Posts Tagged ‘real estate’

WEEKLY Update 22nd – 26th March

Global market sentiments together with continued buying by foreign institutional investors led domestic markets to pose one of the best six consecutive weekly gains after almost a year. The fact behind such a move is that market participants are gaining a lot of confidence & believe that the domestic economic activity is getting stronger & stronger over the period.

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Encouraging advance tax payments for the Q4 March 2010 also assured the market participants for better than expected corporates profit. As expected Standard & Poor’s (S&P), the credit rating agency revised India’s outlook to ‘stable’ from ‘negative’ with the government’s pledge to reduce fiscal deficit over the next three years in the budget.

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The move complemented overall sentiments of the market post the S&P upgrade as some foreign investors who were restricted from investing in countries below a certain degree of credit worthiness would now come to the market. On the expected lines of monetary tightening, RBI surprised the markets on the last day of trading by increasing both policy rates by 25 bps, a month before its quarterly meeting scheduled in April.

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In the light of sustained pickup in economic activity & headline inflation passing through the baseline projection of 8.5 for end-March 2010 has induced RBI to come up with such stronger action. Moreover, non-food manufacturing products that constitutes 52.2 per cent weight in WPI has seen sustained rise from negative (-0.4 per cent) in November 2009 to 4.3 per cent in February 2010.

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Increasing capacity utilisation and rising commodity and energy prices are exerting pressure on overall inflation. The small hike of 25 bps in policy rates is considered only as a signal & if needed, RBI may come out with more of such steps in case of sustained inflationary conditions in the economy. In the coming week, interest rate sensitive like, Auto & Real estate stocks may see some pressure on the expectation of dearer loans in the future.

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Overall trend of world markets is still up but the rise in dollar index every now and then gives some fear to the rally in commodities. Dollar index, which is at current levels of 80.75, if closes above its key resistance level of 81, can give jitters to various commodities and stock markets so one should take care. Nifty has support between 5150-5050 levels and Sensex between  17200-16800 levels.

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Range trading from last few weeks has kept investors in a fix. Ambiguity over the next move is refraining investors to take large positions in commodities. Currency has become crucial here. Greece concern is capping the upside of euro and dollar index is not breaking its range.

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Furthermore, there is no as such big fundamental news which can give a clear cut direction to commodities. Some supply disruption in copper and nickel can support the prices at higher side. Hence, cautious trading is advised for investors.

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Even in agro commodities, arrival pressure in many commodities is limiting the upside despite the steady demand. Once arrivals get clear, bottom formation is expected in many agro commodities.

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GST Introduction in April to Reduce Indirect Tax Burden

GST Introduction to Reduce Indirect Tax Burden

The Finance Ministry maintained that the net burden of indirect taxes on the people would reduce by 25-30% when the proposed Goods and Services Tax (GST) is introduced from April 1, 2010.

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However, it is said that real estate would also be brought under the GST scanner and deliberations in this regard between the Centre and the States were almost conclusive.

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The draft legislation on GST had been referred to legal experts and would be finalized in order to facilitate the government to achieve target of implementation of Goods and Services Tax as has been promised by April, 1, 2010.

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Meanwhile, it is said that there were divergent views expressed by the Empowered Committee of State Finance Ministers and the Thirteenth Finance Commission (TFC) on certain issues relating to GST, but noted that these were on the verge of finding a solution.

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On the other hand, according to the implementation programme, the government plans to introduce the GST regime from the new fiscal to replace excise duty and service tax at the Central level and the VAT at the State level, apart from others levies like cess, surcharges and local taxes as currently applicable on good and services.

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Domestic Realty Companies Faces Challenges Post Dubai Storm

Domestic Realty Companies faces Challenges Post Dubai Debt fallout

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Domestic realty companies which are planning to tap the primary markets may not see a smooth sailing as the Dubai debt crisis is likely to undermine investor confidence in the sector.

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As many as nine realty companies, including Emmar MGF, have filed their draft red herring prospectus (DRHP) with the market regulator Sebi aiming to raise about Rs 15,000 crore.

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“It will not be surprising if some realty companies defer their share sale plan.

The Dubai debt crisis will not give any positive signal to investors in realty companies and IPOs of companies like Emmar MGF will face huge challenge,”

SMC Capitals‘ equity head Jagannadham Thunuguntla said.

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As per the DRHP filed with the Sebi, nine relators are planning to raise an estimated Rs 15,000 crore through the initial public offers (IPOs).

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This includes Emmar MGF’s Rs 4,000 crore issue, followed by Sahara Prime City (Rs 3,400 crore), Lodha Developers (Rs 2,700 crore), BPTP (Rs 2,000 crore), and Godrej Properties (Rs 500 crore).

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Last month, the Dubai government-owned investment company Dubai World asked for a six-month delay on repaying its $ 59 billion debts.

Dubai Woes to Hit India Hard? “No” Says India’s Think Tank :)

 

Dubai Woes to Hit India Hard? "No" Says India's Think Tank


Indian policy-makers
are not really worried over the potential adverse impact on the country’s economy because of the multi-billion-dollar debt default risk faced by Dubai World, ranked among the largest conglomerates in the region.

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Commerce Minister Anand Sharma said “India is a very large economy. It is a resilient economy”.

“I don’t think some development in real estate in Dubai will have an impact on the Indian economy” he added.

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He also said “As far as India is concerned, the housing, real estate sector and construction industry are all doing well.

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This is confirmed by the increasing demand for construction materials, cement and steel,”

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Finance Secretary Ashok Chawla also saw little impact of the Dubai World’s woes on the country’s economy.

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Though he was a trifle more circumspect and preferred to watch the situation before hazarding a guess.

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“We will have to study what the issue is, what is the problem, what will be the possible implication if any for the Indian economy, the people and corporates,” Chawla told.

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Asked if the crisis will impact money flows into India,since the Gulf region accounts for over half the total inward remittances worth over $25 billion annually from expatriate Indians,

Chawla said: “It’s unlikely.”

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The state-run Dubai World stunned the global financial world Thursday when it announced it would need to restructure its debt, estimated at $59 billion, to preempt default and asked creditors for a six-month deferment.

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The conglomerate, which has a host of companies under its fold, has interests in a wide range of businesses such as realty, infrastructure, logistics and economic zones.

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And that is not just in the region but across a clutch of countries including India.

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Indian equities reacted adversely to the development, with the benchmark sensitive index (Sensex) of the Bombay Stock Exchange (BSE) down as much as 634.16 points, or 3.76 percent, midway into the trading session Friday.

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It later recovered and closed with a loss of some 220 points, or 1.3 percent over the previous close.

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Indian markets have rallied more than 100 percent from the lows a year ago,mostly backed by news of recovery and not necessarily on fundamentals,”

said Jagannadham Thunuguntla of brokerage firm SMC Capital.

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“This is why such news will have a negative impact on our markets and we will be dragged down,” Thunuguntla, who heads the equities division of SMC Capital told.

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Even some Gulf-based companies, like Emmar, which have business interests in India, said there will be virtually no impact on their ongoing projects in India.

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The response was similar from India’s leading engineering and construction major Larsen and Toubro Ltd, which said its exposure in Dubai was around $20-$25 million.

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Northern Region – Largest Contributor to the GDP :)

north-india

North India - Largest Contributor to the GDP

CII report states that although the economic growth in the region has underperformed the national average, the Northern Region continued to be the largest contributor to the GDP at 27.5% in 2007-08.

However, it said that it clocked a CAGR of 6.2% against 6.5% nationally while the under performance had been witnessed across primary and tertiary sectors.

Moreover, the northern region has not been able to capitalize on its traditional stronghold –agriculture while it has also not been able to capitalize on the opportunities in the service sector like the other regions.

One of the key reasons of under performance in the primary sector has been slow growth rates witnessed by two of the largest agrarian states in the region – Uttar Pradesh and Punjab, which contribute 57.5 per cent to the region’s primary sector.

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Performance of the northern region has been reasonably good in the secondary sector, driven to a large extent by growth in the construction sector.

Construction, on the other hand, is also the fastest growing sub sector for the region, CAGR of 12.6% over 1999-00 to 2007-08

Other fastest growing sub sectors for the region are transport, storage and communication; Banking & insurance, real estate, ownership of dwellings & business services.

Discussing the state economies, CII offical said that Uttar Pradesh, Rajasthan and Delhi are the three largest economies in the region.

Chandigarh, Uttarakhand and Haryana are the three fastest growing economies in the region.

All northern region state economies have witnessed declining contribution from the primary sector.

The greatest increase in percentage contribution of the secondary sector has been in Uttarakhand, 15 per cent points.

Similarly the contribution of the tertiary sector has witnessed greatest increase in Haryana, 10 per cent points, he said.

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RBI, Monetary Projections And Indian Economy

Hello Friends,

Just an extension of our previous blog ”RBI And Its Policies – Part 1″.

RBI, Monetary Projections And Indian Economy

RBI, Monetary Projections And Indian Economy

In this Blog we would touch upon the aspects as that of Monetary projection from RBI, assessment of economy scenario at present and relevance of RBI policy on economy.

Monetary projection:

For policy purposes, money supply (M3) growth for 2009-10 is placed at 17.0 per cent, down from 18.0 per cent projected in the Annual Policy Statement.

Consistent with this, aggregate deposits of scheduled commercial banks are projected to grow by 18.0 per cent.

The growth in adjusted nonfood credit, including investment in bonds/debentures/shares of public sector undertakings and private corporate sector and Commercial Papers (CPs), has been revised downwards at 18.0 per cent as in the Annual Policy Statement.

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Economy:

Since the last review in July 2009, there has been a discernable improvement in the global economy.

The recovery is underpinned by output expansion in emerging market economies, particularly in Asia.

World output has improved in the second quarter, manufacturing activity has picked up, trade is recovering, financial market conditions are improving, and risk appetite is returning.

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A sharp recovery in equity markets has enabled banks to raise capital to repair their balance sheets.

If we talk about the home country then there are definitive indications of the economy attaining the ‘escape velocity‘ and reverting to the growth track.

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The performance of the industrial sector has improved markedly in recent months.

Domestic and external financing conditions are on the upturn.

Capital inflows have revived.

Moreover activity in the primary capital market has picked up and funding from non-bank domestic sources has eased.

Liquidity conditions have remained easy and interest rates have softened in the money and credit markets.

Growth projection for GDP for 2009-10 on current assessment is placed at 6.0% with an upward bias, the same as the previous policy review.

But some darker parts also persist.

There are clear signs of rising inflation stemming largely from the supply side, particularly from food prices.

Private consumption demand is yet to pick up.

Agricultural production is expected to decline.

Services sector growth remains below trend.

Bank credit growth continues to be sluggish.

The central bank has warned of possible asset price bubbles, raised banks’ provisioning requirements for commercial real estate loans and lifted inflation forecast.

WPI inflation for end-March 2010 is projected at 6.5 per cent with an upward bias.

This is once again higher than the projection of 5.0 per cent made in the Annual Policy Statement in July 2009.

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Stay Tuned for more on the topic.

We would look into Monetary Policy stance, more facts about economic indicators and Analysis from the Analyst from monetary point of view.

Note : For More Finance Gyan, Latest Industry, Stock Market, Economy News and Updates, please click here

Interest Rates War Heating Up,Home Loans Rates Down!

An interest rate war led to the dip in home loan rates

An interest rate war led to the dip in home loan rates

An interest rate war is brewing in the home loans this festive season.

Development Credit Bank (DCB) and GIC Housing offering home loans below the psychological 8%.

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DCB, which recently entered the segment, is offering home loans at 7.95% for loans up to Rs 5 crore at fixed interest rate for the first year and floating rates from year two.

Affordable housing is the buzzword these days, but the market would get a further boost if attractive financing options are available.

Therefore, bankers have started coming up with the attractive options for their target segments.

Central Bank of India and PNB have waived processing fee and documentation charges on certain loans.

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Bankers have basically started offering a psychological pricing to get more borrowers into their fold.

According to bank observers, borrowers have started preferring low interest bearing home loan accounts of nationalised banks over private banks.

However, private sector bankers maintain that borrowers should not fall flat over the sub 8% schemes and exercise caution before signing on the dotted line.

As well as borrowers also say that such switch over is not easy.

Half way through EMI repayments, it is getting quite impossible for borrowers to get their account Shifted.

Constraints like, paying a hefty penalty and transfer fees are proving to be deterrents for them.

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Interest Rate War is really heating up coming Diwali. 🙂

PE-backed Companies Queuing up the Market with IPOs :)

pressure from PE players is forcing companies to take the IPO route :)

pressure from PE players is forcing companies to take the IPO route 🙂

The buoyancy in the capital markets over the past few weeks has seen a spate of initial public offerings (IPOs) hitting the market.

Sectors such as infrastructure, power and real estate are the ones that have been most bullish.

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However, most companies that are taking the IPO route for raising funds are the ones that have strong private equity (PE) backing.

And in most cases, it is the pressure from these PE players that is forcing these companies to take the IPO route.

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Recently, four real estate companies – Emaar MGF Land, Lodha Developers, Sahara Prime City and Ambience Ltd – filed draft red herring prospectuses (DRHPs) with the market regulator Securities and Exchange Board of India (Sebi) to launch their IPOs.

All the four together are looking to mop up over Rs 11,000 crore.

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Said Jagannadham Thunuguntla, equity head, SMC Capitals Limited, “Several companies are filing their IPO prospectuses with Sebi, with the confidence provided by the strong capital market bounceback and the healthy subscription levels seen by the IPOs of Adani, NHPC and OIL.”

“Taking the capital market bounce-back as a good exit opportunity, several PE-backed companies are queuing up with their prospectuses.

While this trend of PE-backed companies filing prospectuses can be seen across industries, it is quite prominent in the real estate industry,” he added.

According to him, “Several companies which have filed their prospectuses in the past three to four days have PE backing at the corporate or SPV levels.

The recent capital market bounce-back is giving a fresh breath of life to PE players” he added.

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This trend of PE-backed companies going to the market with IPOs is not a surprise. PE firms are keen to capitalize on the buoyant financial markets and exit certain investments.

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India Crossed the $100 Billion Mark in FDI :)

Amidst of the global crisis, India crossed the $100 billion milestone in foreign direct investment (FDI)

Amidst of the global crisis, India crossed the $100 billion milestone in foreign direct investment (FDI)

Amidst of the global crisis, India crossed the $100 billion milestone in foreign direct investment (FDI) through equity confirming its rising profile as a safe and sound investment objective.

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However, 44% of the money came through Mauritius as investors wanted to take advantage of India’s double taxation avoidance treaty with the island nation.

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Moreover, the cumulative FDI inflows since 2000 and up to July 2009 amounted to $100.33 billion while the inflows in the first 4 months of the current fiscal were $10.49 billion and the other big investors included Singapore, the US, UK and the Netherlands.

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Additionally, it is said that FDI’s main impact comes from new technology, new managerial capabilities and new benchmarks in corporate functioning whereas India reached the $100 billion mark at a time when the global financial crisis has had a dampening impact on FDI flows which are expected to fall this year.

Further, it is said that the global FDI flows will decline by 30% in 2009 reviving only marginally during the next year.

Although declining, FDI flows to developing countries proved to be more flexible than other capital flows such as portfolio investment and bank lending, the main reasons being that FDI is more of a long term nature than capital flows.

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On the other hand, India’s services sector received 23% of the cumulative equity FDI inflows followed by computer software, hardware, telecommunication and real estate.

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QIPs Outstripped PE Funding & IPOs in Fund Raising Process ;)

QIP-investments-outpace-PEfunds

Qualified institutional placements (QIPs) have outstripped private equity (PE) funding since January by at least eight times, making it by far the most popular fund-raising route for firms this year.

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QIPs raised at least Rs. 21,209 crore since January this year, while PE funds invested only Rs. 2,574 crore in listed firms.

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QIPs have almost raised more than twice of initial public offerings.

A QIP is a private placement by a listed company of shares or securities convertible to equity with qualified institutional buyers approved by market regulator Securities and Exchange Board of India(SEBI).

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Data from Delhi-based investment bank SMC Capitals Ltd shows another 48 QIPs worth Rs.43,891 crore are in the pipeline.

But analysts do not expect a significant rise in the number of, or funds through, PE deals this year.

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Typically, PE investments take up to six months to complete, whereas a QIP can be done in up to four weeks, making the fund-raising process faster and more reliable since the institutional buyers are selected carefully.

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Also, in a QIP, the institutional buyers rarely seek a seat on the company board, or management control, a common practice in large PE deals.

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Since PE is perceptionally intrusive for promoters, QIP serves as a good alternative.

However this QIP structure is liked by investors and firms as in a QIP the window is shorter and money can be raised quickly.

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While real estate firms typically prefer QIPs for their need of capital at short notice, the companies currently waiting to do QIPs are across sectors, including telecom, entertainment, retail and information technology.

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In line for QIPs are Reliance Communications Ltd, Pyramid Saimira Theatre Ltd, Pantaloon Retail (India) Ltd  and few more.

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Some firms, though, have taken both routes for their funding needs.

Historically, PE investments in India have been in the form of private investments in public enterprises, or PIPEs, which also happen to the only firms eligible for QIPs.

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“Private equity investors have missed the boat,” Jagannadham Thunuguntla, head of SMC Capitals, said in a statement.

Companies that are in the pipeline for QIPs may also look for American depository receipts or global depository receipts for funds, he  added.

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