms Kochhar said. Provisions declined marginally to Rs 1,002 crore (Rs 1,008 crore).
The provisioning coverage ratio now stands at 62 per cent with technical write offs.
The bank has received licenses for 580 branches and will be opening them before the end of this fiscal. This will take its network to 2000 by March 2010, Ms Kochhar said.
New Board of Directors
The board of directors of ICICI Bank appointed Mr Homi R. Khusrokhan and Mr V. Sridar as non-Executive Directors, said a press release from the bank.
Mr Khusrokhan retired as the Managing Director of Tata Chemicals Ltd in 2008. He was earlier Managing Director of Tata Tea and Glaxo India Ltd. Mr V. Sridar retired as Chairman and Managing Director of UCO Bank in 2007. Prior to that he was Chairman of the National Housing Bank and Executive Director of UCO Bank.
Mr Khusrokhan and Mr Sridar would hold office up to the date of the next Annual General Meeting, when their appointment would be considered by the shareholders of ICICI Bank.
Mr P.M. Sinha, non-Executive Director of ICICI Bank, today retired from the board, the press release said.
Hindu Business Line, January 22, 2010, Page 7
Our Bureau, Mumbai
In the third quarter ICICI Bank earned a profit of Rs 202 crore from the sale of 81 per cent stake in its Point-of-Sales terminals business to First Data Corporation. This boosted its other income.
The home and auto loan segments have seen a pick up with disbursements increasing by 25 per cent. The retail loan book now accounts for 45 per cent of the total asset portfolio, said Ms Chanda Kochhar, Managing Director and Chief Executive Officer, ICICI Bank.
Though the ratio of non-performing assets to total assets increased, the provisioning is lower, which is an indication of the improvement in asset quality, Ms Kochhar said. Provisions declined marginally to Rs 1,002 crore (Rs 1,008 crore).
The provisioning coverage ratio now stands at 62 per cent with technical write offs.
The bank has received licenses for 580 branches and will be opening them before the end of this fiscal. This will take its network to 2000 by March 2010, Ms Kochhar said.
New Board of Directors
The board of directors of ICICI Bank appointed Mr Homi R. Khusrokhan and Mr V. Sridar as non-Executive Directors, said a press release from the bank.
Mr Khusrokhan retired as the Managing Director of Tata Chemicals Ltd in 2008. He was earlier Managing Director of Tata Tea and Glaxo India Ltd. Mr V. Sridar retired as Chairman and Managing Director of UCO Bank in 2007. Prior to that he was Chairman of the National Housing Bank and Executive Director of UCO Bank.
Mr Khusrokhan and Mr Sridar would hold office up to the date of the next Annual General Meeting, when their appointment would be considered by the shareholders of ICICI Bank.
Mr P.M. Sinha, non-Executive Director of ICICI Bank, today retired from the board, the press release said.
The reality on rates
The reality on rates
Hindu Business Line, January 22, 2010, Page 8
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By its own admission, the RBI's easy money policy has not worked as well as it should have. A reversal of the policy now would simply ratchet up an already high real interest rate regime.
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One issue that the Reserve Bank of India (RBI) should consider in its third quarter review due next week is the impact of administered rates on its key monetary policy changes. The Governor, Dr D. Subbarao, has repeatedly pointed to the way administered rates on small savings, among other factors, jammed its signals for cheaper lending by banks. The interest rate of 8 per cent for deposits under small savings schemes set the floor for banks as a result of which lending rates fell far less than the central bank's own aggressive reductions in the cost of funds called for.
That was last year when the RBI was aggressively pursuing a soft interest rate policy. Now it is set to weigh its options about tightening a bit. Given the headline inflation of around 7 per cent and the likely effects of bountiful liquidity on its upward movement, the natural tendency for Dr Subbarao would be to push the buttons for tighter money so as to skim off any excess demand. However, before doing so, the RBI should recall its critique on administered rates. Despite itself and by its own admission, its easy money policy has not worked as well as it should have in making domestic capital cheap. Under the circumstances, any reversal of the easy money policy now would simply ratchet up an already high real interest rate regime. As it is, the enthusiasm for bank credit is just picking up as the latest data show; sending signals out for dearer money could dampen that pick-up at a time when it is most needed to rev up investment growth. The RBI surely knows that its signals for higher interest rates work far better than those announcing a dip; administered rates after all set the floor not the ceiling. That is exactly why the RBI must view a rate or cash reserve ratio (CRR) hike this month with some reservation. Domestic rates have been historically high, a feature that had Indian firms scurrying for cheaper global capital during the period of high growth till 2008-09. The only way to change that pattern is for the RBI to curb external commercial borrowings or for its signals for softer rates to work effectively.
Dealing with administered rates and government borrowings, whose ever-increasing size also prevent bank rates from falling, is New Delhi's job; it may be easier to control the need for funds than it will be to reduce rates on small savings or abolish administered rates altogether. But as financial services acquire sophistication, that task too could be tackled without hurting the interests of the small saver.
Hindu Business Line, January 22, 2010, Page 8
--------------------------------------------------------------------------------
By its own admission, the RBI's easy money policy has not worked as well as it should have. A reversal of the policy now would simply ratchet up an already high real interest rate regime.
--------------------------------------------------------------------------------
One issue that the Reserve Bank of India (RBI) should consider in its third quarter review due next week is the impact of administered rates on its key monetary policy changes. The Governor, Dr D. Subbarao, has repeatedly pointed to the way administered rates on small savings, among other factors, jammed its signals for cheaper lending by banks. The interest rate of 8 per cent for deposits under small savings schemes set the floor for banks as a result of which lending rates fell far less than the central bank's own aggressive reductions in the cost of funds called for.
That was last year when the RBI was aggressively pursuing a soft interest rate policy. Now it is set to weigh its options about tightening a bit. Given the headline inflation of around 7 per cent and the likely effects of bountiful liquidity on its upward movement, the natural tendency for Dr Subbarao would be to push the buttons for tighter money so as to skim off any excess demand. However, before doing so, the RBI should recall its critique on administered rates. Despite itself and by its own admission, its easy money policy has not worked as well as it should have in making domestic capital cheap. Under the circumstances, any reversal of the easy money policy now would simply ratchet up an already high real interest rate regime. As it is, the enthusiasm for bank credit is just picking up as the latest data show; sending signals out for dearer money could dampen that pick-up at a time when it is most needed to rev up investment growth. The RBI surely knows that its signals for higher interest rates work far better than those announcing a dip; administered rates after all set the floor not the ceiling. That is exactly why the RBI must view a rate or cash reserve ratio (CRR) hike this month with some reservation. Domestic rates have been historically high, a feature that had Indian firms scurrying for cheaper global capital during the period of high growth till 2008-09. The only way to change that pattern is for the RBI to curb external commercial borrowings or for its signals for softer rates to work effectively.
Dealing with administered rates and government borrowings, whose ever-increasing size also prevent bank rates from falling, is New Delhi's job; it may be easier to control the need for funds than it will be to reduce rates on small savings or abolish administered rates altogether. But as financial services acquire sophistication, that task too could be tackled without hurting the interests of the small saver.
Thursday, January 21, 2010
Banks pulled up for fine on home loan pre-pay
Banks pulled up for fine on home loan pre-pay
Times of India, January 21, 2010, Page 25
New Delhi: Competition watchdog CCI has asked about two dozen banks and housing finance companies, including HDFC, ICICI Bank, and LICHF, to explain their imposing penalty on borrowers for pre-payment of home loans. The commission, according to official sources, has sent notices to major home loan players after examining a report of director general (investigations) which found evidences against banks for misusing their dominant position and entering into anti-competitive agreements.
"We have sent showcause notices to 20 banks including ICICI Bank, HDFC, LIC Housing Finance, Deutsche Postbank and the Indian Banks' Association. We have also sensitised RBI on how the practice of charging pre-payment penalty is hurting consumers," a senior CCI official said. The commission was scrutinising a complaint filed by a customer against the practice by these banks.
Spokespersons of ICICI Bank, HDFC and LIC Housing Finance could not be reached for comments. The move gives hopes to thousands of borrowers of foreclosing their housing loans without paying penalty. If the penalty is lifted, it may also lead to borrowers' shifting their credit to those lenders offering lower interest.
The CCI, official said, could also penalise lenders for adopting such practices to discourage customers from pre-paying home loans or the the practice could be banned across the industry. HDFC, for example, currently levies pre-payment charges ranging between 0% and 2%. PTI
Times of India, January 21, 2010, Page 25
New Delhi: Competition watchdog CCI has asked about two dozen banks and housing finance companies, including HDFC, ICICI Bank, and LICHF, to explain their imposing penalty on borrowers for pre-payment of home loans. The commission, according to official sources, has sent notices to major home loan players after examining a report of director general (investigations) which found evidences against banks for misusing their dominant position and entering into anti-competitive agreements.
"We have sent showcause notices to 20 banks including ICICI Bank, HDFC, LIC Housing Finance, Deutsche Postbank and the Indian Banks' Association. We have also sensitised RBI on how the practice of charging pre-payment penalty is hurting consumers," a senior CCI official said. The commission was scrutinising a complaint filed by a customer against the practice by these banks.
Spokespersons of ICICI Bank, HDFC and LIC Housing Finance could not be reached for comments. The move gives hopes to thousands of borrowers of foreclosing their housing loans without paying penalty. If the penalty is lifted, it may also lead to borrowers' shifting their credit to those lenders offering lower interest.
The CCI, official said, could also penalise lenders for adopting such practices to discourage customers from pre-paying home loans or the the practice could be banned across the industry. HDFC, for example, currently levies pre-payment charges ranging between 0% and 2%. PTI
Banks get notices for penalty on home loan pre-payment
Banks get notices for penalty on home loan pre-payment
Business Standard, January 21, 2010, Section II, Page 14
Press Trust of India, New Delhi
The Competition Commission of India (CCI) has asked about two dozen banks and housing finance companies, including SBI, HDFC, ICICI Bank and LICHF, to explain their move of imposing penalty on borrowers for pre-payment of home loans.
The Commission, according to official sources, has sent notices to major home loan players after examining a report of Director General (Investigations) which found evidences against banks, which also include public sector lenders Punjab National Bank and Bank of Baroda, for misusing their dominant position and entering into anti-competitive agreements. "We have sent showcause notices to 20 banks, including ICICI Bank, HDFC, LIC Housing Finance, Deutsche Postbank and the Indian Banks' Association. We have also sensitised the Reserve Bank on how the practice of charging pre-payment penalty is hurting consumers," a senior CCI official said.
The competition watchdog was scrutinizing a customer complaint against the practice. However spokespersons of ICICI Bank, HDFC and LICHF could not be reached for comments.
The move gives hope to thousands of borrowers who want to close their home loans without paying penalty. If the penalty is lifted, it may also lead to borrowers’ shifting their accounts to lenders offering lower interest rates. The commission could peanlise the lenders for adopting such practices or the practice could be banned across the industry, according to the official.
Market leader HDFC, for example, currently levies pre-payment charges ranging between zero and two per cent of the amount pre-paid by a borrower.
The pre-payment penalties are imposed to discourage customers from retiring their debts before the scheduled date. Some lenders charge only if the customer seeks refinancing the loan by taking money at a lower rate from some other entity.
Housing Loan outstanding at the end of March 2009, rose to Rs 2,63,235 crore, compared to Rs 2,52,932 crore at the end of 2007-08.
Business Standard, January 21, 2010, Section II, Page 14
Press Trust of India, New Delhi
The Competition Commission of India (CCI) has asked about two dozen banks and housing finance companies, including SBI, HDFC, ICICI Bank and LICHF, to explain their move of imposing penalty on borrowers for pre-payment of home loans.
The Commission, according to official sources, has sent notices to major home loan players after examining a report of Director General (Investigations) which found evidences against banks, which also include public sector lenders Punjab National Bank and Bank of Baroda, for misusing their dominant position and entering into anti-competitive agreements. "We have sent showcause notices to 20 banks, including ICICI Bank, HDFC, LIC Housing Finance, Deutsche Postbank and the Indian Banks' Association. We have also sensitised the Reserve Bank on how the practice of charging pre-payment penalty is hurting consumers," a senior CCI official said.
The competition watchdog was scrutinizing a customer complaint against the practice. However spokespersons of ICICI Bank, HDFC and LICHF could not be reached for comments.
The move gives hope to thousands of borrowers who want to close their home loans without paying penalty. If the penalty is lifted, it may also lead to borrowers’ shifting their accounts to lenders offering lower interest rates. The commission could peanlise the lenders for adopting such practices or the practice could be banned across the industry, according to the official.
Market leader HDFC, for example, currently levies pre-payment charges ranging between zero and two per cent of the amount pre-paid by a borrower.
The pre-payment penalties are imposed to discourage customers from retiring their debts before the scheduled date. Some lenders charge only if the customer seeks refinancing the loan by taking money at a lower rate from some other entity.
Housing Loan outstanding at the end of March 2009, rose to Rs 2,63,235 crore, compared to Rs 2,52,932 crore at the end of 2007-08.
High inflation, a concern: Pranab
High inflation, a concern: Pranab
The Hindu Business Line, January 21, 2010, Page 21
Our Bureau, New Delhi
The Finance Minister, Mr Pranab Mukherjee, today said that high inflation is a matter of concern and hinted that more steps are on the cards to check rising prices.
“It (inflation) is a matter of concern. Cabinet Secretary has held a meeting and certain steps are being taken,” Mr Mukherjee told reporters on the sidelines of rural development conference here today.
Driven by high food prices, India's wholesale price index (WPI) based inflation surged to 7.31 per cent in December from 4.78 per cent in the previous month.
The Committee of Secretaries, headed by the Cabinet Secretary, Mr K.M. Chandrasekhar, had on Tuesday reviewed the situation on prices as well as availability of essential commodities. Annual food inflation for the week ended January 2 stood at 17.28 per cent, latest official data showed.
Mr Mukherjee pointed out that the Government had already liberalised imports to meet shortage of essential commodities. “We have also ensured availability of wheat and rice in the market by offloading through FCI,” he said.
The Finance Minister also said that the Government was constantly monitoring the price situation of essential commodities.
The Hindu Business Line, January 21, 2010, Page 21
Our Bureau, New Delhi
The Finance Minister, Mr Pranab Mukherjee, today said that high inflation is a matter of concern and hinted that more steps are on the cards to check rising prices.
“It (inflation) is a matter of concern. Cabinet Secretary has held a meeting and certain steps are being taken,” Mr Mukherjee told reporters on the sidelines of rural development conference here today.
Driven by high food prices, India's wholesale price index (WPI) based inflation surged to 7.31 per cent in December from 4.78 per cent in the previous month.
The Committee of Secretaries, headed by the Cabinet Secretary, Mr K.M. Chandrasekhar, had on Tuesday reviewed the situation on prices as well as availability of essential commodities. Annual food inflation for the week ended January 2 stood at 17.28 per cent, latest official data showed.
Mr Mukherjee pointed out that the Government had already liberalised imports to meet shortage of essential commodities. “We have also ensured availability of wheat and rice in the market by offloading through FCI,” he said.
The Finance Minister also said that the Government was constantly monitoring the price situation of essential commodities.
No PAN card may cost 20% more tax
No PAN card may cost 20% more tax
Financial Express, January 21, 2010, Page 2
fe Bureau, New Delhi
If you don’t have a permanent account number (PAN), be prepared for paying higher income tax at source from the next fiscal. According to a government notification, “Tax at higher of the prescribed rate or 20% will be deducted on all transactions liable to TDS, where the PAN of the deductee is not available,” and the new provision will become applicable with effect from April 1, 2010.
All assessees will have to quote their PAN in their correspondences, bills, vouchers and other documents sent to each other. The finance ministry notification said all deductors should intimate their deductees to obtain and furnish their PAN so as to avoid TDS at a higher rate. Also, all non-residents in respect of payments or remittances liable to TDS will comply with the new norm. “All deductees, including non-residents having transactions in India liable to TDS, are advised to obtain PAN by March 31, 2010 and communicate the same to their deductors before tax is actually deducted on transactions after that date,” the ministry said.
Assessees who do not have PAN will also not get certificate from assessing officer about lower or no tax liability.
Financial Express, January 21, 2010, Page 2
fe Bureau, New Delhi
If you don’t have a permanent account number (PAN), be prepared for paying higher income tax at source from the next fiscal. According to a government notification, “Tax at higher of the prescribed rate or 20% will be deducted on all transactions liable to TDS, where the PAN of the deductee is not available,” and the new provision will become applicable with effect from April 1, 2010.
All assessees will have to quote their PAN in their correspondences, bills, vouchers and other documents sent to each other. The finance ministry notification said all deductors should intimate their deductees to obtain and furnish their PAN so as to avoid TDS at a higher rate. Also, all non-residents in respect of payments or remittances liable to TDS will comply with the new norm. “All deductees, including non-residents having transactions in India liable to TDS, are advised to obtain PAN by March 31, 2010 and communicate the same to their deductors before tax is actually deducted on transactions after that date,” the ministry said.
Assessees who do not have PAN will also not get certificate from assessing officer about lower or no tax liability.
Realty builds on revival, brick by brick
Realty builds on revival, brick by brick
Financial Express, January 21, 2010, Page 14
Nikita Upadhyay
The realty sector, which was hit by the slowdown in purchases, could well be at the cusp of a revival, highlight December 2009 earnings. Industry analysts reckon that signs of revival in property volumes are evident. The harbinger could well be price rises in certain locations in Mumbai, where developers have sought prices that match the March 2008 peak levels.
However, a Motilal Oswal Securities (MOSL) report suggests that volumes are unlikely to surge in the near term unless prices moderate by 5-8% from the current level. Several suburban projects in Mumbai have been delayed due to lack of approvals and developers have been faced with pressure from customers demanding refunds. Home buyers are shifting focus to ready-to-move-in projects or projects nearing completion, says the report.
Even with lower volumes, sales seem to be flowing at a steady pace in the National Capital Region (NCR), despite price increases. “Prices increased by 5-10% across key projects since August, 2009. Prices in some key areas in South Delhi have moved to new highs. Demand from non-resident Indians is a demand driver in the NCR,” adds the report.
South India also witnessed some recovery with sales gaining momentum in Bangalore and Chennai. Recovery in Bangalore picked up steam as the December, 2009, quarter progressed. “Sales volumes have gained momentum over the past few months, with transactions having increased by about 40% on a yearly basis. Momentum of new launches and sales continues, however, due to excessive supply and high inventories, prices are unlikely to increase in the near term,” pointed out the report.
The December, 2009, quarter has also seen a strong momentum in launches. According to Jones Lang LaSalle Meghraj (JLLM), while new launches from January to March, 2009, in seven key metro cities totalled to 24,400 units, new launches in April to June, 2009, stood at 42,458 units. Tier-1 cities of Delhi and Mumbai accounted for almost 64% of the launches.
The market has started to re-look at realty stocks closely. The central bank’s policy was a cautious one. However, in the current year the tide seems to have changed and the real-estate companies are no longer pariahs. Godrej Properties managed to raise Rs 500 crore and a decent listing gain of around 15%.
According to ICICI Securities, revival in equity and real-estate markets may lead developers, including Emaar MGF, Lodha Developers, DB Realty, Sahara Prime City and Ambience, to target primary markets. “These firms could potentially raise Rs 12,000 crore in March, 2009, quarter. We believe with recent price correction in listed real estate companies, they offer a better opportunity for investment at current prices,” the report says.
As the recovery in the residential properties saw strong volume and price momentum, the same for the commercial and retail vertical is daunting. “While leasing is yet to pick up strongly, the commercial and retail verticals are set to revive over next 6-9 months, noted the MOSL report.
Another report from ICICI Securities mentions that both commercial and retail segments continue to lag. “We do not expect any pick-up in the year 2009-10. We believe the uptrend will continue, gaining from increase in housing demand, affordable home loan interest rates and timely execution,” said the report.
Financial Express, January 21, 2010, Page 14
Nikita Upadhyay
The realty sector, which was hit by the slowdown in purchases, could well be at the cusp of a revival, highlight December 2009 earnings. Industry analysts reckon that signs of revival in property volumes are evident. The harbinger could well be price rises in certain locations in Mumbai, where developers have sought prices that match the March 2008 peak levels.
However, a Motilal Oswal Securities (MOSL) report suggests that volumes are unlikely to surge in the near term unless prices moderate by 5-8% from the current level. Several suburban projects in Mumbai have been delayed due to lack of approvals and developers have been faced with pressure from customers demanding refunds. Home buyers are shifting focus to ready-to-move-in projects or projects nearing completion, says the report.
Even with lower volumes, sales seem to be flowing at a steady pace in the National Capital Region (NCR), despite price increases. “Prices increased by 5-10% across key projects since August, 2009. Prices in some key areas in South Delhi have moved to new highs. Demand from non-resident Indians is a demand driver in the NCR,” adds the report.
South India also witnessed some recovery with sales gaining momentum in Bangalore and Chennai. Recovery in Bangalore picked up steam as the December, 2009, quarter progressed. “Sales volumes have gained momentum over the past few months, with transactions having increased by about 40% on a yearly basis. Momentum of new launches and sales continues, however, due to excessive supply and high inventories, prices are unlikely to increase in the near term,” pointed out the report.
The December, 2009, quarter has also seen a strong momentum in launches. According to Jones Lang LaSalle Meghraj (JLLM), while new launches from January to March, 2009, in seven key metro cities totalled to 24,400 units, new launches in April to June, 2009, stood at 42,458 units. Tier-1 cities of Delhi and Mumbai accounted for almost 64% of the launches.
The market has started to re-look at realty stocks closely. The central bank’s policy was a cautious one. However, in the current year the tide seems to have changed and the real-estate companies are no longer pariahs. Godrej Properties managed to raise Rs 500 crore and a decent listing gain of around 15%.
According to ICICI Securities, revival in equity and real-estate markets may lead developers, including Emaar MGF, Lodha Developers, DB Realty, Sahara Prime City and Ambience, to target primary markets. “These firms could potentially raise Rs 12,000 crore in March, 2009, quarter. We believe with recent price correction in listed real estate companies, they offer a better opportunity for investment at current prices,” the report says.
As the recovery in the residential properties saw strong volume and price momentum, the same for the commercial and retail vertical is daunting. “While leasing is yet to pick up strongly, the commercial and retail verticals are set to revive over next 6-9 months, noted the MOSL report.
Another report from ICICI Securities mentions that both commercial and retail segments continue to lag. “We do not expect any pick-up in the year 2009-10. We believe the uptrend will continue, gaining from increase in housing demand, affordable home loan interest rates and timely execution,” said the report.
Chinese banks told to curb lending after concerns of overheating
Chinese banks told to curb lending after concerns of overheating
Financial Express, January 21, 2010, Page 20
Bloomberg, Shanghai, Beijing
Chinese authorities ordered some big banks to curb lending for the rest of January, intensifying their efforts to prevent the world’s third-largest economy from overheating.
The news on Wednesday weighed down stocks in Asia and Europe and oil fell toward $78 a barrel on fears that demand in China, the world economy’s main source of growth, may now slow down as authorities tighten policy.
China’s central bank told some banks, including Citic Bank and Everbright Bank, to increase their reserve requirement ratio by half a percentage point, banking sources told Reuters.
A surge of new lending in January has triggered a series of intensifying steps by authorities to rid the financial system of excess cash that can fuel inflation and asset bubbles. Last week, the central bank raised bank reserve requirements for the first time since June 2008. “The question now is not whether we need to control credit and money supply but when and how to control it,” said Chen Xingdong, chief China economist at BNP Paribas in Beijing. “Policy will not be a straight line.”
Chinese banks lent 1.1 trillion yuan ($161 billion) in the first half of January, sources said, citing central bank data. That puts total new loans in January on track for the highest since June 2009, when banks doled out 1.5 trillion yuan in new lending.
The top four banks together lent more than 500 billion yuan during the same period, the sources said. Last year, Chinese banks lent a record 9.6 trillion yuan. The surge, combined with Beijing’s 4 trillion yuan stimulus plan, helped kick-start the economy after a slump, but aroused investor fears of overheating. Data due on Thursday is expected to again show double-digit quarterly GDP growth.
Zhu Baoliang, chief economist at a government think tank, said consumer inflation has accelerated a lot in December and would likely push policymakers to raise interest rates by the middle of the year. There were conflicting accounts of what exactly authorities would do. The official China securities journal cited unidentified banking sources as saying that some banks had been told to stop all lending for the rest of the month. However, a source at the China Banking Regulatory Commission, who spoke on condition of anonymity, said the CBRC had not ordered banks to halt lending for the rest of January, though it continued to crack down on lenders that do not meet criteria.
“It is our long-standing principle that banks that do not meet regulatory requirements must not lend any more,” the source said. In any case, after last week’s increase in bank reserve requirements, a rise in 1-year bill yields, and steps to root out speculation in the property market, the message from authorities is clear: fast growth in credits and money supply will not be tolerated because the stakes are too high.
Financial Express, January 21, 2010, Page 20
Bloomberg, Shanghai, Beijing
Chinese authorities ordered some big banks to curb lending for the rest of January, intensifying their efforts to prevent the world’s third-largest economy from overheating.
The news on Wednesday weighed down stocks in Asia and Europe and oil fell toward $78 a barrel on fears that demand in China, the world economy’s main source of growth, may now slow down as authorities tighten policy.
China’s central bank told some banks, including Citic Bank and Everbright Bank, to increase their reserve requirement ratio by half a percentage point, banking sources told Reuters.
A surge of new lending in January has triggered a series of intensifying steps by authorities to rid the financial system of excess cash that can fuel inflation and asset bubbles. Last week, the central bank raised bank reserve requirements for the first time since June 2008. “The question now is not whether we need to control credit and money supply but when and how to control it,” said Chen Xingdong, chief China economist at BNP Paribas in Beijing. “Policy will not be a straight line.”
Chinese banks lent 1.1 trillion yuan ($161 billion) in the first half of January, sources said, citing central bank data. That puts total new loans in January on track for the highest since June 2009, when banks doled out 1.5 trillion yuan in new lending.
The top four banks together lent more than 500 billion yuan during the same period, the sources said. Last year, Chinese banks lent a record 9.6 trillion yuan. The surge, combined with Beijing’s 4 trillion yuan stimulus plan, helped kick-start the economy after a slump, but aroused investor fears of overheating. Data due on Thursday is expected to again show double-digit quarterly GDP growth.
Zhu Baoliang, chief economist at a government think tank, said consumer inflation has accelerated a lot in December and would likely push policymakers to raise interest rates by the middle of the year. There were conflicting accounts of what exactly authorities would do. The official China securities journal cited unidentified banking sources as saying that some banks had been told to stop all lending for the rest of the month. However, a source at the China Banking Regulatory Commission, who spoke on condition of anonymity, said the CBRC had not ordered banks to halt lending for the rest of January, though it continued to crack down on lenders that do not meet criteria.
“It is our long-standing principle that banks that do not meet regulatory requirements must not lend any more,” the source said. In any case, after last week’s increase in bank reserve requirements, a rise in 1-year bill yields, and steps to root out speculation in the property market, the message from authorities is clear: fast growth in credits and money supply will not be tolerated because the stakes are too high.
HDFC net up 23% on NPA dip, better NIM
HDFC net up 23% on NPA dip, better NIM
The Economic Times, January 21, 2010, Page 10
Net Profit For April-December Stands At Rs 1,900 Cr
Our Bureau MUMBAI
THE country’s largest mortgage financier, Housing Development Finance Company (HDFC), reported a 23% jump in profits for the third quarter as margins improved and bad loans fell. For the quarter ended December
2009, HDFC reported a net profit of Rs 671 crore, an increase of 23% over the net profit of Rs 547 crore in the corresponding quarter last year.
The corporation’s net profits for the nine-month period ended December 2009 stood at Rs 1,900 crore up 23% from Rs 1,549 crore in the corresponding period last year.
The housing finance company was confident of maintaining its margins despite the introduction of teaser loans where the interest is 8.25% in the first year. “We expect to do loans worth Rs 3,500-4,000 crore until the end of January 2009 under the new scheme. We are able to extend loans at this rate because we have managed to raise loans at a cost of around 6.1%, which enables us to still earn a spread of around 2.2%,” said HDFC vice-chairman and CEO Keki Mistry. The special scheme is due to end in January. However, the corporation is likely to review the closure date closer to the month end.
Loan approvals during the ninemonth period ending December 31, 2009, amounted to Rs 41,110 crore against Rs 33,820 crore in the corresponding period last year, representing a growth of 22%. Loan disbursements during the nine-month period ending December 31, 2009, amounted to Rs 33,527 crore against Rs 27,211 crore during the corresponding period last year, representing a growth of 23%. The spread on loans over the cost of borrowings for the nine-month period ended December 31, 2009, stood at 2.25% compared with 2.21% for the year ended March 31, 2009.
HDFC’s net interest margins improved even as it dropped rates on home loans. This was because the institution took advantage of the surplus liquidity to raise wholesale funds from banks at cheap rates. Net interest income from the quarter was up 14% at Rs 1,001 crore compared with Rs 877 crore in the corresponding quarter last year. The net interest income for the nine-month period was Rs 2,778 crore up 13.1% from Rs 2,457 in the previous year. The net interest margin improved to 4.27% from 4.19% last year.
Mr Mistry said he expects some tightening by RBI in its monetary policy in January. However, banks were unlikely to hike lending rates because of ample liquidity in the system. “The only way rates could go up is if demand for credit by corporates picks up,” said Mr Mistry.
The Economic Times, January 21, 2010, Page 10
Net Profit For April-December Stands At Rs 1,900 Cr
Our Bureau MUMBAI
THE country’s largest mortgage financier, Housing Development Finance Company (HDFC), reported a 23% jump in profits for the third quarter as margins improved and bad loans fell. For the quarter ended December
2009, HDFC reported a net profit of Rs 671 crore, an increase of 23% over the net profit of Rs 547 crore in the corresponding quarter last year.The corporation’s net profits for the nine-month period ended December 2009 stood at Rs 1,900 crore up 23% from Rs 1,549 crore in the corresponding period last year.
The housing finance company was confident of maintaining its margins despite the introduction of teaser loans where the interest is 8.25% in the first year. “We expect to do loans worth Rs 3,500-4,000 crore until the end of January 2009 under the new scheme. We are able to extend loans at this rate because we have managed to raise loans at a cost of around 6.1%, which enables us to still earn a spread of around 2.2%,” said HDFC vice-chairman and CEO Keki Mistry. The special scheme is due to end in January. However, the corporation is likely to review the closure date closer to the month end.
Loan approvals during the ninemonth period ending December 31, 2009, amounted to Rs 41,110 crore against Rs 33,820 crore in the corresponding period last year, representing a growth of 22%. Loan disbursements during the nine-month period ending December 31, 2009, amounted to Rs 33,527 crore against Rs 27,211 crore during the corresponding period last year, representing a growth of 23%. The spread on loans over the cost of borrowings for the nine-month period ended December 31, 2009, stood at 2.25% compared with 2.21% for the year ended March 31, 2009.
HDFC’s net interest margins improved even as it dropped rates on home loans. This was because the institution took advantage of the surplus liquidity to raise wholesale funds from banks at cheap rates. Net interest income from the quarter was up 14% at Rs 1,001 crore compared with Rs 877 crore in the corresponding quarter last year. The net interest income for the nine-month period was Rs 2,778 crore up 13.1% from Rs 2,457 in the previous year. The net interest margin improved to 4.27% from 4.19% last year.
Mr Mistry said he expects some tightening by RBI in its monetary policy in January. However, banks were unlikely to hike lending rates because of ample liquidity in the system. “The only way rates could go up is if demand for credit by corporates picks up,” said Mr Mistry.
HDIL raises Rs 425 cr additional debt
HDIL raises Rs 425 cr additional debt
Business Standard, January 21, 2010, Page 4
Press Trust of India / Mumbai
Realty developer Housing Development and Infrastructure (HDIL) today said it has raised Rs 425 crore as debt, in addition to Rs 400 crore raised last month, to retire high cost loans.
In all, the company plans to raise Rs 1,150 crore through the issue of secured redeemable and non-convertible debentures.
The company has a total debt of Rs 3,300 crore, HDIL MD Sarang Wadhawan told PTI.
"The company has received application and subscription for 4,250 secured redeemable and non-convertible debentures of Rs 10 lakh each, aggregating to Rs 425 crore," HDIL said in a filing to the Bombay Stock Exchange.
Earlier during the day, the company reported a 12 per cent decline in net profit at Rs 162.76 crore for the quarter ended December 31, 2009. However, the company's total income rose to Rs 435.47 crore for the third quarter, against Rs 334.7 crore in the same period previous fiscal.
Shares of HDIL closed down 3.96 per cent at Rs 371.
Business Standard, January 21, 2010, Page 4
Press Trust of India / Mumbai
Realty developer Housing Development and Infrastructure (HDIL) today said it has raised Rs 425 crore as debt, in addition to Rs 400 crore raised last month, to retire high cost loans.
In all, the company plans to raise Rs 1,150 crore through the issue of secured redeemable and non-convertible debentures.
The company has a total debt of Rs 3,300 crore, HDIL MD Sarang Wadhawan told PTI.
"The company has received application and subscription for 4,250 secured redeemable and non-convertible debentures of Rs 10 lakh each, aggregating to Rs 425 crore," HDIL said in a filing to the Bombay Stock Exchange.
Earlier during the day, the company reported a 12 per cent decline in net profit at Rs 162.76 crore for the quarter ended December 31, 2009. However, the company's total income rose to Rs 435.47 crore for the third quarter, against Rs 334.7 crore in the same period previous fiscal.
Shares of HDIL closed down 3.96 per cent at Rs 371.
Wednesday, January 20, 2010
Unitech withdraws $700-m FCCB plan
Unitech withdraws $700-m FCCB plan
Financial Express, January 20, 2010, Page 4
Rajat Guha, New Delhi
The country's second largest real estate developer Unitech has withdrawn its plans to raise $700 million through foreign currency convertible bonds (FCCBs) amidst strong signals from the government that the current norm prohibiting developers to repatriate profits from investments for a period of three years would not be relaxed.
The Delhi-based company’s plan to raise money via these debt instruments was based on the hope that the government would waive off the three-year lock-in period for foreign capital. The funds that were expected to be raised would have been used by the company to develop integrated townships. Currently, under the government's external commercial borrowings (ECB) norms that also govern FCCBs, there's a three-year lock-in before which one cannot redeem the bonds.
Although the department of industrial policy and promotion (DIPP), the key FDI policy making body, had supported Unitech's proposal, the finance ministry and the Reserve Bank of India opposed relaxation of the lock-in norm, a senior government official, who has dealt with the proposal said.
Unitech had earlier argued with the government that FCCBs should be treated as debt till the time of conversion and they would be issued to portfolio investors. FCCBs are bonds that allow the bondholder to redeem the bonds after the maturity period or convert them into equity at a predetermined price. Until then, they carry a nominal rate of interest.
In January 2009, as part of the second stimulus package the government allowed real estate companies to raise funds via ECB for integrated township project.
But except Unitech, no other realty company has approached the government so far seeking permission to raise funds through this route.
Foreign direct investment (FDI) in construction is allowed through the automatic route but with riders. The government had imposed the lock-in in real estate to prevent an asset bubble. A Unitech executive said the company has given up its plans to raise money through FCCBs as there was no immediate need for funds.
Last year, Unitech was on a fund-raising spree. It raised Rs 4,000 crore through two rounds of QIPs. Part of these funds were utilised to retire its debts.
Financial Express, January 20, 2010, Page 4
Rajat Guha, New Delhi
The country's second largest real estate developer Unitech has withdrawn its plans to raise $700 million through foreign currency convertible bonds (FCCBs) amidst strong signals from the government that the current norm prohibiting developers to repatriate profits from investments for a period of three years would not be relaxed.
The Delhi-based company’s plan to raise money via these debt instruments was based on the hope that the government would waive off the three-year lock-in period for foreign capital. The funds that were expected to be raised would have been used by the company to develop integrated townships. Currently, under the government's external commercial borrowings (ECB) norms that also govern FCCBs, there's a three-year lock-in before which one cannot redeem the bonds.
Although the department of industrial policy and promotion (DIPP), the key FDI policy making body, had supported Unitech's proposal, the finance ministry and the Reserve Bank of India opposed relaxation of the lock-in norm, a senior government official, who has dealt with the proposal said.
Unitech had earlier argued with the government that FCCBs should be treated as debt till the time of conversion and they would be issued to portfolio investors. FCCBs are bonds that allow the bondholder to redeem the bonds after the maturity period or convert them into equity at a predetermined price. Until then, they carry a nominal rate of interest.
In January 2009, as part of the second stimulus package the government allowed real estate companies to raise funds via ECB for integrated township project.
But except Unitech, no other realty company has approached the government so far seeking permission to raise funds through this route.
Foreign direct investment (FDI) in construction is allowed through the automatic route but with riders. The government had imposed the lock-in in real estate to prevent an asset bubble. A Unitech executive said the company has given up its plans to raise money through FCCBs as there was no immediate need for funds.
Last year, Unitech was on a fund-raising spree. It raised Rs 4,000 crore through two rounds of QIPs. Part of these funds were utilised to retire its debts.
Tourism ministry seeks 5-yr tax holiday extension for Games hotels till July 31
Tourism ministry seeks 5-yr tax holiday extension for Games hotels till July 31
Financial Express, January 20, 2010, Page 14
Surabhi Agarwal, New Delhi
To speed up the development of hotel rooms before the Commonwealth Games due in October, the tourism ministry has urged the finance ministry to extend the benefits of the five-year tax holiday for budget hotels under construction in the national capital region (NCR) up to July 31, 2010, instead of the earlier deadline of March 31, 2010.
“Looking at the macro-economic situation over the past year, most of the hotels will take a little longer to complete.
Extending the tax holiday would be an incentive for hotels to speed up the process of development and start operations soon, adding to the country’s preparedness for the Games,” a tourism ministry official told FE.
The five-year tax holiday for budget hotels was introduced to attract hospitality chains to build more hotels in the NCR region. However, the economic downturn put a spanner in the development of a majority of properties raising concerns of a shortage of rooms during the Games, which are expected to attract around 1,00,000 tourists from across the world. According to estimates, there is a requirement of around 40,000 rooms in the NCR region to host the guests.
The tourism ministry has also urged the finance ministry for “non-inclusion of interstate passenger tax, state road tax and toll tax in GST as a result of which seamless travel and uniform road tax would not be possible”. Stamp duty, vehicular tax and toll taxes are part of the exemptions demanded by the empowered committee of state finance ministers, which is negotiating the GST rate and structure with the centre. States receive a consolidated Rs 10,000 crore annually from vehicles, according to the estimate of the 13th Finance Commission task force on GST.
The ministry has also demanded the restoration of Budget grant to Rs 1,000 crore, which was reduced to Rs 950 crore in the revised estimates of 2009-10. The ministry has also reiterated its demand for the revival of 80HHD of the income tax act of the tourism sector, which allowed the 50% of the profits earned from the services provided to the foreign tourists was exempted from tax and further 50% of the profit was also exempted if it was invested in the tourism sector.
“This benefit was discontinued from the financial year 2005-06 and the revivals of the benefits would set a path of growth for building up much needed tourism infrastructure in the country,” it said. The ministry has also asked for grant of infrastructure status to hotels along with deemed export status for earnings of inbound tour operators, demands which were not met in the last Budget.
In order to give a boost to the cruise tourism in the country, which is still in its infancy in the country, the ministry has asked to bring cruise tour operators at par with the other tour operators by extending 75% abatement of service tax. While approved tour operators are subject to only 2.58% of the service tax on packages, the cruise tourist packages are taxed at 10.3%.
Financial Express, January 20, 2010, Page 14
Surabhi Agarwal, New Delhi
To speed up the development of hotel rooms before the Commonwealth Games due in October, the tourism ministry has urged the finance ministry to extend the benefits of the five-year tax holiday for budget hotels under construction in the national capital region (NCR) up to July 31, 2010, instead of the earlier deadline of March 31, 2010.
“Looking at the macro-economic situation over the past year, most of the hotels will take a little longer to complete.
Extending the tax holiday would be an incentive for hotels to speed up the process of development and start operations soon, adding to the country’s preparedness for the Games,” a tourism ministry official told FE.
The five-year tax holiday for budget hotels was introduced to attract hospitality chains to build more hotels in the NCR region. However, the economic downturn put a spanner in the development of a majority of properties raising concerns of a shortage of rooms during the Games, which are expected to attract around 1,00,000 tourists from across the world. According to estimates, there is a requirement of around 40,000 rooms in the NCR region to host the guests.
The tourism ministry has also urged the finance ministry for “non-inclusion of interstate passenger tax, state road tax and toll tax in GST as a result of which seamless travel and uniform road tax would not be possible”. Stamp duty, vehicular tax and toll taxes are part of the exemptions demanded by the empowered committee of state finance ministers, which is negotiating the GST rate and structure with the centre. States receive a consolidated Rs 10,000 crore annually from vehicles, according to the estimate of the 13th Finance Commission task force on GST.
The ministry has also demanded the restoration of Budget grant to Rs 1,000 crore, which was reduced to Rs 950 crore in the revised estimates of 2009-10. The ministry has also reiterated its demand for the revival of 80HHD of the income tax act of the tourism sector, which allowed the 50% of the profits earned from the services provided to the foreign tourists was exempted from tax and further 50% of the profit was also exempted if it was invested in the tourism sector.
“This benefit was discontinued from the financial year 2005-06 and the revivals of the benefits would set a path of growth for building up much needed tourism infrastructure in the country,” it said. The ministry has also asked for grant of infrastructure status to hotels along with deemed export status for earnings of inbound tour operators, demands which were not met in the last Budget.
In order to give a boost to the cruise tourism in the country, which is still in its infancy in the country, the ministry has asked to bring cruise tour operators at par with the other tour operators by extending 75% abatement of service tax. While approved tour operators are subject to only 2.58% of the service tax on packages, the cruise tourist packages are taxed at 10.3%.
CRR rate likely to go up, says Tendulkar
CRR rate likely to go up, says Tendulkar
Financial Express, January 20, 2010, Page 15
fe Bureaus, Mumbai
Suresh Tendulkar, director of the central board of Reserve Bank of India (RBI), on Tuesday said the country will record a GDP growth of 7.5-8% for a remarkable period of time.
Commenting on the government’s move on the stimulus packages exit , Tendulkar said it is a tough call for the government as all sectors of the economy have not been equally benefited from the measures.
However, he feels there may be hike in cash reserve ratio (CRR) in the forthcoming policy of RBI on January 29 to withdraw excess liquidity in the system.
Tendulkar was here to address a seminar at SME Chamber of India on Tuesday,
Tendulkar, who is also the former chairman of Prime Minister’s Economic Advisory Council, said that while auto sales have picked up fast, Nano has given a further twist as it has inspired some of the other multinational auto companies to enter the small car segment.
According to him, GST is on the anvil though date and time for the same was yet to be finalised. “Once it happens, it is going to be a game changer for the taxation differentials in the entire sub-continental market. But, rules and procedures need to be stabilised. Revenue maximisation is going to remain an issue,” he said.
Financial Express, January 20, 2010, Page 15
fe Bureaus, Mumbai
Suresh Tendulkar, director of the central board of Reserve Bank of India (RBI), on Tuesday said the country will record a GDP growth of 7.5-8% for a remarkable period of time.
Commenting on the government’s move on the stimulus packages exit , Tendulkar said it is a tough call for the government as all sectors of the economy have not been equally benefited from the measures.
However, he feels there may be hike in cash reserve ratio (CRR) in the forthcoming policy of RBI on January 29 to withdraw excess liquidity in the system.
Tendulkar was here to address a seminar at SME Chamber of India on Tuesday,
Tendulkar, who is also the former chairman of Prime Minister’s Economic Advisory Council, said that while auto sales have picked up fast, Nano has given a further twist as it has inspired some of the other multinational auto companies to enter the small car segment.
According to him, GST is on the anvil though date and time for the same was yet to be finalised. “Once it happens, it is going to be a game changer for the taxation differentials in the entire sub-continental market. But, rules and procedures need to be stabilised. Revenue maximisation is going to remain an issue,” he said.
Non-salaried too can get hassle-free home loans
Non-salaried too can get hassle-free home loans
The Economic Times, January 20, 2010, Page 10
While banks may not chase self-employed pros with home loan packages, they too can get funds for house purchases with proper paper work, says Preeti Kulkarni
SALARIED individuals have banks chasing them all the time for home loans as this segment of borrowers is best placed to deal with equated monthly instalments. Lenders have no hesitation in ‘pre-approving’ those holding decent positions in large companies.
But generally speaking, for the self-employed, the sanction process is not as standardised and straightforward as it is for the salaried. Lenders will not extend a loan unless they are fully convinced that the borrower is in a position to meet his/her monthly obligations. Here are some measures that professionals, self-employed and businessmen could take to ensure that their home loan sanction goes through smoothly.
First, a disclaimer. Not all professionals and businessmen find it difficult to raise a home loan. Some may encounter a simpler process and speedy loan disbursal vis-Ã -vis their salaried counterparts.
“Typically a salaried borrower would look for a loan worth 80% of the home value while self-employed borrowers tend to seek a loan for 55-60% of the property value, which means that loan-to-value (LTV) ratio is better,” says Kamlesh Rao, executive V-P — personal finance & mortgage of Kotak Mahindra Bank. In some cases, this factor could work to self-employed individuals’ advantage.
DOCUMENTATION
In addition to documents for fulfilling the know-your-customer (KYC) norms, a common requirement in all home loans is the proof of income. While for employees, a salary statement and Form 16 document submitted to the I-T department are proof enough, the self-employed need to provide some alternative proof. “A self-employed person could be earning income from a number of sources — his business could be paying him a dividend, or it could pay him a salary, or he might even be receiving interest on the capital he has deployed. The one common document that will show the income from all sources is the computation of income statement submitted to the I-T department,” says an HDFC spokesperson. Banks, therefore, insist on this document along with I-T returns for the last three years. In addition, they will also ask for balance sheet and profit & loss statements duly certified by a chartered accountant. If the loan is sought before the returns are filed, you will be asked to furnish the current year’s provisional statements and advance tax challans if any.
THE PROCEDURE
The key to getting your loan sanctioned is convincing the banker about the robustness of your business and cash flow. Typically, banks insist on a personal discussion with the proprietors to get their insights on the business model, actual margins, business mix and so on. “The ability of the lending bank to be able to plot the actual cash flow versus what their financials reflect is critical. We also look at the net worth of the applicant,” adds Mr Rao.
While assessing the repayment capacity of loan-seekers, banks take into consideration the actual cash profits made by the business, as this will be used for servicing the loan. Other factors that are considered, include properties owned by the applicants, their track record with their personal banker and so on — their repayment record as far as overdraft and working capital is concerned also counts.
Unlike salaried home loan-seekers, whose EMI servicing capacity is considered to be 50% of the net salary, there is no thumb rule in this case. Documentation alone is not adequate.
Therefore, the clarity of thoughts you display at the personal discussion to convince the bank about your credentials and the business prospects could go a long way in getting the loan approved. Furthermore, the line of business you operate in could also play a role. Those with businesses associated with sectors such as exports and textiles, which are cyclical in nature, could be at a disadvantage if the industry is passing through a rough phase.
SELF-EMPLOYED PROFESSIONALS
While the documentation for this category of home loan seekers would be similar, the process is less complex in comparison. This is because in case of most professionals, their earnings are reflected in their financial statements, thereby leaving little scope for any ambiguity. In contrast, many self-employed non-professionals could be conducting a major part of their dealings in cash.
Besides, banks draw comfort from the fact that in the event of any adverse impact on the business, the qualified professionals — like chartered accountants, doctors or engineers can always land a well-paying job.
HOME A ‘LOAN’
If you are a qualified professional
You stand better chance of getting a home loan if you are well-qualified and easily employable Lenders will look at who your clients are to ascertain steady income Your credit history and income tax records for the last three years are important Check if you need to submit the registration certificate for deduction of profession tax and the certificate of practice
If you own a proprietary concern
Ensure that you have your computation of income statement, along with tax returns Same goes for the registration certificate under Shop and Establishment Act and Factories Act Bank account statements, as well as profit & loss and balance sheet statements will be required too If you are engaged in an activity that is going through a downturn, lenders will be cautious Again, a good client list will impress the lender Give an accurate picture of your networth
If you are a part of a partnership
Have an up-to-date deed of partnership that provides for all situations Banks will ask for identity of partners I-T returns, again, forms a key document Like in case of proprietary firms, bank account, profit & loss and balance sheet statements will have to be submitted. Clear communication on your firm's goals, business mix, margins, etc, during the discussion with bank officials is critical.
The Economic Times, January 20, 2010, Page 10
While banks may not chase self-employed pros with home loan packages, they too can get funds for house purchases with proper paper work, says Preeti Kulkarni
SALARIED individuals have banks chasing them all the time for home loans as this segment of borrowers is best placed to deal with equated monthly instalments. Lenders have no hesitation in ‘pre-approving’ those holding decent positions in large companies.
But generally speaking, for the self-employed, the sanction process is not as standardised and straightforward as it is for the salaried. Lenders will not extend a loan unless they are fully convinced that the borrower is in a position to meet his/her monthly obligations. Here are some measures that professionals, self-employed and businessmen could take to ensure that their home loan sanction goes through smoothly.
First, a disclaimer. Not all professionals and businessmen find it difficult to raise a home loan. Some may encounter a simpler process and speedy loan disbursal vis-Ã -vis their salaried counterparts.
“Typically a salaried borrower would look for a loan worth 80% of the home value while self-employed borrowers tend to seek a loan for 55-60% of the property value, which means that loan-to-value (LTV) ratio is better,” says Kamlesh Rao, executive V-P — personal finance & mortgage of Kotak Mahindra Bank. In some cases, this factor could work to self-employed individuals’ advantage.
DOCUMENTATION
In addition to documents for fulfilling the know-your-customer (KYC) norms, a common requirement in all home loans is the proof of income. While for employees, a salary statement and Form 16 document submitted to the I-T department are proof enough, the self-employed need to provide some alternative proof. “A self-employed person could be earning income from a number of sources — his business could be paying him a dividend, or it could pay him a salary, or he might even be receiving interest on the capital he has deployed. The one common document that will show the income from all sources is the computation of income statement submitted to the I-T department,” says an HDFC spokesperson. Banks, therefore, insist on this document along with I-T returns for the last three years. In addition, they will also ask for balance sheet and profit & loss statements duly certified by a chartered accountant. If the loan is sought before the returns are filed, you will be asked to furnish the current year’s provisional statements and advance tax challans if any.
THE PROCEDURE
The key to getting your loan sanctioned is convincing the banker about the robustness of your business and cash flow. Typically, banks insist on a personal discussion with the proprietors to get their insights on the business model, actual margins, business mix and so on. “The ability of the lending bank to be able to plot the actual cash flow versus what their financials reflect is critical. We also look at the net worth of the applicant,” adds Mr Rao.
While assessing the repayment capacity of loan-seekers, banks take into consideration the actual cash profits made by the business, as this will be used for servicing the loan. Other factors that are considered, include properties owned by the applicants, their track record with their personal banker and so on — their repayment record as far as overdraft and working capital is concerned also counts.
Unlike salaried home loan-seekers, whose EMI servicing capacity is considered to be 50% of the net salary, there is no thumb rule in this case. Documentation alone is not adequate.
Therefore, the clarity of thoughts you display at the personal discussion to convince the bank about your credentials and the business prospects could go a long way in getting the loan approved. Furthermore, the line of business you operate in could also play a role. Those with businesses associated with sectors such as exports and textiles, which are cyclical in nature, could be at a disadvantage if the industry is passing through a rough phase.
SELF-EMPLOYED PROFESSIONALS
While the documentation for this category of home loan seekers would be similar, the process is less complex in comparison. This is because in case of most professionals, their earnings are reflected in their financial statements, thereby leaving little scope for any ambiguity. In contrast, many self-employed non-professionals could be conducting a major part of their dealings in cash.
Besides, banks draw comfort from the fact that in the event of any adverse impact on the business, the qualified professionals — like chartered accountants, doctors or engineers can always land a well-paying job.
HOME A ‘LOAN’
If you are a qualified professional
You stand better chance of getting a home loan if you are well-qualified and easily employable Lenders will look at who your clients are to ascertain steady income Your credit history and income tax records for the last three years are important Check if you need to submit the registration certificate for deduction of profession tax and the certificate of practice
If you own a proprietary concern
Ensure that you have your computation of income statement, along with tax returns Same goes for the registration certificate under Shop and Establishment Act and Factories Act Bank account statements, as well as profit & loss and balance sheet statements will be required too If you are engaged in an activity that is going through a downturn, lenders will be cautious Again, a good client list will impress the lender Give an accurate picture of your networth
If you are a part of a partnership
Have an up-to-date deed of partnership that provides for all situations Banks will ask for identity of partners I-T returns, again, forms a key document Like in case of proprietary firms, bank account, profit & loss and balance sheet statements will have to be submitted. Clear communication on your firm's goals, business mix, margins, etc, during the discussion with bank officials is critical.
Realty cos on a stronger wicket in Q3
Realty cos on a stronger wicket in Q3
The Economic Times, January 20, 2010, Page 21
Orbit May Lead With 220% YoY Spike In Net Sales, Mahindra Life May Post 28.7% Growth
Supriya Verma Mishra ET INTELLIGENCE GROUP
THE uptick in the quarterly sales of most listed players is perhaps an indication that housing demand may have picked up after a prolonged slump.
The improved show is also on account of the fact that qualified institutional buyers (QIB) have pumped in money which has helped boost liquidity levels for realty firms. By paring debt, these companies have been able to check interest outflows, making it easier to raise funds in the future.
All these are expected to be reflected in the upcoming December 2009 quarter results. On a quarter-onquarter(q-o-q) as well as year-onyear (y-o-y) basis, there should be an improvement in sales. In fact, it is not only just first-time buyers who are in the market, there is also an upswing in resale activity. Commercial and retail segments are seeing signs of a recovery but there’s nothing that firmly signals an upward trend.
The average of estimates of the ET Intelligence Group and four-brokerage houses show that the overall industry revenues are expected to grow by 59% on a y-o-y basis. On a q-o-q basis, industry’s revenues would grow at an average 16%.
“We expect the December quarter results to reflect the improving real estate sector outlook, aided by a lowbase impact, and a pick-up in residential sales,” said a Motilal Oswal report.
Out of all listed companies, Orbit Corporation is expected to lead the sector with a 220% y-o-y growth in net sales. This is because prices have inched up and more projects have reached the revenue-recognition stage. Another company, Mahindra Lifespaces Developers’ may also report a good set of numbers with a 28.7% y-o-y growth. This is on the back of booking of revenue from its Mumbai (Goregaon) and Faridabad (Haryana) projects. Though Unitech and Indiabulls Real Estate also launched new projects but not many of them have been able to cross the threshold level for revenue recognition.
DLF, the market leader, has undergone a restructuring activity whereby DLF Cyber City Developers (a 100% subsidiary of DLF) has been integrated with Caraf Builders in the ratio of 60:40. After the merger, DLF will hold a 60% stake in the integrated entity, while the residual 40% will be held by the promoters of DLF. This deal has provided a lot of clarity on the conflict of interest between promoter’s interests in DLF-DAL. This new entity may well open up the possibilities for an international listing.
Since several companies have new residential projects in the low-margin affordable category, operating margins are expected to be lower. Though, prices have risen, it could not compensate for the higher margin luxury residential projects. Thus, average EBIDTA for December 2009 is expected to decline by 2-5% to 45-52% as against 58% for September 2009. However, even as operating margins decline, net profit should be higher as realty firms have been able to access alternate sources of funds to lower their interest liability.
The overall PAT margins at 35-40% for the December quarter will be 300-350 basis points above the September 2009 average PAT margins of 32%. For example for Mumbai-based HDIL, a q-o-q upward movement of 25% in TDR prices will help improve margins. The low interest liability has resulted in higher net margins for Unitech but the shift towards affordable housing has had a pull-down effect. Other developers such as Anant Raj, IBREL and Phoenix Mills are expected to report PAT margins of over 30%.
After the gloom, the worst may be behind the real estate sector, primarily on account of its improved leverage position and a pick up in real estate demand. As is evident from the broader market mid-cap companies that are leading the growth momentum, mid-cap realty companies with a city-centric focus will be outperformers. Strong financials and faster delivery schedules will be the differentiators.
The Economic Times, January 20, 2010, Page 21
Orbit May Lead With 220% YoY Spike In Net Sales, Mahindra Life May Post 28.7% Growth
Supriya Verma Mishra ET INTELLIGENCE GROUP
THE uptick in the quarterly sales of most listed players is perhaps an indication that housing demand may have picked up after a prolonged slump.
The improved show is also on account of the fact that qualified institutional buyers (QIB) have pumped in money which has helped boost liquidity levels for realty firms. By paring debt, these companies have been able to check interest outflows, making it easier to raise funds in the future.
All these are expected to be reflected in the upcoming December 2009 quarter results. On a quarter-onquarter(q-o-q) as well as year-onyear (y-o-y) basis, there should be an improvement in sales. In fact, it is not only just first-time buyers who are in the market, there is also an upswing in resale activity. Commercial and retail segments are seeing signs of a recovery but there’s nothing that firmly signals an upward trend.
The average of estimates of the ET Intelligence Group and four-brokerage houses show that the overall industry revenues are expected to grow by 59% on a y-o-y basis. On a q-o-q basis, industry’s revenues would grow at an average 16%.
“We expect the December quarter results to reflect the improving real estate sector outlook, aided by a lowbase impact, and a pick-up in residential sales,” said a Motilal Oswal report.
Out of all listed companies, Orbit Corporation is expected to lead the sector with a 220% y-o-y growth in net sales. This is because prices have inched up and more projects have reached the revenue-recognition stage. Another company, Mahindra Lifespaces Developers’ may also report a good set of numbers with a 28.7% y-o-y growth. This is on the back of booking of revenue from its Mumbai (Goregaon) and Faridabad (Haryana) projects. Though Unitech and Indiabulls Real Estate also launched new projects but not many of them have been able to cross the threshold level for revenue recognition.
DLF, the market leader, has undergone a restructuring activity whereby DLF Cyber City Developers (a 100% subsidiary of DLF) has been integrated with Caraf Builders in the ratio of 60:40. After the merger, DLF will hold a 60% stake in the integrated entity, while the residual 40% will be held by the promoters of DLF. This deal has provided a lot of clarity on the conflict of interest between promoter’s interests in DLF-DAL. This new entity may well open up the possibilities for an international listing.
Since several companies have new residential projects in the low-margin affordable category, operating margins are expected to be lower. Though, prices have risen, it could not compensate for the higher margin luxury residential projects. Thus, average EBIDTA for December 2009 is expected to decline by 2-5% to 45-52% as against 58% for September 2009. However, even as operating margins decline, net profit should be higher as realty firms have been able to access alternate sources of funds to lower their interest liability.
The overall PAT margins at 35-40% for the December quarter will be 300-350 basis points above the September 2009 average PAT margins of 32%. For example for Mumbai-based HDIL, a q-o-q upward movement of 25% in TDR prices will help improve margins. The low interest liability has resulted in higher net margins for Unitech but the shift towards affordable housing has had a pull-down effect. Other developers such as Anant Raj, IBREL and Phoenix Mills are expected to report PAT margins of over 30%.
After the gloom, the worst may be behind the real estate sector, primarily on account of its improved leverage position and a pick up in real estate demand. As is evident from the broader market mid-cap companies that are leading the growth momentum, mid-cap realty companies with a city-centric focus will be outperformers. Strong financials and faster delivery schedules will be the differentiators.
PEs give realty IPO exits a miss
PEs give realty IPO exits a miss
Business Standard, January 20, 2010, Section II, Page 3
Raghavendra Kamath & Vandana / Mumbai
Better gains after listing, avoiding pricing pressure on stocks key reasons.
Private equity (PE) investors are holding on to their investments and not opting for an exit in at least four of the upcoming public issues of real estate companies. They are expecting better gains once these firms get listed.
Initial public offerings (IPOs) are considered as one of the main exit routes for PE investors.
Though offshore investors cannot exit real estate companies due to a mandatory three-year lock-in for foreign direct investment and one-year lock-in if they do not intend to sell during IPOs, some of the domestic and international investors are staying on in the hope that they can improve upon the returns once the property sector picks up in coming quarters.
Global hedge fund Och Ziff with investment in Bangalore-based Nitesh Estates, Morgan Stanley in Oberoi Realty, Indiareit’s domestic fund, which is making a partial exit in Mumbai’s Neptune Developers, HDFC Property Fund in Vascon Engineers are some of the investors staying on for the moment.
Morgan Stanley invested Rs 675 crore in Oberoi Realty in January 2007.
Though global investor Citigroup was planning to swap its entity-level investment in Delhi-based BPTP with investments in some of its realty projects, the plans had been put on hold for at least one year, said a source close to development. BPTP recently filed its draft red herring prospectus with capital markets regulator Securities and Exchange Board of India (Sebi).
Some investors have put conditions for the realty companies going for IPOs. For instance, as per the agreement between German investor Deutsche Bank, which held stake in the key subsidiary of Mumbai-based Lodha Developers, the latter has to go in for at least a Rs 2,000-crore IPO if it wanted to go public, as Deutsche had invested Rs 1,640 crore in the company and it wanted ample liquidity in the stock of Lodha once it got listed on the exchanges. It was also agreed that Lodha would give a minimum 13.65 per cent interest on the debentures subscribed by Deutsche, and later raise it to up to 22.50 per cent on improvement in market conditions.
“Funds having completed the three-year lock-in might be staying because they are looking at better business prospects for the company once it lists and gets cash flow to reduce the debt burden. A lot of funds think that the worst is over and prices may actually shoot up after the listing, considering the revival in real estate,” said Avinash Gupta, national head, financial advisory services at consulting firm Deloitte.
Adds Indiareit Fund Advisors Managing Director Ramesh Jogani, “Though we are in the business of investing and exiting with good gains, we also believe in the growth prospectus of the company.”
Ajay Piramal group-promoted Indiareit Fund holds 15.8 per cent stake in Neptune through its domestic (4 per cent) and offshore (11.8 per cent) funds, and is part-exiting from its domestic fund. It will sell 2.7 per cent from its domestic fund stake and retain the offshore investment.
In January 2007, Och Ziff, through its fund AMIF, invested $51 million (around Rs 230 crore) in Nitesh Estates for 25 per cent stake. The three-year lock-in is coming to an end.
Nearly 10 property developers have filed draft red herring prospectus (DRHP) to raise over Rs 15,000 crore from the capital markets.
Bankers said a part of the reason for a deferred exit was the revival in the stock markets. As a result, investors can offload their investments in the secondary market at any time. “Exits generally happen in a bad market. Funds exit from their investments either when there is a redemption pressure, or they do not think that future prospects of these IPOs are bright. It is no more an issue now. They can anyway exit through the secondary market route after the one-year lock-in,” said S Subramanian, head of investment banking at Enam Capital Markets.
Some bankers said that PE players were also avoiding pricing pressure in IPOs by staying on. “Since most of these players hold a reasonable stake, it would result in a downward pressure on pricing if they tender it at one go. They would rather do it in small tranches or through part-exits,’’ said a banker who did not want to be quoted.
Business Standard, January 20, 2010, Section II, Page 3
Raghavendra Kamath & Vandana / Mumbai
Better gains after listing, avoiding pricing pressure on stocks key reasons.
Private equity (PE) investors are holding on to their investments and not opting for an exit in at least four of the upcoming public issues of real estate companies. They are expecting better gains once these firms get listed.
Initial public offerings (IPOs) are considered as one of the main exit routes for PE investors.
Though offshore investors cannot exit real estate companies due to a mandatory three-year lock-in for foreign direct investment and one-year lock-in if they do not intend to sell during IPOs, some of the domestic and international investors are staying on in the hope that they can improve upon the returns once the property sector picks up in coming quarters.
Global hedge fund Och Ziff with investment in Bangalore-based Nitesh Estates, Morgan Stanley in Oberoi Realty, Indiareit’s domestic fund, which is making a partial exit in Mumbai’s Neptune Developers, HDFC Property Fund in Vascon Engineers are some of the investors staying on for the moment.
Morgan Stanley invested Rs 675 crore in Oberoi Realty in January 2007.
Though global investor Citigroup was planning to swap its entity-level investment in Delhi-based BPTP with investments in some of its realty projects, the plans had been put on hold for at least one year, said a source close to development. BPTP recently filed its draft red herring prospectus with capital markets regulator Securities and Exchange Board of India (Sebi).
Some investors have put conditions for the realty companies going for IPOs. For instance, as per the agreement between German investor Deutsche Bank, which held stake in the key subsidiary of Mumbai-based Lodha Developers, the latter has to go in for at least a Rs 2,000-crore IPO if it wanted to go public, as Deutsche had invested Rs 1,640 crore in the company and it wanted ample liquidity in the stock of Lodha once it got listed on the exchanges. It was also agreed that Lodha would give a minimum 13.65 per cent interest on the debentures subscribed by Deutsche, and later raise it to up to 22.50 per cent on improvement in market conditions.
“Funds having completed the three-year lock-in might be staying because they are looking at better business prospects for the company once it lists and gets cash flow to reduce the debt burden. A lot of funds think that the worst is over and prices may actually shoot up after the listing, considering the revival in real estate,” said Avinash Gupta, national head, financial advisory services at consulting firm Deloitte.
Adds Indiareit Fund Advisors Managing Director Ramesh Jogani, “Though we are in the business of investing and exiting with good gains, we also believe in the growth prospectus of the company.”
Ajay Piramal group-promoted Indiareit Fund holds 15.8 per cent stake in Neptune through its domestic (4 per cent) and offshore (11.8 per cent) funds, and is part-exiting from its domestic fund. It will sell 2.7 per cent from its domestic fund stake and retain the offshore investment.
In January 2007, Och Ziff, through its fund AMIF, invested $51 million (around Rs 230 crore) in Nitesh Estates for 25 per cent stake. The three-year lock-in is coming to an end.
Nearly 10 property developers have filed draft red herring prospectus (DRHP) to raise over Rs 15,000 crore from the capital markets.
Bankers said a part of the reason for a deferred exit was the revival in the stock markets. As a result, investors can offload their investments in the secondary market at any time. “Exits generally happen in a bad market. Funds exit from their investments either when there is a redemption pressure, or they do not think that future prospects of these IPOs are bright. It is no more an issue now. They can anyway exit through the secondary market route after the one-year lock-in,” said S Subramanian, head of investment banking at Enam Capital Markets.
Some bankers said that PE players were also avoiding pricing pressure in IPOs by staying on. “Since most of these players hold a reasonable stake, it would result in a downward pressure on pricing if they tender it at one go. They would rather do it in small tranches or through part-exits,’’ said a banker who did not want to be quoted.
FSI hike to boost Maha realty biz
FSI hike to boost Maha realty biz
Business Standard, January 20, 2010, Page 1
Sanjay Jog & Raghavendra Kamath / Mumbai
The Maharashtra government has decided to increase floor space index (FSI) to 3 from the current 2.5 for buildings which have come up between 1940 and 1960. The decision opens up the possibility for redeveloping 16,461 old buildings.
FSI is the ratio of total floor area of a building to the size of the plot. It indicates the maximum construction allowed on a plot in a particular area. That is, if the FSI is one and the plot size is 1,000 sq ft, the maximum construction allowed on that plot will be 1,000 sq ft. The state’s initial estimates state an additional FSI of 300 million sq ft will be available in phases. A senior government official, who did not want to be quoted, said the redevelopment would involve Rs 3 lakh crore under private public partnership.
“If we calculate the average FSI rate at Rs 10,000 per sq ft, it comes to Rs 3 lakh crore,” he added. Chief Minister Ashok Chavan said the government is keen to hasten the process.
Developers said the move would release more housing stocks in the market but prices are unlikely to reduce.
“It will be easier to convince the tenants. I expect more old buildings to come under redevelopment quickly. The true market potential of such buildings can be discovered now,’’ said Pujit Agarwal, managing director of Orbit Corporation, a redevelopment projects player.
Business Standard, January 20, 2010, Page 1
Sanjay Jog & Raghavendra Kamath / Mumbai
The Maharashtra government has decided to increase floor space index (FSI) to 3 from the current 2.5 for buildings which have come up between 1940 and 1960. The decision opens up the possibility for redeveloping 16,461 old buildings.
FSI is the ratio of total floor area of a building to the size of the plot. It indicates the maximum construction allowed on a plot in a particular area. That is, if the FSI is one and the plot size is 1,000 sq ft, the maximum construction allowed on that plot will be 1,000 sq ft. The state’s initial estimates state an additional FSI of 300 million sq ft will be available in phases. A senior government official, who did not want to be quoted, said the redevelopment would involve Rs 3 lakh crore under private public partnership.
“If we calculate the average FSI rate at Rs 10,000 per sq ft, it comes to Rs 3 lakh crore,” he added. Chief Minister Ashok Chavan said the government is keen to hasten the process.
Developers said the move would release more housing stocks in the market but prices are unlikely to reduce.
“It will be easier to convince the tenants. I expect more old buildings to come under redevelopment quickly. The true market potential of such buildings can be discovered now,’’ said Pujit Agarwal, managing director of Orbit Corporation, a redevelopment projects player.
Top developers to bid for mega road projects
Top developers to bid for mega road projects
Business Standard, January 20, 2010, Page 5
Top road developers will be allowed to bid for mega projects, which the Ministry of Road Transport and Highways plans to award soon.
"The norms for mega projects will be such that the country's top road developing companies can qualify on their own," said Road Secretary Brahm Dutt.
It was earlier believed that the norms for mega road projects would be made such that only international developers would qualify.
The ministry is working on new norms for mega projects worth Rs 45,000 crore, which were to be formulated by December and are expected to begin by March.
The length of one mega proj¬ect could go as long as 700 kIn, entailing investments worth around Rs 5,000 crore.
The concept of large road projects was suggested by foreign concessionaires in road shows abroad and was mooted to woo them to the country. The foreign developers wanted the size of the projects to be large enough to make it attractive for them to come to India.
The ministry also plans to develop a corridor for road projects.
"We are looking at corridor development for road projects so that the road between two major points is uniform. We are also working on renaming the highways to make it simpler," Dutt said.
To make the roads uniform, the ministry has decided not to award small projects.
"We have also decided that no project worth less than Rs 50 crore is awarded," Dutt added.
The ministry is also looking at developing real estate projects along the highways to make them lucrative.
"The Ganga Expressway, connecting eastern and wester borders of Uttar Pradesh, is being built by the concessionaire, without any investment from the state government. This proves that the mega road projects can be made lucrative if real estate projects are developed along them," Dutt said.
Business Standard, January 20, 2010, Page 5
Top road developers will be allowed to bid for mega projects, which the Ministry of Road Transport and Highways plans to award soon.
"The norms for mega projects will be such that the country's top road developing companies can qualify on their own," said Road Secretary Brahm Dutt.
It was earlier believed that the norms for mega road projects would be made such that only international developers would qualify.
The ministry is working on new norms for mega projects worth Rs 45,000 crore, which were to be formulated by December and are expected to begin by March.
The length of one mega proj¬ect could go as long as 700 kIn, entailing investments worth around Rs 5,000 crore.
The concept of large road projects was suggested by foreign concessionaires in road shows abroad and was mooted to woo them to the country. The foreign developers wanted the size of the projects to be large enough to make it attractive for them to come to India.
The ministry also plans to develop a corridor for road projects.
"We are looking at corridor development for road projects so that the road between two major points is uniform. We are also working on renaming the highways to make it simpler," Dutt said.
To make the roads uniform, the ministry has decided not to award small projects.
"We have also decided that no project worth less than Rs 50 crore is awarded," Dutt added.
The ministry is also looking at developing real estate projects along the highways to make them lucrative.
"The Ganga Expressway, connecting eastern and wester borders of Uttar Pradesh, is being built by the concessionaire, without any investment from the state government. This proves that the mega road projects can be made lucrative if real estate projects are developed along them," Dutt said.
Tuesday, January 19, 2010
ASSOCHAM launches economic awareness campaign........................
ASSOCHAM launches economic awareness campaign
India Inc advocates equitable, efficient and transparent system
Chambers should be out of tax purview, Piramal
Withdrawal of stimulus package may hurt growth
The Economic Time
s, January 19, 2010, Page 11Expect PSU selloff every three weeks
Expect PSU selloff every three weeks
Hindustan Times, HT Business, January 19, 2010, Page 25
From the fiscal year beginning in April, expect one share issue from public sector companies every three weeks, as initial public offers (IPOs) of unlisted firms or follow-on public offers (FPOs) of listed ones.
The UPA government is set for a large wave of sell-offs, possibly celebrating the end of five years of coalition constraints that blocked disinvestments before elections last year.
As many as 30 IPOs or FPOs are expected over the next two years –interrupted only by logistical difficulties in managing the cash chasing the shares.
“The market outlook during 2010-11 looks bullish. We should be able to do one issue every three weeks,” Disinvestment Secretary Sunil Mitra told HT.
Subsequently, FPOs of even cash-rich companies such as ONGC, Indian Oil Corporation, Hindustan Petroleum Corporation Limited (HPCL), Bharat Petroleum Corporation Limited (BPCL) and GAIL India could be seen during 2011-12
Last November, the government had decided that the public should hold at least 10 per cent shares in all listed, profitable government-owned companies.
There are 10 listed units where public shareholding is below 10 per cent. They include companies such as National Mineral Development Corporation, MMTC and Neyveli Lignite.
The government has also decided that all unlisted CPSUs that have made profit in the past three years and have a positive net worth (assets greater than liabilities) should get listed on stock exchanges.
About 60 companies qualify for disinvestment under these criteria.
“We would hope to float the issues of Coal India Limited, SAIL and BSNL in 2010-11,” Mitra said.
“We have been in consultations with the CIL and BSNL since August last year,” he said.
Since the UPA government came to office for the second term this May, two public sector companies — NHPC and Oil India — have already listed.
The government has already approved stake sales in power generation companies NTPC Ltd, Satluj Jal Vidyut Nigam (SJVN), Rural Electrification Corporation (REC), NMDC and Engineers India Limited (EIL).
The SAIL Board has cleared a 10 per cent stake sale and is awaiting Cabinet approval.
Timely steps saved the economy: FM
Timely steps saved the economy: FM
Hindustan Times, HT Business, January 19, 2010, Page 25
Finance Minister Pranab Mukherjee on Monday said that timely and pro-active monetary and fiscal measures have enabled the Indian economy to stage a quick recovery amid the scars of a global economic meltdown. "The finance minister stated that the adverse impact of the global financial crisis and the subsequent recessionary trend in the major economies of the world had cast a cloud of uncertainty over the domestic economy in the second half of 2008-09," a finance ministry statement said. "The policy measures undertaken by the government have worked and the macro-economic situation confirms signs of a turn-around for the economy," it said. Mukherjee was chairing a pre-budget meeting of the ministry's Parliamentary consultative committee. The Indian economy grew 7.9 per cent in the July-September period - its strongest in six quarters - on the back of higher consumer spending and private investment. Recent data has triggered hopes that the worst might be over for the Indian economy. Industrial output grew by 11.7 per cent in November, the highest in two years, raising prospects of a sustained revival in the broader economy in the coming months. Automobile sales grew by 68 per cent in December, while exports have turned positive in November after contracting for 13 successive months. However, there are concerns over rising inflation and a widening deficit in the government's budget. India's wholesale inflation rose by 7.3 per cent in December as policy makers launched a plan to contain prices by shoring up supplies of staple items such as sugar and foodgrains.
Hindustan Times, HT Business, January 19, 2010, Page 25
Finance Minister Pranab Mukherjee on Monday said that timely and pro-active monetary and fiscal measures have enabled the Indian economy to stage a quick recovery amid the scars of a global economic meltdown. "The finance minister stated that the adverse impact of the global financial crisis and the subsequent recessionary trend in the major economies of the world had cast a cloud of uncertainty over the domestic economy in the second half of 2008-09," a finance ministry statement said. "The policy measures undertaken by the government have worked and the macro-economic situation confirms signs of a turn-around for the economy," it said. Mukherjee was chairing a pre-budget meeting of the ministry's Parliamentary consultative committee. The Indian economy grew 7.9 per cent in the July-September period - its strongest in six quarters - on the back of higher consumer spending and private investment. Recent data has triggered hopes that the worst might be over for the Indian economy. Industrial output grew by 11.7 per cent in November, the highest in two years, raising prospects of a sustained revival in the broader economy in the coming months. Automobile sales grew by 68 per cent in December, while exports have turned positive in November after contracting for 13 successive months. However, there are concerns over rising inflation and a widening deficit in the government's budget. India's wholesale inflation rose by 7.3 per cent in December as policy makers launched a plan to contain prices by shoring up supplies of staple items such as sugar and foodgrains.
Oberoi Realty files papers for IPO
Oberoi Realty files papers for IPO
Hindustan Times, HT Business, January 19, 2010, Page 25
Mumbai: City-based realty firm Oberoi Realty on Monday filed its Draft Red Herring Prospectus with SEBI for an IPO of 39,562,000 equity shares with a face value of Rs. 10 at a price band to be decided later. The issue will constitute a dilution of 12 percent of the fully-paid equity share capital. Kotak Mahindra Capital, Enam Securities, J P Morgan India and Morgan Stanely India are the book running lead managers.
Hindustan Times, HT Business, January 19, 2010, Page 25
Mumbai: City-based realty firm Oberoi Realty on Monday filed its Draft Red Herring Prospectus with SEBI for an IPO of 39,562,000 equity shares with a face value of Rs. 10 at a price band to be decided later. The issue will constitute a dilution of 12 percent of the fully-paid equity share capital. Kotak Mahindra Capital, Enam Securities, J P Morgan India and Morgan Stanely India are the book running lead managers.
Interest rates unlikely to rise
Interest rates unlikely to rise
Times of India, January 19, 2010, Page 21
Prabhakar Sinha, TNN
NEW DELHI: Interest rates are unlikely to firm up even if RBI raises key rates to contain inflation, feel bankers.
In its forthcoming review of the credit policy on January 29, it is believed that RBI will increase the cash reserve ratio (CRR) — the proportion of deposits that banks are required keep with the central bank — by about half a percentage points to contain the soaring inflation.
However, bankers feel that RBI would leave the other two rates — repo and reverse repo — unchanged. Repo rate is the interest rate at which central bank, RBI, lends short term funds to bank. At present, repo rate is at 4.75%. Reverse repo rate is the rate at which banks park their surplus funds with the central bank, which is at 3.25%.
Union Bank of India chairman and managing director M V Nair though refused to speculate on the issue of measures that would be taken by RBI in its review of the credit policy, however, said that it would not lead to increase in the interest rates as there is enough liquidity in the system. Another CMD of a public sector bank said that over a period of time, adopting easy money policy, banks have already cut the deposit rates, which has brought down the cost of funds for them. In near future, the cost structure of funds is not likely to change, he argued. Therefore, he said that in the forthcoming credit policy, even if RBI takes certain measures to control the inflationary expectations, the interest rates are not likely to move up.
According to the latest data, banks are parking around Rs 70,000 crore surplus funds with the RBI at only 3.25% interest rate as against the cost of funds at around 6%. A senior banking official said that even if RBI raises the CRR by half a percentage points, it will suck only around Rs 21,000 crore from the system.
However, as annual inflation has crossed 7% mark, which is higher than central bank's projection of the inflation at 6.5%, bankers feel that the central bank would take measures to squeeze surplus liquidity, which has given rise to inflationary expectations. But this would not affect the availability of funds to lend in the market place, bankers argue.
Since April 2009, in the first nine months of the current financial year till January 1, 2010, while the deposits have grown by Rs 4,30,430 crore, the credit offtake by corporate houses and individuals is only Rs 2,45,258 crore. In fact the condition was even worse a fortnight back. Till then the credit offtake was only at around Rs 1,65,000 crore. In the last fortnight, the credit offtake has shown some signs of recovery when it grew by Rs 79,515 crore.
A senior government official said that a measure leading to rise in the interest rate will be counterproductive and will affect the economic recovery adversely.
Times of India, January 19, 2010, Page 21
Prabhakar Sinha, TNN
NEW DELHI: Interest rates are unlikely to firm up even if RBI raises key rates to contain inflation, feel bankers.
In its forthcoming review of the credit policy on January 29, it is believed that RBI will increase the cash reserve ratio (CRR) — the proportion of deposits that banks are required keep with the central bank — by about half a percentage points to contain the soaring inflation.
However, bankers feel that RBI would leave the other two rates — repo and reverse repo — unchanged. Repo rate is the interest rate at which central bank, RBI, lends short term funds to bank. At present, repo rate is at 4.75%. Reverse repo rate is the rate at which banks park their surplus funds with the central bank, which is at 3.25%.
Union Bank of India chairman and managing director M V Nair though refused to speculate on the issue of measures that would be taken by RBI in its review of the credit policy, however, said that it would not lead to increase in the interest rates as there is enough liquidity in the system. Another CMD of a public sector bank said that over a period of time, adopting easy money policy, banks have already cut the deposit rates, which has brought down the cost of funds for them. In near future, the cost structure of funds is not likely to change, he argued. Therefore, he said that in the forthcoming credit policy, even if RBI takes certain measures to control the inflationary expectations, the interest rates are not likely to move up.
According to the latest data, banks are parking around Rs 70,000 crore surplus funds with the RBI at only 3.25% interest rate as against the cost of funds at around 6%. A senior banking official said that even if RBI raises the CRR by half a percentage points, it will suck only around Rs 21,000 crore from the system.
However, as annual inflation has crossed 7% mark, which is higher than central bank's projection of the inflation at 6.5%, bankers feel that the central bank would take measures to squeeze surplus liquidity, which has given rise to inflationary expectations. But this would not affect the availability of funds to lend in the market place, bankers argue.
Since April 2009, in the first nine months of the current financial year till January 1, 2010, while the deposits have grown by Rs 4,30,430 crore, the credit offtake by corporate houses and individuals is only Rs 2,45,258 crore. In fact the condition was even worse a fortnight back. Till then the credit offtake was only at around Rs 1,65,000 crore. In the last fortnight, the credit offtake has shown some signs of recovery when it grew by Rs 79,515 crore.
A senior government official said that a measure leading to rise in the interest rate will be counterproductive and will affect the economic recovery adversely.
12% service tax likely to return
12% service tax likely to return
Business Standard, January 19, 2010, Page 1
Vrishti Beniwal & Jyoti Mukul / New Delhi
To exit stimulus, govt may raise excise duty too
The government may take the first step towards fiscal consolidation in Budget 2010-11 by partially rolling back tax cuts given to the industry last year. The service tax rate may be restored to 12 per cent, while excise duty could be increased marginally.
The finance ministry is considering a phased exit of the stimulus measures as the economy posted a robust 7.9 per cent growth in July-August quarter of 2009-10. To begin with, it wants to withdraw measures that are not likely to impact the industry significantly, such as the 2 per cent service tax cut. In the case of excise duty, the increase may not be equivalent to 6 per cent reduction that the industry got from the government as part of the stimulus measures.
The Budget changes would also be used as an opportunity to rationalise indirect taxes ahead of introduction of the goods and services tax (GST).
According to government sources, all options were being discussed and a final decision would be taken by Finance Minister Pranab Mukherjee in consultation with Prime Minister Manmohan Singh. Mukherjee took the political input across party lines during pre-Budget consultations with members of the Parliamentary Consultative Committee today.
A senior executive of one of the leading automobile companies said the industry, too, was preparing itself for a partial rollback of excise duty cut which had been given to generate demand. Automobile and consumer durables sectors were the major beneficiaries of the duty cut. But with a spur in demand, some sections in the government felt a rollback could be attempted. Indirect tax receipts have taken a major hit due to lowering of excise duty to 8 per cent (in two phases — 4 per cent and 2 per cent) and service tax to 10 per cent.
The government, meanwhile, is evaluating whether to increase excise duty for specific sectors which are showing recovery, or marginally raise the rate for all sectors to avoid disparity. It may also think of bringing more services in the tax net to improve its revenue mop-up.
An increase in service tax rate without an increase in excise could leave a gap of 4 per cent between the two taxes, which are to be subsumed once GST is introduced. This could come in the way of a smooth rollout of the new tax regime.
Rajeev Dimri, partner, BMR Advisors, said: “If they ( the government) increase service tax, they should also look at excise duty to avoid distortions.”
On the kind of impact the service tax cut could have on rising demand, Dimri said it was difficult to assess, “but the cut provides right signal to the industry by lowering costs for consumer”.
Satya Poddar, partner, Ernst & Young, said every little tax cut helped during slowdown, adding that the bigger stimulus was in excise duty cut.
Added Dimri: “The government has to decide when is the right time to exit the stimulus. Budget is the logical way to do it. It would not make sense to touch the rates two months later. So, they should do it now or six months later.”
Poddar said if the stimulus was rolled back entirely and excise duty was to be raised to 14 per cent, the government might find it difficult to again bring it down to 5 per cent later when GST is introduced. Five per cent is the central rate suggested by the Finance Commission taskforce on GST. “The government would not do anything that is not compatible with GST,” he added.
One of the major concerns against the move towards rolling back the cuts, especially on excise, is rising inflation which touched a year’s high of 7.31 per cent for December 2009. “The inflation could, however, be stoked further if the government’s fiscal deficit is not controlled,” said an expert.
More spending and lower revenues are expected to widen the fiscal deficit to 6.8 per cent of GDP this fiscal, compared with 6.2 per cent in 2008-09 when the FRBM Act required the government to bring it down to 2.5 per cent. Indirect tax receipts has fallen 21 per cent to Rs 1,46,000 crore for the first eight months of the year (April-November), which is 46 per cent of the Budget estimate of Rs 2,69,477 crore for 2009-10.
The fall in excise duty collections has been sharper at 17.4 per cent till November 2009 compared to service tax collections, which have fallen 6.6 per cent. With pressure mounting on launching crucial social sector schemes, the finance ministry would need to shore up revenues. The finance minister has repeatedly stressed the need to get back to the path of fiscal consolidation by aiming a fiscal deficit of 5.5 per cent in 2010-11 and 4 per cent in 2011-12.
Business Standard, January 19, 2010, Page 1
Vrishti Beniwal & Jyoti Mukul / New Delhi
To exit stimulus, govt may raise excise duty too
The government may take the first step towards fiscal consolidation in Budget 2010-11 by partially rolling back tax cuts given to the industry last year. The service tax rate may be restored to 12 per cent, while excise duty could be increased marginally.
The finance ministry is considering a phased exit of the stimulus measures as the economy posted a robust 7.9 per cent growth in July-August quarter of 2009-10. To begin with, it wants to withdraw measures that are not likely to impact the industry significantly, such as the 2 per cent service tax cut. In the case of excise duty, the increase may not be equivalent to 6 per cent reduction that the industry got from the government as part of the stimulus measures.
The Budget changes would also be used as an opportunity to rationalise indirect taxes ahead of introduction of the goods and services tax (GST).
According to government sources, all options were being discussed and a final decision would be taken by Finance Minister Pranab Mukherjee in consultation with Prime Minister Manmohan Singh. Mukherjee took the political input across party lines during pre-Budget consultations with members of the Parliamentary Consultative Committee today.
A senior executive of one of the leading automobile companies said the industry, too, was preparing itself for a partial rollback of excise duty cut which had been given to generate demand. Automobile and consumer durables sectors were the major beneficiaries of the duty cut. But with a spur in demand, some sections in the government felt a rollback could be attempted. Indirect tax receipts have taken a major hit due to lowering of excise duty to 8 per cent (in two phases — 4 per cent and 2 per cent) and service tax to 10 per cent.
The government, meanwhile, is evaluating whether to increase excise duty for specific sectors which are showing recovery, or marginally raise the rate for all sectors to avoid disparity. It may also think of bringing more services in the tax net to improve its revenue mop-up.
An increase in service tax rate without an increase in excise could leave a gap of 4 per cent between the two taxes, which are to be subsumed once GST is introduced. This could come in the way of a smooth rollout of the new tax regime.
Rajeev Dimri, partner, BMR Advisors, said: “If they ( the government) increase service tax, they should also look at excise duty to avoid distortions.”
On the kind of impact the service tax cut could have on rising demand, Dimri said it was difficult to assess, “but the cut provides right signal to the industry by lowering costs for consumer”.
Satya Poddar, partner, Ernst & Young, said every little tax cut helped during slowdown, adding that the bigger stimulus was in excise duty cut.
Added Dimri: “The government has to decide when is the right time to exit the stimulus. Budget is the logical way to do it. It would not make sense to touch the rates two months later. So, they should do it now or six months later.”
Poddar said if the stimulus was rolled back entirely and excise duty was to be raised to 14 per cent, the government might find it difficult to again bring it down to 5 per cent later when GST is introduced. Five per cent is the central rate suggested by the Finance Commission taskforce on GST. “The government would not do anything that is not compatible with GST,” he added.
One of the major concerns against the move towards rolling back the cuts, especially on excise, is rising inflation which touched a year’s high of 7.31 per cent for December 2009. “The inflation could, however, be stoked further if the government’s fiscal deficit is not controlled,” said an expert.
More spending and lower revenues are expected to widen the fiscal deficit to 6.8 per cent of GDP this fiscal, compared with 6.2 per cent in 2008-09 when the FRBM Act required the government to bring it down to 2.5 per cent. Indirect tax receipts has fallen 21 per cent to Rs 1,46,000 crore for the first eight months of the year (April-November), which is 46 per cent of the Budget estimate of Rs 2,69,477 crore for 2009-10.
The fall in excise duty collections has been sharper at 17.4 per cent till November 2009 compared to service tax collections, which have fallen 6.6 per cent. With pressure mounting on launching crucial social sector schemes, the finance ministry would need to shore up revenues. The finance minister has repeatedly stressed the need to get back to the path of fiscal consolidation by aiming a fiscal deficit of 5.5 per cent in 2010-11 and 4 per cent in 2011-12.
FM sees signs of turnaround
FM sees signs of turnaround
Business Standard, January 19, 2010, Page 6
The Finance Minister Pranab Mukherjee on Monday said the macro-economic indicators were confirming the signs of revival in the economy. “The policy measures undertaken by the government have worked and the macroeconomic situation confirms signs of a turnaround for the economy,” Mukherjee sai. PTI.
Business Standard, January 19, 2010, Page 6
The Finance Minister Pranab Mukherjee on Monday said the macro-economic indicators were confirming the signs of revival in the economy. “The policy measures undertaken by the government have worked and the macroeconomic situation confirms signs of a turnaround for the economy,” Mukherjee sai. PTI.
Kamal Nath woos Japanese investors
Kamal Nath woos Japanese investors
Business Standard, January 19, 2010, Page 6
Road Transport Minister Kamal Nath today invited Japanese investors to come forward to participate in the $20-billion worth highway projects to be awarded shortly.
Business Standard, January 19, 2010, Page 6
Road Transport Minister Kamal Nath today invited Japanese investors to come forward to participate in the $20-billion worth highway projects to be awarded shortly.
No need for fiscal tightening: Sharma
No need for fiscal tightening: Sharma
Business Standard, January 19, 2010, Page 6
Ahead of the third quarter monetary policy review by the Reserve Bank later this month, Commerce and Industry Minister Anand Sharma has opposed monetary tightening, saying fund flows to the industry have not caused food inflation. The Reserve Bank of India will announce the third quarter monetary policy on January 29. PTI.
Timing stimulus exit is a challenge: RBI
Timing stimulus exit is a challenge: RBI
Business Standard, January 19, 2010, Section II, Page 3
BS Reporter / Mumbai
The Reserve Bank of India (RBI) on Monday said that the timing and sequence of exit from an easy monetary policy were still a challenge.
Commenting that there has been marked improvement in the performance of the industrial sector, RBI Governor D Subbarao said, “The challenge for RBI is to support the recovery process without compromising on price stability.”
While gross domestic product growth for the second quarter increased to 7.9 per cent compared to the first quarter growth of 6.1 per cent, inflation based on the wholesale price index shot up to a 13-month high of 7.31 per cent in December compared to 4.78 per cent in November. This was above the central bank’s projection of 6.5 per cent and way above its comfort level of 5 per cent.
Subbarao also said the timing and sequencing of exit from the expansionary fiscal and monetary policy occupied central place in RBI’s policy matrix. The central bank is scheduled to release the third quarter review of monetary policy on January 29 amid expectation it would increase the cash reserve ratio, or the proportion of deposits that banks set aside, by 50 basis points to suck out liquidity from the system. Banks on Monday parked close to Rs 70,000 crore with RBI through the reverse repo window used to suck out liquidity.
The central bank had lowered key policy rates after the global financial crisis intensified in September 2008 to avoid any impact on the Indian market and spur economic activity. But with economic activity picking up in recent months, inflation rising and the rupee coming under pressure due to higher capital flows, RBI and the government are expected to withdraw the stimulus gradually.
Subbarao said the contagion of the global financial crisis was effectively contained by coordinated fiscal and monetary measures and described India’s growth in the quarter through September as “robust”.
RBI sees big challenge in timing the stimulus exit
RBI sees big challenge in timing the stimulus exit
The Financial Express, January 19, 2010, Page 12
Agencies, fe Bureaus, Mumbai
Reserve Bank of India (RBI) governor Duvvuri Subbarao on Monday said timing the withdrawal of stimulus is “a challenge” as he prepares to unveil the next monetary policy decision amid growing inflation pressures.
“The challenge for RBI is to support the recovery process without compromising on price stability,” Subbarao said at a conference in the southern Indian town of Benaulim, Goa.
India’s benchmark wholesale-price inflation rate climbed to a 13-month high last month, fueling speculation that Subbarao may tighten policy on January 29. China’s central bank last week unexpectedly raised the proportion of deposits that banks must set aside to check price gains and asset bubbles.
India’s inflation accelerated to 7.31% in December, the government said January 14. In the last policy review in October, Subbarao ordered lenders to set aside a higher proportion of deposits in government bonds.
The government injected fiscal and monetary stimulus worth more than 12% of gross domestic product between September 2008 and April 2009 as the global recession deepened. The intervention helped the economy grow 7.9% in the three months to September 30, the fastest pace in more than a year.
Subbarao said on Monday that the contagion of the global financial crisis was effectively contained by coordinated fiscal and monetary measures and described India’s growth in the quarter through September as “robust.”
India’s Industrial production climbed 11.7% in November, the most in two years. Exports surged to a 15-month high in December after rising 18.2% in November, the first increase in 14 months.
Also commenting on the challenges for DICGC on the way forward Subbarao said one key challenge is reducing the time taken to settle claims. Though the corporation has been able to settle all claims within the statutory time limit, its goal is to go beyond the statutory prescription, and ensure settlement of claims within a few days of liquidation of a bank as against a few months taken now.
“Towards this end, effort is required in two directions. First, DICGC must have a computerised depositors’ data base in respect of over 85,000 branches spread across the country. Second, the entire process of filing claims by the liquidator and their processing by the corporation should be computerised with appropriate connectivity,” he said.
Subbarao, in light of the recent experience which has challenged the concept of “too big to fail”, questioned the need to review the manner of defining ‘risk’ for the purpose of determining risk-based premium.
“How do we go about it?How do we factor-in the risk associated with all the non-banking business of a financial conglomerate on its banking business? How should risk based premium factor in this risk? “ he asked.
He also questioned the taxation of the entire income or the surplus of a deposit insurance system or any part of it.
“Is it possible to define an international benchmark or at least a standard methodology for determining a bench-mark for the reserve ratio (ratio of Deposit Insurance Fund to Insured Deposit), signifying the adequacy of Deposit Insurance Fund?
What countercyclical measures should a deposit insurance system take to build up its funds for the rainy day?” he said.
Poor response from realtors delays Solan IT Park bidding
Poor response from realtors delays Solan IT Park bidding
The Financial Express, January 19, 2010, Page 20
Preeti Parashar, Chandigarh
The bidding process of Himachal Pradesh’s first IT park proposed to come up near Waknaghat in Solan district has been put on hold due to poor response from developers.
Though the last date for inviting the bids had been extended from October 26, 2009 toJanuary 4 this year but not many companies came forward till the last date. A senior official of Himachal’s IT department told FE that tender committee’s meeting will be held on Tuesday to decide whether to further extend the date or defer the bidding for now.
“Since the bidding process had been deferred earlier this month till further orders things will be clear after the meeting. We hope the market to pick up soon and more developers are expected to evince interest in developing the project. The real estate developers have also asked for a few changes in the request for proposal (RFP), which will be taken into consideration in the meeting,” said the official.
He further added, “The companies want some relaxations in the development norms, milestones kept by us for the project and various land laws etc. It is expected that the RFP will be finalised after accommodating the changes during the meeting. Then it will be further forwarded to the cabinet for final approval.”
The IT park-cum-township project has been running slow ever since its inception. Earlier state’s IT department had floated the RFP in September 2009.
As per information available companies like like Mahindra World City, Jaypee Group, AGS Infrastructure, CMC Constructions evinced interest in developing the park. The successful real estate developer will be responsible for designing, developing and managing the proposed IT park cum township.
The IT park-cum-township will be developed on public-private-partnership (PPP) basis and spread over 64.7 acre in village Mauja Majhol in Solan district. The estimated investment going into the park will be around Rs 500 crore.
The developer will plan, market, develop buildings, provide and maintain amenities, and manage the project for 80 years. The infrastructural facilities will have to be developed by the company within four years from date of commencement of the project.
Strong real estate revenues propel Jaiprakash Associates profit in Q3
Strong real estate revenues propel Jaiprakash Associates profit in Q3
The Hindu Business Line, January 19, 2010, Page 2
Our Bureau, New Delhi
Buoyed by stronger real estate revenues and better price realisation for its cement business, Jaiprakash Associates Ltd (JAL) announced on Monday that it had more than doubled its net revenue for the third quarter ended December 31, 2009 – to Rs 2,964 crore from Rs 1,417 crore.
Net profit stood at Rs 103 crore down by 38 per cent as compared to Rs 168 crore in the same quarter last fiscal. However, this includes the expenses made under the “Jaypee Employee Stock Purchase Scheme, 2009”. The company had issued 1.25 crore equity shares to a trust for the employees and as per SEBI guidelines the difference between the market price and face value had to shown in the accounts. The Chief Financial Officer, Mr Rahul Kumar, said that this expense is a notional expense and has no impact on the company's operating margins.
If the expense for the Employee Stock Purchase Scheme is not taken into account, the net profit stood at Rs 314 crore, almost 87 per cent higher than Rs 168 crore in the same quarter last year.
Mr Kumar added that the company's strong performance has been boosted by its cement business and he expects cement prices to firm up in the coming months, “In the first nine months of this fiscal, price realisation is Rs 500/tonne higher than it was in the same period last fiscal. While construction continues to be our greatest revenue contributor, cement is catching up fast.”
The company is expanding its cement production capacity. The capacity has gone up from 9.5 million tonnes at the beginning of the year to 15 mt. Mr Kumar said by the end of the fiscal, another five mt would be added from greenfield projects. “The cement grinding joint venture with SAIL in Bhilai would be commissioned in the next three months. This would add two mt per annum capacity to our current capacity,” said Mr Kumar.
Giving his expectations for the next quarter, Mr Manoj Gaur, Chairman, Jaiprakash Associates, said, “We are on course to reach Rs 10,000-crore turnover for the year. Already we have sold 12.5 million sq ft of real estate area and we expect to sell another 5-6 million sq ft in the next quarter. As the economy is growing I believe we would be able to maintain the momentum in revenue and profitability.”
The company's share price on the Bombay Stock Exchange closed at Rs 163.25 on Monday, down 1.25 per cent from Rs 164.50 at the previous close.
No need for monetary tightening now
No need for monetary tightening now
The Hindu Business Line, January 19, 2010, Page 15
Arun S, Lagos
The Commerce and Industry Minister, Mr Anand Sharma, has called for easier availability of credit at low interest rates till the industry completely recovers from the aftermath of the financial crisis. The Minister's statement against any tightening of monetary measures comes days before the Reserve Bank of India (RBI) is slated to announce the third quarter review of its monetary and credit policy on January 29.
“I don't think there is any need for monetary tightening now,” Mr Sharma told reporters on the sidelines of the recently held Ficci event Namaskar Africa here.
Pointing out that the industry was yet to recover fully from the effects of the credit squeeze and freeze following the collapse of some big financial institutions in the West, the Minister said, “If you want the industry to expand and exports to be competitive then they must get credit on easy terms and low interest rates.”
“The dollar credit window we have created in the Foreign Trade Policy (FTP) for exporters should continue,” he added.
Announcing several incentives for exporters on January 12, Mr Sharma had said the Commerce Ministry has taken up with the Finance Ministry issues such as continuation of interest subsidies, cheaper dollar credit and more time for exporters to realise overdue export proceeds.
However, the Minister said he would not want to delve into the domain of the RBI. “Let them (RBI) regulate. I am only talking of the availability of credit on easy terms,” he said.
Asked whether the easy availability of cheap credit would further push up inflation, the Minister shot back saying, “There is no spill-over effect of credit on inflation. What should businesses do, should they shut down or stop expanding?”
He said the increase in food inflation had nothing to do with banks offering credit to business.
“I think there is a speculative build-up when it comes to food inflation in some of the commodities,” he said, adding that food inflation was resulting mainly from shortage of sugar, edible oil and pulses.
“There is enough grain available in the country. Both rice and wheat procurement is good. But I am worried about pulses and edible oils. The agriculture sector is also concerned. The Cabinet Committee on food security is taking a fortnightly stock of the situation. I am a member of that. We hope the food prices come down. We are also optimistic about the rabi crop,” he said. Food inflation was 17.28 per cent for the week ended January 2, down from 18.22 per cent in the previous week.
The Hindu Business Line, January 19, 2010, Page 15
Arun S, Lagos
The Commerce and Industry Minister, Mr Anand Sharma, has called for easier availability of credit at low interest rates till the industry completely recovers from the aftermath of the financial crisis. The Minister's statement against any tightening of monetary measures comes days before the Reserve Bank of India (RBI) is slated to announce the third quarter review of its monetary and credit policy on January 29.
“I don't think there is any need for monetary tightening now,” Mr Sharma told reporters on the sidelines of the recently held Ficci event Namaskar Africa here.
Pointing out that the industry was yet to recover fully from the effects of the credit squeeze and freeze following the collapse of some big financial institutions in the West, the Minister said, “If you want the industry to expand and exports to be competitive then they must get credit on easy terms and low interest rates.”
“The dollar credit window we have created in the Foreign Trade Policy (FTP) for exporters should continue,” he added.
Announcing several incentives for exporters on January 12, Mr Sharma had said the Commerce Ministry has taken up with the Finance Ministry issues such as continuation of interest subsidies, cheaper dollar credit and more time for exporters to realise overdue export proceeds.
However, the Minister said he would not want to delve into the domain of the RBI. “Let them (RBI) regulate. I am only talking of the availability of credit on easy terms,” he said.
Asked whether the easy availability of cheap credit would further push up inflation, the Minister shot back saying, “There is no spill-over effect of credit on inflation. What should businesses do, should they shut down or stop expanding?”
He said the increase in food inflation had nothing to do with banks offering credit to business.
“I think there is a speculative build-up when it comes to food inflation in some of the commodities,” he said, adding that food inflation was resulting mainly from shortage of sugar, edible oil and pulses.
“There is enough grain available in the country. Both rice and wheat procurement is good. But I am worried about pulses and edible oils. The agriculture sector is also concerned. The Cabinet Committee on food security is taking a fortnightly stock of the situation. I am a member of that. We hope the food prices come down. We are also optimistic about the rabi crop,” he said. Food inflation was 17.28 per cent for the week ended January 2, down from 18.22 per cent in the previous week.
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