Wednesday, December 31, 2008

Indian economy: Winner in global turmoil of 2008

It is the collectivism of RBI and the government that helped the government avert the blues of the global financial crisis on the domestic economy

Described as the elephant that didn’t know its strength, India stood tall in 2008 as the global community battled this century’s worst economic crisis, while easing prices and dissipation of energy turbulence offered the hope it would outperform the rest in the new year.
To read more, please, visit - livemint.com

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Bill on valuation of real estate under consideration

A Bill on valuation of real estate, agriculture, industries and machinery and plants, works of art and life interest, marine properties, textiles, electronic and telecommunication engineering and products is under the consideration of Parliament.

Initiated by the Ministry of Company Affairs, the draft bill to recognise, regulate and frame rules and regulations is under examination by different agencies and very soon will be tabled in Parliament, according to S S K Bhagat, Vice-President, Institution of Valuers-IIV (India).
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Investment opportunities in Nagpur - international summit on January 15-16

Nagpur — the Growth Nucleus of India

The Vidarbha Economic Development Council, in association with The Economic Times, has planned a two-day international summit on investment opportunities in Nagpur on January 15-16.

Titled ‘Nagpur — the Growth Nucleus of India’, the summit will focus on investment opportunities in urban infrastructure, SEZ and MIHAN, multi-modal logistics and tourism infrastructure. Deloitte is the knowledge partner. The summit comes against the backdrop of recent studies that rated Nagpur among the fastest-growing investment destinations of India. A number of mega infrastructure projects coming up in and around Nagpur have changed the city’s profile.

One such project is a multi-modal international airport and a multi-product SEZ over 4,025 hectares being developed by Maharashtra Airport Development Company (MADC). The multi-modal cargo hub project and SEZ, with an estimated investment of $11,625 million, is expected to be a major driver of economic growth not only for Nagpur, but also for the entire Vidarbha region, said MADC vice-chairman and MD RC Sinha.

According to property consultants Jones Lang LaSalle, Nagpur is among top IT/ITeS commercial destinations among tier III cities. IT majors like TCS, Wipro, Satyam, HCL and Hexaware Tech have purchased around 500 acres for their proposed projects. On the investment front, four major sectors are expected to fetch an investment of around $16,135 million over the next decade or so. The tourism sector has pegged an inflow of $120 million.
To read more, please, visit - The Economic Times

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Satyam case: Maytas looks to raise $500 mn

Maytas Properties, a firm linked to Satyam Computer Services chairman S Ramalinga Raju’s family, is looking at raising funds through several of its real estate-related ventures after a potential $1.3-bn sale to Satyam was called off, following investor backlash.

Maytas’ fund-raising exercise would see the property firm bring in equity partners in some of its ambitious projects or sell some of its assets spread across most southern states.

The firm has approached consulting firms and bankers to chart out a $500-mn (about Rs 2,350-crore) fund-raising plan through divestments in key identified assets, according to people familiar with the development.

Some of the assets that could be used to unlock cash, include the group’s three SEZs, an ambitious warehousing project, property developments in various cities and outright sale of land parcels in and around Hyderabad. When contacted, a Maytas spokesperson said: “We cannot comment on market speculation.”

Funds from some of these equity dilutions are expected to meet the promoters’ equity contribution in the Rs 12,000-crore Hyderabad Metro Rail project that has been undertaken by the group company Maytas Infra, people close to the development said.
To read more, please, visit - The Economic Times

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India's top 20 business houses see 65% value erosion in 2008

Realty, infrastructure groups lead race to the bottom

India’s richest business houses would like to forget 2008 in a hurry. The market capitalisation of the top 20 business houses fell a whopping 65 per cent (Rs 16.73 lakh crore) over the previous year, courtesy the mayhem in the stock markets, performing far worse than the Bombay Stock Exchange’s benchmark Sensex (down 52.5 per cent) and the broadbased BSE-500 index (down 58.3 per cent).

Predictably, the credit risk that began with the housing bubble has hurt real estate stocks the most. So no surprises that Ramesh Chandra, the biggest value creator in the bull markets, saw the market value of Unitech, his flagship realty firm, decline 92.2 per cent in one year, the most among the largest business groups by market capitalisation (m-cap).

DLF is the other real estate firm to figure in the losers’ list with its m-cap eroding 74 per cent. The K P Singh-promoted firm ranks fourth in the list of firms that saw the biggest percentage fall in their m-cap.
To read more, please, visit - Business-Standard

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Monday, December 29, 2008

India may see deflation 2009: Bankers

Indian economy may go into deflation by the second quarter of financial year 2009-10 as there are fears of inflation going below zero percent in the face of unprecedented fall in crude and commodity prices

'If the current pace in inflation-decline continues, the figure (in WPI-based inflation) may slide below two percent by end-fiscal,' HDFC Bank's deputy head of treasury, Ashish Parthasarathy, said, adding 'it may fall further to below zero per cent by Q2 FY10.'

Inflation almost halved to a nine-month low of 6.61 percent from this year's peak of 12.91 percent, giving more space to the RBI to signal further cuts in interest rates.

Deflation occurs in an economy when the negative inflation prevails for a long period. In the event of deflation, the Reserve Bank will have to enhance money supply and lower rates further 'to support inflation', IDBI Gilts' Economist, Amol Agarwal said."
To read more, please, visit - ZeeNews

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Indian real estate will remain negative on a fundamental sense - Ajay Bagga of Financial Planning Standards Board of India

"For real estate fundamentals are pretty poor, high debt, high leverage, refunding will be difficult, promoter shares pledged already margin calls, and so there is a lot of stretch there on the offtake of their product.

All the four verticals are weak residential, retail, hospitality and office commercial space and are expected to weaken further.

So overall there is no demand coming up in terms of new offices or new residential demand, everything is subdued.

I would say a real estate would remain a negative on a fundamental sense," Bagga told CNBC-TV18
(Watch Video)

Year of all-pervasive poor governance

The state as well as the corporate world showed symptoms of bad governance in 2008.

It is always tempting to write a ‘year that was’ piece towards the end of December. This column will not do so. Instead, it seeks to look at three unrelated current events that would remind one of how another year may go by, but the poor quality of governance remains unresolved in India.
To read more, please, visit - Somasekhar Sundaresan - Business-Standard

Related Story:

Not good for business

Not good for business

That the Raju family, owning only 9% of Satyam Computer Services, is able to control it fully, underlines the malaise in the Indian private sector

The blow to Corporate India could not have come at a worse time. Still reeling from the impact of the growing global financial meltdown, the greed of the managers of Satyam Computer Services, the country’s fourth largest information technology company, has yet again brought into sharp focus issues of corporate ethics and governance.

In a move reminiscent of the pre-economic liberalisation years, Satyam managers sought to palm off two troubled family-owned real-estate firms to the cash-rich IT giant, plunging Satyam’s share price to a five-year low.
To read more, please, visit - IndiaDiary

Monday, December 22, 2008

DLF and Unitech gain as Housing Development Finance Corporation and State Bank of India cut interest rates on home loans

DLF Ltd., the nation’s biggest real estate developer, rose to the highest in two months, gaining 3.9 percent to 319.75 rupees as of 11:15 a.m. in Mumbai trading.

Unitech, the second- biggest developer, gained 8.6 percent to 48.05 rupees, the highest in more than a month.

The Realty Index of the Bombay Stock Exchange added 4.3 percent to its highest level since Oct. 21.

The index has climbed 60 percent over the past four weeks, the biggest monthly rise since it was set up in July last year."
To read more, please, visit - Bloomberg.com

Sunday, December 21, 2008

Banking meltdown: India an opportunity for expats and NRIs

R2I:

There is a large Non-Resident Indian (NRI) population working in the financial sector abroad. This very well regarded and skilled talent pool has tremendous experience with blue-blooded investment banks and institutions across the globe who are now finding India to be a very attractive destination both from a professional and personal standpoint.

Professionally, roles in India pose unique challenges because of the country’s aggressive growth rate. Additionally , compensation has scaled to new heights and India now offers NRIs cost of living packages that allow them to live comparable lifestyles to what they have enjoyed overseas. Personally, India offers NRIs the chance to be closer to their ageing parents and family. Those with children also see it as an opportunity to expose them to the Indian culture, “value systems” and understand their roots.
To read more, please, visit - The Economic Times

Related Stories:

1) Is this the right time for NRIs to book a flat at Amanora Park Town?

2) The project which gives you value for your money

3) Magic Hills, NRI township in Navi Mumbai, to begin construction in October '08 and to complete Phase 1 in December '09 - says Sternon and Garnet

4) NRIs take advantage of the current situation of high exchange rates and interest rates - Venugopalan

5) Investment opportunities for Non Resident Indian (NRI) in India

6) How are foreign exchange rates determined?

Friday, December 19, 2008

Fast growth is not the right approach now: ICICI chief

Chanda Kochhar was formally named as CEO-designate and the incoming head of India’s largest private bank, ICICI Bank Ltd. She will take over the job in May succeeding K.V. Kamath, who will become non-executive chairman. Edited excerpts

Are your NPAs growing?

In the current economic scenario, on the corporate side I still think that NPAs would not grow much because the corporate profits are still high and their debt levels are low.

On the retail side, as long as India does not face any large scale retrenchment – I don’t think that will happen – and the scenario continues to be what it is currently, we will not have any worry on mortgages and car loans. On unsecured loans and credit cards, we have already seen industrywide higher credit losses than what used to be prevalent a couple of years ago. I think we will have to learn to leave with the little higher level of credit losses of such loans.

To read more, please, visit - Tamal Bandyopadhyay - livemint.com

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Politics of donations behind home loan plan

Finally, such a package will dent the profitability of public sector banks as the cost of funds is much more than the return on home loans. Banks are offering about 10.5% interest on one-year deposits. Taking into account the reserve requirements, the actual cost works out at least 11%. So, the banks will lose 2.5 percentage points on every small loan and 1.75 percentage points on loans up to Rs20 lakh. Besides, no processing fee and prepayment penalty will increase their losses.

Still, why is the government, the majority owner of public sector banks, forcing them to do the harakiri? After all, it earns dividend income if the banks make profits.

The official reason for this is bolstering the sagging economy. But had the general election not been round the corner, the government may not have goaded its banks to offer cheap home loans.
To read more, please, visit - Tamal Bandyopadhyay - livemint.com

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Thursday, December 18, 2008

Limit for tax rebate on home loans may go up to Rs 2 lakh

In the second and last stimulus package to revive the economy, the government is likely to raise the cap on income tax exemption on interest on home loans to Rs 2 lakh

On housing loans, at present, a borrower is allowed tax rebate on up to Rs 1.50 lakh paid as interest on home loans. The limit was set in 2001 and the real estate industry has been making a strong pitch for raising the cap.
The Economic Times

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Research and Markets: Know The Indian Realty Mart In-Depth and Keep a Hawk's Eye on the Deals Happening in Real Estate in India

Research and Markets (http://www.researchandmarkets.com/research/5bcafd/india_real_estate) has announced the addition of the "India Real Estate Market Watch" report to their offering.

The roving eye of the IREF research team captures significant ongoing activity in the realty mart and offers a snapshot of the deals happening in this space. So, be well-informed and make erudite decisions by keeping abreast with the latest news and views concerning the Indian real estate and finance markets.

Capturing the Indian Market Dynamics:

As its name suggests, the significant research activity of deal tracking in the Indian real estate market comprises the content of this article. Major deals in the Indian realty mart have been listed. Also, a month-wise record of deals with a concise description of the investment has been given for the period October 2007-May 2008.

Target Audience:

Its readership base could comprise developers, capital market players, consultants to investors, from the VC/PE communities, merchant bankers and managers of the evolving REITs and REMFs.

Key Topics Covered:

Significant deals in the Indian Real Estate Market, from June 2007 to May 2008
From October 2007 to May 2008, Indian Real Estate deals tracked for:
PE Investments
PE Funds
Mergers & Acquisitions
Joint Venture
Others
Charts & Tables
Significant deals in the Indian Estate Market, from June 2007 to May 2008
Deal Tables for Real Estate Market in India stating the name of investor, investee, investment size and segment.

For more information visit http://www.researchandmarkets.com/research/5bcafd/india_real_estate.


BusinessWire

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At present it is difficult to speculate about the trajectory of global downturn and its consequent fallout for the Indian economy - RBI

RBI Report on Trend and Progress of Banking in India 2007-08

Indian banks do not have financial exposure to the U.S. sub-prime assets

The adverse global developments have led to moderation of growth in the industrial and services sectors in the first-half of 2008-09. In recent weeks, “the impact on liquidity and credit has also been felt.”

“The global financial situation described the worst since the Great Depression, continues to be uncertain and unsettled. At present it is difficult to speculate about the trajectory of global downturn and its consequent fallout for the Indian economy,” the RBI cautioned. The financial sector in India is sound and healthy, the RBI stated adding, Indian banks do not have financial exposure to the U.S. sub-prime assets.
To read more, please, visit - The Hindu : Emphasis on financial stability

Related Story:

The dangerous inter-dependence between real estate cycles, bank crisis and the ultimate threat to financial stability

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Banks must manage risks associated with real estate: RBI

The dangerous inter-dependence between real estate cycles, bank crisis and the ultimate threat to financial stability

Real estate prices:

The Reserve Bank on Wednesday said that it is imperative for banks to manage balance sheet risks associated with real estate exposure.

This becomes important "particularly in the current scenario of slowdown in the economy with its expected ramifications on real estate prices, given the historically positive correlation between economic downturn and its adverse impact on real estate prices," the apex bank said.

"Risky Ventures"

With the major portion of real estate exposure consisting of mortgage-related assets, which are long-term in nature and have dynamic cash flow characteristics, they become "risky ventures", the RBI said in its Report on Trend and Progress of Banking in India, 2007-08, released here.

The recent global financial turmoil, caused by the mortgage market crisis in the US, has brought into focus "the dangerous inter-dependence between real estate cycles, bank crisis and the ultimate threat to financial stability", it said.

Anecdotal evidence suggests real estate prices rose 2-4 times during the past 3-4-years in different parts of the country, the RBI said.

Real estate prices affect the economy primarily in two ways, it said.

To read more, please, visit - ZeeNews

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Tuesday, December 16, 2008

Bargain, get a cheap home loan from banks

The Reserve Bank of India has lowered the repo rate (rate at which the central bank lends money to other commercial banks) by 100 basis point from 7.5 per cent to 6.5 per cent.

Following this, ICICI Bank announced a reduction in its home loan rate from 13 per cent to 11.5 per cent for loans up to Rs 20 lakh. This new rate is applicable only for new customers. Other banks are likely to follow suit.

Existing customers: Bargain!

"If your bank offers home loan at more than 11 per cent, look towards other banks who offer lower rate of interest," says home loan expert Harsh Roongta.

While negotiating for lower interest rates from the present bank or the new bank, it will work in your favour to have the following brownie points:

1. A spotless record of repayment since your loan commencement.

2. Your income has either remained stable or has increased.

3. You have not acquired any fresh liability.


Penalties and fees

It's worth it to pay up the prepayment penalties and loan processing charges if the new loan will come at less than 11 per cent, say experts.

The numbers

Old home loan: Rs 20 lakh

Floating rate interest: 13 per cent

Tenure: 20 years

EMI would have been Rs 23,726 per month.

Now, assume that you have paid EMI for 2 years.

Outstanding loan amount: Rs 19.47 lakh

Interest rate: 11 per cent

Tenure: 18 years

EMI: would be Rs 21,259

Total switching cost (including prepayment penalty and processing fee for the new loan) would be Rs 48,683.

Read: Don't let higher EMIs ruin your budget


Read: Should I prepay my home loan?

Disclaimer: While efforts have been made to ensure the accuracy of the information provided in the content, the web site or the author shall not be held responsible for any loss caused to any person whatsoever who accesses or uses or is supplied with the content (consisting of articles and information).
ibnlive

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The future of the real estate sector lies in providing affordable housing

The focus has shifted from luxury or premium category apartments to smaller, no-frills affordable houses

Around 70% of the Indian population comes under this category of housing. Companies like Omaxe and Puravankara Projects formed subsidiaries to focus on this part of the business.

An upsurge in demand is the only saving grace for these builders. This is what prompted the RBI to declare low-cost loans as priority lending. Developers with projects in Tier-II and Tier-III cities are expected to benefit from this move.

Mumbai real estate market:

Mumbai’s real estate market is a different ball game compared to the rest of India. Premium housing and slum rehabilitation are the two main categories where the majority of developers such as Orbit, HDIL and Akruti City operate.

As of now, affordable housing is missing from the Mumbai market, since land prices in this region are among the highest in the country. Thus, it is difficult for this stimulus package to impact end customers in Mumbai.

Pune and Nashik real estate markets:

In other cities like Pune, Ahmedabad, Nasik and Surat, developers who have launched projects within Rs 15-25 lakh will benefit from the government’s package. Down South, property prices had started correcting earlier than in Mumbai.

Bookings!

Developers were facing a major headwind in sales. However, some sanity prevailed and with reduced profit margins, property is now being sold at affordable levels.

End user:

There is still some time before we see a major shift in investor sentiment and actual buying takes places in the market. In fact, some developers feel that the real estate sector requires much more than what this stimulus package provides. It is the end consumers who are now leading the demand in the sector. Though it may still be too early to gauge the actual impact of the stimulus package on real estate companies, it will definitely provide a breather to the sector.
To read more, please, visit - Stimulus package to realty cos may provide breather

Related Story:

Public sector banks cut home loan rates to prop up demand

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Sunday, December 14, 2008

DLF cuts target by a third due to property slump

DLF Ltd, the largest real estate developer, has cut its current fiscal deliverable targets by about 33% following the deterioration in the housing and commercial property market.

The company is now expecting to deliver 15 million square feet (msf) against a guidance of 22-24 msf at the beginning of this fiscal.
To read more, please, visit - DNA

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Friday, December 12, 2008

Reverse Mortgage Loan scheme- by National Housing Bank

What is Reverse Mortgage Loan ?

Reverse Mortgage Loan is a scheme by the National Housing Bank which enables a senior citizen (of 60 years and above) to avail of periodical payments from a lender against the mortgage of his/her house while remaining the owner and occupying the house.
As of now, the duration is for 20 years.

Reverse Mortgage : Good News for Senior Citizens:

For senior citizens planning to avail a reverse mortgage loan, there is good news around the corner. The National Housing Bank (NHB) is in talks with leading insurance companies to work out a scheme wherein senior citizens can avail their periodical payments till the end of their lives.

Reverse Mortgage Loan (RML), a scheme developed by the NHB, enables a senior citizen – above the age of 60 years – to avail periodical payments from a lender against the mortgage of his house while staying as the owner and occupying the house for – as of now – a maximum of 20 years.

The senior citizen borrower is not required to service the loan his/her lifetime and, therefore, does not make monthly repayments of principal and interest to the lender.

The RML is repaid by the bank out of the sale proceeds of the house mortgaged, after the death of the borrower, or him/her permanently moving out the of the house.

Covering 'Longevity Risk':


“We are in talks with insurance companies to cover the ‘longevity risk’ associated with NHB,” said S Sridhar, chairman and managing director, National Housing Bank.

In effect, the NHB and insurance companies will work out a scheme wherein – if the borrower lives beyond the stipulated 20 years of the loan, also referred as ‘longevity risk’ – the rest of the EMIs will be borne by the insurance companies.

The concept of reverse mortgage emerged last year when Finance Minister P Chidambaram, during his Union Budget speech for the year 2007-2008 , declared that NHB will introduce the scheme. Since then, the bank has disbursed loans worth Rs 550 crore to about 2,000 customers.

Initially jittery, but Widley accepted:


“Lack of clarity on issues such as property valuation and taxation was one of the reasons why borrowers found them unviable initially, but things have changed a lot since then,” said Sridhar.

Presently, all payments under RML shall be exempt from income tax under Section 10 (43) of the Income Tax Act, 1961.

India... A Growing Market:

In India, senior citizens, i.e. those aged 60 and above, number around 7.7 crore, constituting 7.5 per cent of the total population (Census 2001).

This elderly population is projected to increase to 17.9 crore in 2031 and further 30.1 crore in 2051. It is projected that the elderly will constitute 12 per cent of the country’s population by 2031 and 17 per cent by 2051.

In a bid to spread the awareness of the reverse mortgage scheme, the NHB on Thursday tied up with Tina Ambani’s NGO Harmony for Silvers Foundation to set up a helpline (1800 100 1111) that will address queries and concerns of senior citizens regarding RML.
-Mumbai Mirror-The Economic Times

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Through IIRF2, IL&FS Investment Managers to invest in the entire range of real estate spaces, across Tier I and Tier II cities

Confident of the long-term prospects:

Through IL&FS India Realty Fund – II (IIRF2), IL&FS Investment Managers (IIML) proposes to invest in the entire gamut of real estate space, across Tier I and Tier II cities.

“The current market situation and capital scarcity provide valuable opportunities. As investors, we continue to look at investments with cautious optimism since we believe in the underlying strength of the Indian real estate market and remain confident of the long-term prospects of this sector,” said Archana Hingorani – CEO and Executive Director of IIML.

Providing growth capital:

IIML is planning investments of $25-$75 million by providing growth capital to mid-market real estate developers in India. “We have partnered with some of the most reputed real estate developers as well as nurtured some of the more upcoming developers and we expect these relationships to further deepen through Fund II,” Hingorani said.

Single largest fund:

IL&FS Investment Managers has raised $895 million from IL&FS India Realty Fund – II (IIRF2), exceeding its target of $ 750 million, and making it one of the single largest funds dedicated to the Indian real estate sector. To read more, please, visit - -The Economic Times

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