Real Estate Intelligence Report, Friday, July 17, 2009

No stamp duty in SEZs

No stamp duty in SEZs
The Economic Times, July 17, 2009 Page 1

Relief On Land Buys Even For Non-Core Activities Within Notified Area

Deepshikha Sikarwar & Amiti Sen NEW DELHI

DEVELOPERS of special economic zones (SEZs) will get a blanket exemption from stamp duty on land purchases within the notified area for non-core activities such as building hotels, housing complexes, shopping malls and golf courses, according to a government official.

The exemption had become a contentious issue with states where these projects are located demanding that it be restricted to core manufacturing areas, which have to cover at least 50% of the total SEZ land.

The government has extended this to cover the whole area within the zone and has issued guidelines detailing the circumstances under which the sop can be availed, said the official asking not to be named.

For the developers of the 500-odd SEZs in the country, slated to bring in investments of over Rs 100,000 crore, this ends the uncertainty that had cropped up after some states had voiced their opposition.

Orissa had objected to the Centre giving such a tax sop without consulting states and had termed the move ultra vires. It had pointed out that while the Centre had powers to legislate on stamp duty, the power to fix the duty rates lay with the states.
This had forced the commerce department to seek the law ministry’s opinion on the provision in the SEZ Act.

The exemption, however, will be available only after formal approval of the zone. For land bought after in-principle approval, the state government may either give the exemption upfront or collect the duty and refund it after the zone has been set up. If under some circumstances, notification of a zone is cancelled, the state government will be entitled to withdraw the concession and recover the same from the developer.

Haryana plans 8,000 low-cost flats in NCR

Haryana plans 8,000 low-cost flats in NCR
Times of India, July 17, 2009, Page 1

Haryana has entered into a deal with real estate developers to provide affordable housing and is inviting expressions of interest for building 8,000 flats in NCR areas in the state

8,000 flats coming up in Gurgaon and Faridabad

8,000 flats coming up in Gurgaon and Faridabad
Times of India, July 17, 2009, Page 3

Manveer Saini TNN

Chandigarh: In a move expected to give a big push to the housing sector in Gurgaon and Faridabad, the Haryana Housing Board is in the process of inviting expressions of interest for building 8,000 flats in these cities and some other places in the national capital region areas. This is in addition to the 38,000 housing units, majority of them in NCR, planned in the next two years.

Under the latest project, the state will enter into an agreement with real estate developers to provide affordable housing to middle and lower middle class under the public private partnership mode.

‘‘Since we do not have land in Faridabad and Gurgaon, we will be joining hands with private colonizers whose projects have been stuck due to the (economic) slowdown. We’ll prefer those who have the licence, and then those who have enough land,’’ said S P Gupta, chief administrator of the housing board.

The announcement follows chief minister Bhupinder Singh Hooda’s assurance to developers that steps will be taken to counter the slump in the real estate market. It will also fulfil his commitment of providing cheap housing to locals, especially those in NCR cities of Gurgaon and Faridabad. Among the other areas selected for the project are Bawal (in Rewari district close to Gurgaon), Badhi (Sonepat) and Karnal. Officials claim that around 828 units would come up at Badhi, a township to the north of Delhi.

Govt front-loads borrowing, to raise Rs 2.99 lakh cr in H1

Govt front-loads borrowing, to raise Rs 2.99 lakh cr in H1
The Financial Express, July 17, 2009, Page 1

fe Bureau, New Delhi

The government will raise two-thirds of its planned annual borrowing of Rs 4.51 lakh crore in the first half of the current fiscal. At a meeting on Thursday, the finance ministry and RBI resolved to borrow Rs 2.99 lakh crore in the April-September period, higher by Rs 58,000 crore, or 24%, of the Rs 2.41 lakh crore indicated in March. These funds will be used to bridge the fiscal deficit, which is estimated to widen to 6.8% in 2009-10.

Since the government has already raised Rs 1.89 lakh crore (this includes Rs 12,000 crore in bond sales planned for Friday) from the market, it will borrow the remaining Rs 1.1 lakh crore in ten tranches beginning next week until the end of September, RBI deputy governor Shyamala Gopinath said.

“There is ample liquidity in the system,” said Gopinath, assuring markets that the government’s borrowing programme would not be disruptive. Banks have parked an average of Rs 1.2 lakh crore in funds every day with RBI since April 1, against Rs 46,100 crore in the previous three months. RBI will also continue to support the market by buying bonds in the secondary market.

The bond market cooled off on Thursday as the government’s additional borrowings were below market expectations. Yields on the benchmark ten-year government bond closed at 6.79% on Thursday, from its previous close of 6.85%. However, traders said the initial optimism would not last and that yields would continue to remain under pressure.

According to the borrowing schedule, the government will raise the remaining one-third, or Rs 1.52 lakh crore, between October and March. “It would be quite challenging to manage second-half borrowings unless the government is able to raise resources from other avenues like disinvestment,” said DK Joshi, principal economist at ratings agency Crisil.

A substantial portion of the government’s debt is being raised in the first half of the fiscal to ensure that enough funds are available to the private sector in the remainder of the year, when the economy is expected to pick up steam. Once this takes place, credit growth is expected to rise significantly from 15.65% for the fortnight ended July 3.

“The recovery momentum is likely to be lower in the first half. So, in the second half, when we expect stronger recovery, the government’s borrowing will not interfere with private demand,” confirmed Bank of Baroda chief economist Rupa Rege Nitsure.

The Centre’s debt sale includes seven tranches of Rs 12,000 crore each between July 18 and September 4. Another Rs 11,000 crore, Rs 7,000 crore and Rs 8,000 crore will be carried out between September 4 and September 25, the finance ministry stated. The government paper will be of 5-20 years maturity. The government will also roll over treasury bills worth Rs 86,500 crore in 11 auctions between July 22 and September 30.

In a separate statement, RBI said it would continue its open market operations (OMOs) and conduct auctions every alternate week. Under these OMOs, the central bank buys government bonds in the secondary market to enhance liquidity and support the debt market. RBI had said in March it would buy bonds worth Rs 80,000 crore through OMOs in April-September. So far, the central bank has bought government paper worth Rs 29,850 crore through these auctions.

Centre to borrow more in first half

Centre to borrow more in first half
The Hindu Business Line, July 17, 2009, Page 1

Our Bureau, New Delhi

The Centre has stepped up its first half year borrowing programme by nearly 25 per cent to Rs 2.99 lakh crore.

This is being done to fund a higher-than-anticipated fiscal deficit, owing to higher social sector spending and lower revenue receipts.

The new borrowing level for April-September 2009, arrived at by the Finance Ministry and the Reserve Bank of India (RBI) following a meeting here on Thursday, is Rs 58,000 crore more than the March 2009 projection of Rs 2.41 lakh crore.

For the entire fiscal ending March 31,2009, the Centre’s gross market borrowings have been budgeted at Rs 4.51 lakh crore, about Rs 89,000 crore more than what was projected in the Interim Budget on February 16.

The new borrowing level of Rs 2.99 lakh crore would also mean that Government would in the first half complete about 66 per cent of its total borrowing target of Rs 4.51 lakh crore for the entire fiscal. “So far, the Government has borrowed Rs 1.89 lakh crore (in the first half). The balance Rs 1.10 lakh crore will be raised till September 30 in ten tranches”, Ms Shyamala Gopinath, RBI Deputy Governor, told reporters after meeting the Finance Secretary, Mr Ashok Chawla, and other senior Finance Ministry officials.

On open market operations, Ms Gopinath said that Rs 43,000 crore, out of Rs 80,000 crore announced in March 2009, had already been raised “This would continue through the first half….. We will manage the programme in non-disruptive manner”.

Calendar of borrowing

Later in the day, the Finance Ministry released an indicative calendar of Government borrowing for Rs 1.10 lakh crore through July 18 - September 30.

Although the market had been worried over the size as well as timing of the extra borrowing for the current fiscal, the announcement saw the easing of bond yields as the additional borrowing was below expectations.

Two-thirds of govt borrowing in H1

Two-thirds of govt borrowing in H1
Business Standard, July 17, 2009, Page 1

BS Reporters / New Delhi/ Mumbai

The government intends to borrow Rs 1,10,000 crore over the next 75 days, which will push up its first-half borrowings by Rs 58,000 crore from the earlier planned level.

This means that the government will now borrow Rs 2,99,000 crore by the end of September through bond issues, which would account for around two-thirds of the Rs 4,51,000 crore the Centre proposes to borrow during the current financial year.

The revised borrowing calender finalised by the Reserve Bank of India (RBI) and the finance ministry today has generally met with market approval. “Given the fact that the bond supply is large over a short duration, it is a positive sign,” said Sandeep Bagla, senior vice-president at ICICI Securities.

The government had earlier indicated it would frontload its borrowings to ensure that there was enough space for private sector fund raising in the second half. So far, during the financial year, the government has raised market loans worth Rs 1,89,000 crore.

According to the revised borrowing calendar finalised today, the Centre will maintain its weekly borrowings at Rs 12,000 crore from July 17 to early September before tapering it to 8,000 crore in the last week of September.

Though Finance Secretary Ashok Chawla had earlier indicated that half the borrowings would be supported by the Reserve Bank of India’s (RBI’s) open market operations (OMO), in a statement, the central bank said that for the moment, the OMO estimate of Rs 80,000 crore for the first half of the year was being retained.

Stating that the endeavour was to maintain adequate liquidity in the system, the central bank said: “It is reiterated that the Reserve Bank will have the flexibility to make changes in the amount of OMO and alter frequency and day of auction as may be necessary.”

So far in 2009-10, RBI has bought securities worth Rs 29,850 crore through OMO, which involves buying government bonds in the secondary market, against the notified amount of Rs 43,500 crore.

As for the third element of the fund raising exercise — the unwinding of market stabilisation scheme bonds — RBI has transferred Rs 28,000 crore through desequestering, while bonds of Rs 37,500 crore have been redeemed. Over the next 10 weeks, MSS redemptions of Rs 4,500 crore are due.

Under MSS operations, RBI had issued securities on behalf of the government and sucked out the excess liquidity. The government bears the interest costs on these bonds.

When these bonds are unwound, the bonds are liquidated and the money is transferred to the Centre’s account. The funds which are released would meet a part of the government’s borrowing requirements and do away with the need to tap the markets to raise funds.

“The government and the RBI are trying to front-load the borrowing programme to avoid crowding out private investments. This borrowing will be done in a non-disruptive manner.

There is ample liquidity in the system,” RBI Deputy Governor Shyamala Gopinath said earlier in the day.

Following her comments, the yield on the most-traded 6.90 per cent paper due in July 2019 dropped six basis points to 6.79 per cent (yield has an inverse relation to price). The borrowing calendar, released in the evening, provided further comfort to the bond dealers and bankers.

“The bond yields are not likely to move up further and remain range-bound,” added IDBI Gilts Managing Director G A Todas.

Though the government has proposed to increase its borrowings by 72 per cent during the current financial year, lenders such as Corporation Bank Chairman and Managing Director J M Garg said interest rates were unlikely to move up soon since there was ample liquidity in the system and credit demand was low.

Today banks parked Rs 1,28,000 crore with RBI through the reverse repo window, which is used to absorb surplus liquidity from the system. The flow of bank credit has dropped to 16.34 per cent during the year up to July 3, as against RBI’s projection of 18 per cent for the current financial year.

CENTRE TO BORROW 24% MORE IN H1

CENTRE TO BORROW 24% MORE IN H1
The Economic Times, July 17, 2009 Page 1

THE GOVERNMENT WILL

borrow Rs 2.99 lakh crore, 24% more than its earlier estimate for H1 of FY10. “We have already done Rs 1,89,000 crore. The balance is Rs 1,10,000 crore, which we will do up to September 30 in 10 tranches,” RBI deputy governor Shyamala Gopinath told reporters.

Bonds cool to govt’s stiffer borrowing

Bonds cool to govt’s stiffer borrowing
The Economic Times, July 17, 2009 Page 9

Centre To Borrow Rs 2.99 Lakh Crore In First Half, 24% Higher Than Earlier Estimate

Our Bureaus NEW DELHI MUMBAI

THE government bond market shrugged off the Centre’s revised borrowing schedule to raise Rs 1.1 lakh crore in the next 10 weeks through long-dated bonds, as the amount was in line with expectations. The Centre will borrow Rs 2.99 lakh crore from markets, 24% higher than its earlier estimate, for the first half of this fiscal.

The revised schedule would raise the total target for the first half of this fiscal to Rs 3 lakh crore against Rs 2.4 lakh crore as per the original schedule, and is eventually expected to push up yields. After market hours, the central bank announced that of the next 10 auctions (after Friday), seven will raise Rs 12,000 crore for the government while there will be three auctions of Rs 11,000 crore, Rs 8,000 crore and Rs 7,000 crore each. A Rs 12,000-crore bond auction is scheduled on Friday.

“We have already done and announced Rs 1,89,000 crore...So, the balance is Rs 1,10,000 crore, which we are going to be doing up to September 30 in 10 tranches,” RBI deputy governor Shyamala Gopinath told reporters after meeting finance secretary Ashok Chawla.

After her statement, benchmark 10-year bond yields declined to end at 6.79%, down 7 basis points. When yields fall, prices rise. “It’s unlikely that the market will get spooked by the new borrowing schedule, as it was more or less expected,” said Sandeep Bagla, senior vice-president at ICICI Securities Primary Dealership. “Excess supply will remain an issue, but global factors like US treasury yields and crude prices will also hold the key,” he added.

Ms Gopinath also sought to assuage market fears over the excess supply of government paper. “There is ample liquidity in the system. We will manage the borrowing programme in a nondisruptive manner.”

The government has raised Rs 1.77-lakh crore from 13 bond auctions up to July 10 and borrowed more than originally planned in the last seven sales.

The central bank also reiterated its commitment to open market operations wherein it buys bonds directly from traders. The rupee gave up some of its early gains to end at 48.74 against the dollar, weaker than Wednesday’s close of 49.64 with stocks hit by profit booking.

Domestic job market rises 8.1% in June, highest in a year

Domestic job market rises 8.1% in June, highest in a year
The Financial Express, July 17, 2009, Page 2

fe Bureaus, New Delhi

There is some positive news with hiring activity in the country rising 8.1% in June, 2009, compared with May, 2009. According to the JobSpeak survey conducted by online jobs portal Naukri.com, the growth in recruitment in June over May is “the highest upward movement since July 2008, indicating a strong hiring sentiment coming back to the market”.

Out of the key sectors surveyed in the report, all sectors except for FMCG, food & beverage and consumer durables showed an increase in hiring. While banking& financial services (BFSI) saw an increase of 22% in June, hiring for IT professionals was back in action and saw an increase of 12%. However, hiring in BPO and ITeS sectors was up by 3% as against May, with recruitment of software professionals going up 10%.

Other sectors, which saw an uptake include real estate and retail, where hiring was up by almost 25%. “Telecom saw a comeback with hiring activity picking up by 17%,” noted the report. However, hiring in FMCG and consumer durables saw a 8% and 14% drop, respectively.

Another sector which saw a huge upsurge in hiring was teaching and education, partly due to the beginning of the new academic year, as recruitment of professionals in these sectors saw a jump in demand by 22%. In BFSI, banking & insurance professionals saw a jump in demand by 12%, while demand for accounting & finance professionals inched up by 5%.

In terms of city-wise hiring, out of the top 13 cities, 12 recorded an increase in hiring activity. While hiring activity in Mumbai picked up by 13% after falling for several months in succession, Bangalore, Chennai and Pune saw a pick up in hiring activity by 10%,19% and 15%, respectively.