Reddy to ask Finance Ministry to Review Service Tax on Housing Sector

S Jaipal Reddy, the urban development ministry will ask the finance ministry to review the proposal to bring the housing sector under the service tax net from April 1, 2010. “We will approach the finance minister in the next few days and ask him to review his decision of bringing housing under the service tax net,” said Urban Development Minister S Jaipal Reddy. He was speaking at a conference on Indian Real Estate organised by Associated Chambers of Commerce and Industry of India (Assocham). Real estate players and various industry chambers are already lobbying the government to withdraw the service tax imposed on the housing sector (at 3.3 per cent, with abatement) , as it would discourage buyers.

“This is not the right time for service tax implementation as the government’s objective is to encourage people to own houses. We have to wait for another month or so to see if the finance ministry listens to our request,” said KP Singh, Chairman, DLF Group. Addressing issues faced by the real estate sector today, the Reddy said availability of land — which is a state subject — has become a major concern. “If we want India to cater to the issue of demand and gap in the housing sector, apart from the central government, it is the state government which should become the facilitator.”

He also said since land is very limited, the best way forward is to go for vertical development (building high-rise buildings) instead of the present approach of going horizontal. “In Delhi, we would allow vertical development of real estate dwellings in older areas and remaining sprawl of Delhi provided the Municipal Corporation and Delhi (MCD) assure availability of all basic amenities such as water, power, etc.” In this regard, Reddy said the Ministry of Urban Development would soon come out with a new relaxed Floor Area Ratio (FAR) regime without specifying any time frame for it.

Another pertinent point that has been a concern for real estate developers is the number of clearances one has to take to start a project. “Today, there are more than 50 agencies from where we have to take our clearances. We have to ensure that the best way forward is to have a single window system as it would not only save time, but also ensure transparency,” said Navin M Raheja, Managing Director, Raheja Developers Ltd. “It is very important to have a single window clearance system in real estate sector,” echoed Anil K. Agarwal, Past President, Assocham.

Singh feels if real estate and urban development has to reach a self-sustaining level in India, “we have to follow the way it has been done in the telecom and IT sector”. “We need to have a visionary like Sam Pitroda, who can think centuries ahead in the real estate and urban development sector to formulate policies. Today, we are concentrating on meeting shortages, when policies are being framed. This needs to change fast, as we have to take the aspirations of people when we build a nation.”

Tightened Monitory Policy and Newly Imposed Service Tax Set to Boost Property Prices

Further monetary tightening by the Reserve Bank of India (RBI) and imposition of service tax on under-developed housing complexes, as proposed in the Budget 2010-11, will lead to increase in property prices, according to real estate companies. India’s central bank last week hiked two major policy rates - the repo rate and reverse repo rate - by 25 basis points each. “The recent monetary tightening by the RBI was on expected lines, but further tightening will certainly lead to increase in property prices. Further rate hikes will impact affordability of home loans,” K.P. Singh, chairman of DLF, India’s leading real estate developer, said here Friday.

“The monetary policy should be such as it encourages this important sector of the society. The policies should encourage people to buy homes, particularly the middle class who wants to buy,” he added. In the budget, Finance Minister Pranab Mukherjee proposed to bring development of real estate complexes under the ambit of service tax. At this, Singh said this is not the right time to impose service tax as the industry has just started recovering.

According to Navin Raheja, managing director of Raheja Developers, if the RBI hikes the key policy rates further and the government decides to impose service tax on under-construction apartments, “it will pressurise the real estate companies to pass on the burden to consumers.” “The prices of properties will go northwards in that case.”

Premium localities sell well in Delhi, Chennai

A weekly snapshot of some big-ticket city deals.

Delhi-NCR
An apartment admeasuring 3,700 sqft located in Malcha Marg was leased out for a monthly rental value of Rs 3,75,000. The rental values in this location range from Rs 2,75,000 4,25,000 per month and this apartment is well within this range and has seen an appreciation of around 12% over the previous year due to restricted supply and high demand, especially from expatriate community.

Malcha Marg is one of the citys most sought-after residential locations, due to its strategic location being equidistant from the established CBD and new business district of Gurgaon. Additionally,the location, due to excellent town planning,offers congestionfree traffic movement.

Chennai
An independent house located at Rambagh, Besant Nagar, was taken on lease by a major corporate. The house admeasuring around 5,000 sqft is located in the prime residential boulevard of the city. The monthly rental of Rs 3,00,000 per month is moderately higher than the prevalent rental for high-end residential units in the area, due to the fact that its location is equidistant from the central business district (CBD) of the city as well as from other emerging business locations. The area, by virtue of being an established residential location, also has good social infrastructure, including retail and entertainment, education and healthcare.

Pune
A three-bedroom apartment unit, admeasuring 1,441 sqft was sold in Chinchwad for a total cost of Rs 49,05,871. The per square foot value of this property is around Rs 3,400 per sq ft, which is in line with the current prevalent values in the location. This mid-ranged apartment complex is located in the suburban location of Pune, which is currently going through a transformation, with many apartment complexes and gated development being planned in the location. The area has been gaining importance due to its convenient location and good access to various office and commercial locations across the city.

Hyderabad
A residential apartment admeasuring 3,170 sq ft was purchased in an under-construction project in Madhapur, Western Hyderabad,at a capital value of Rs 4,250 per sq ft. The property,being built by a prominent national developer,houses apartments ranging from 2,200 sqft to 4,375 sqft in the configuration of three and five-bedroom units. The apartment is located in Madhapur,a part of Mindspace IT Park and adjacent to Westin Mindspace Hotel,in the Western part of Hyderabad. This area has seen a growth in demand for residential units owing to the fact that it is a prominent office location. The location has, due to a steady increase in demand, seen a growth of around 6% in capital values over the past three months. Being located in close proximity to work places, this premium project is expected to garner significant interest from end users. Source: MagicBricks

Rules may be eased for service tax on realty

New Delhi:

Home buyers and property developers need not worry about being levied a service tax if they cannot procure a completion certificate from the local authority. The government could allow some independent authority to certify that the property is complete.

We are examining the issue and will see if a similar certificate from an outside agency can suffice, a finance ministry official said. Local authorities in some states do not issue completion certificates while others take many years to issue one.

The budget for 2010-11 has proposed to expand the scope of construction service to impose service tax on houses that are still being built.

The service tax will be levied only on 33% of the base price of a flat sold at construction stage. The effective service tax rate will work out to 3.3%,or 10% of 33%. Charges such as development fee, parking fee and premium location usually paid at the time of completion of construction will also be included in the base price.

The new rule will come into effect when Parliament approves the budget. Service tax will be levied only if payment is made before the completion of construction. Sale of fully completed houses will be exempt from the tax if a completion certificate from a local authority is provided.

The finance ministry may admit a certificate from an architect or builders association as a sufficient proof of completion.

Property developers had a mixed response to the proposal. Rajeev Talwar, managing director of DLF,t he country’s largest developer,felt the flexibility could be abused. However, an executive of Delhi-based developer Ansal API appreciated the governments decision. If the government takes the decision to outsource the whole process to an accredited agency, it will take the pressure off the realty firms.

Non-availability of completion certificate can increase the cost of a property as the 3.3% service tax would be significant, taking the tax element to nearly 10% after including the stamp duty.

India Industrial Sector: The Oasis of Economic Growth

The comprehensive report by Cushman & Wakefield explores the drivers for manufacturing growth in India, major markets, along with the opportunities and challenges facing the sector and its related real estate.

Important Findings:

Despite the current economic slowdown and a downsizing of India's expected GDP from 9% to approximately 7.1% as per the latest report by Central Statistical Organisation, India still remains one of the fastest growing economies in the world, ranking only second to China. The pace of this growth has largely revolved around India's service exports, backed by a robust and ever-increasing domestic consumption. Strong long term fundamentals like dynamic industrial environment, positive trend in outsourced manufacturing, increasing domestic demand and growth in exports have led the Indian economy to gain greater foothold in the world market over the past decade. Distinct advantages such as lower costs of production and superior output quality makes India a viable destination for outsourcing of manufacturing for several multi-national corporations (MNCs) across the world.

The manufacturing sector in India has witnessed a healthy average growth of approximately 9% in the last four years, with a record growth of 12.3% in 2006-07, primarily attributed to the global cost competitiveness – competitive capital and operative costs – that India has been able to provide vis-à-vis other locations. Further, the expanding domestic market together with the scaling up of operations by Indian companies, emergence of new industry segments and amendments in the regulatory framework such as incentives and subsidies, single-window clearances, investor friendly policies by several state governments, etc., have provided a further boost to the manufacturing scenario in India.An increased and sustained focus on the manufacturing sector is inevitable as well as advisable to achieve the projected average growth of 9% growth during the 11th Five Year Plan (2007-2012).

India has always enjoyed certain core advantages in the manufacturing sector, like rich mineral resources (iron ore, coal etc.), developed processing base, natural sea ports (Kandla, Kochi, Visakhapatnam, Paradeep, etc.) and abundant supply of cost-effective labour. Owing to these natural advantages, the manufacturing sector in India has spread across primary, secondary and tertiary processing segments.While the traditional manufacturing strongholds in India which have been steel, cement, heavy engineering, textiles, etc., the emerging industrial and related sectors include agro-based/food processing industries, pharmaceuticals, automobiles, logistics and warehousing, among others which are also gaining grounds in India.

Like the manufacturing industry on the whole, the Indian industrial real estate market has also delivered a strong performance in recent years, with average rental growth reaching around 25-30% in key markets. Supply shortages, however, in prime centres such as Mumbai and Delhi –

NCR have forced much of the manufacturing and logistics facilities to relocate to industrial parks in emerging tier-II and III locations. Read complete report at Cushman & Wakefield

Ashiana to invest Rs 120cr in hospitality biz

Jaipur:

Ashiana Housing Limited is planning to invest Rs 120 crore for setting up 3 four-star category hotels in Bhiwadi, Jodhpur and Jamshedpur.

Ashiana Housing executive director Ankur Gupta informed that the realty group would be rolling out altogether 260 rooms in these hotels in next 3 years. “We are planning a 110-room hotel in Jamshedpur, 50-room in Jodhpur besides adding 50 rooms to our existing 4 star property in Bhiwadi. The cost of each room would be Rs 25-30 lakh. We would be developing about 2.5 lakh square feet area over these three boutique hotels and malls”, he said.

The company plans to develop these properties on the dual concept - a retail space which houses a boutique hotel with all fine dining, entertainment and recreational facilities and caters to business as well as retail needs of local residents. “Our strategy for the hospitality business would be to provide the business traveller with well appointed guest rooms at competitive rates, convenient to nearby businesses,” he said.

The upcoming hotels would offer recreational facilities that include Swimming Pool, Gym, Spa with steam and sauna, Badminton Court, Dinning options like a Bar, Coffee Shop and Multi-cuisine Restaurant, Banquet, Conference Halls etc.

Apart from that, the realty group is also planning to roll out Retirement Resorts in Mumbai, Chennai, Neemrana and Bangalore. “We already have three such resorts in Jaipur, Bhiwadi and Lavasa. Looking at their success, we are scouting for land in other parts of the country. We are open for joint ventures as well,” Mr.Gupta said.

The company so far has constructed 90 lakh square feet in its various housing projects at Bhiwadi, Ghaziabad, Gurgaon, Neemrana, Jaipur, Jodhpur, Greater Noida, Jamshedpur & Patna.

“We are constructing more than 11 lakh square feet area in this fiscal and plans to double it by 2012-13,” he said.

Cement sales likely to rise by 12% in March

Mumbai:

Sales of cement is likely to go up by 12% in March on demand from real estate and construction sectors , say industry executives and analysts. This would be the third consecutive growth in sales of the building material in a month.

Cement companies are scheduled to announce sales data on March 31.

 “There are no dampeners to growth,” said Shree Cement managing director Hari Mohan Bangur. “Demand is robust and the industry will see healthy growth in March. The growth momentum will continue as there are no dampening factors.”

The growing sales are reflective of a robust demand scenario and Indian companies are expanding capacities. India’s cement industry is targeted to go up to 300 million tonnes by December, from the current 240 million tonnes. Globally, India is the second-largest cement maker after China.
In January, all India cement sales were up 11%,while it grew 4.3% in February.

Large cement majors - Aditya Birla, Jaiprakash Associates, Dalmia, JK Lakshmi and Shree Cements, are expected to grow mainly due to higher consumption by the building industry. These five companies together account for almost half of Indias total capacity of 240 million tonnes.

“Our initial estimates show that March sales would be higher compared to the first two months of the current year,” said Rupesh Sankhe,a cement analyst with Angel Securities. Sales could go up by 12% in March.

On Tuesday, Prime Minister Manmohan Singh said the country needs to spend $1 trillion on roads, ports, power and other infrastructure between 2012 and 2017.

“A sharp sales increase likely in March would be due to inventory pile up of February month. There was a shortage of wagons last month when many companies unable to deliver the commodity to the retailers,” Mr Sankhe added.

Apart from a revival in real estate, sectoral analysts say sharp pick up in the consumption of the key building commodity, following the government’s thrust on infrastructure spending.

“Sales have increased and company expects a 15% jump in revenues in the current quarter due to the boom in infrastructure and real estate projects in Kolkata,” said Ashok Gutgutia,managing director of Burnpur Cement.

With the boost given by the government to various infrastructure projects,road networks and housing facilities, growth in cement consumption has been anticipated.

Ajit Motwani, cement analyst, Emkay Global says that demand will rise over the next one quarter as most firms are expanding current projects aggressively, due to increased construction activities from the Commonwealth Games, which is scheduled to be hosted in Delhi. Source: MagciBricks

Ahmedabad gets Rs 1,900cr to improve infrastructure

Ahmedabad:

Looking at the size of the funds allocation this financial year, there’s lot more in store for the city. The state government has earmarked Rs 1,900 crore in 2010-11 for improving services in Ahmedabad. The money is to be used for projects spanning all sectors under a plan that aims to change the way the city looks and its citizens live.

The focus this year will be on slum upgradation and urban development. State Finance Minister Vajubhai Vala said, “Approximately Rs 2,000 crore has been allocated this year. 2010-11 will focus on slum upgradation. We want to achieve the target of providing housing facility to one lakh slum dwellers.”

Urban Development Minister Nitin Patel said the BRTS, the biggest project of 2009 has been a great success and thus, more funds will go into extending the services “according to the share in government funds”.

POLICE (HOME DEPARTMENT): Rs 183 CRORE
A new scheme, ‘Gaurav Senani’ (police aide) will be launched to generate posts in the department. A Home Guard Bhavan will come up in the city for Rs 42 lakh. The Sabarmati Central Jail will get 400 new cells at a cost of Rs 9 crore.
 

ROADS AND BUILDINGS: Rs 66 CRORE
Rs 5.48 crore has been allocated for Ahmedabad-Gandhinagar metro link. Three new bridges will be built on the Sarkhej-Gandhinagar highway. Rs 7 crore will be spent on a mini-theatre, lab and a hostel for women at L D Engineering College campus.

JUDICIARY: Rs 40 CRORE
Of this Rs 12.25 crore will go into constructing new sessions and city civil court. The 30 bungalows for judges in Bodakdev will be renovated. Judges will get new cars (allocation: Rs 3.36 crore) and 42 Blackberry phones (Rs 15 lakh) from this. Source: MagicBricks

Luxury houses tempt buyers with lower tags

LONDON: Luxury homes became more affordable last year, as the financial crisis eroded prices from Monaco to Barbados, according to Knight Frank. 

Prime real-estate values at 56 locations declined by an average of 5.5%, the London-based property broker said in a report published on Tuesday. Monaco was the most expensive market for the second year in a row, followed by London and Paris. 

Wealthy individuals put off making purchases in 2009 because of concern about the economy, Knight Frank said. 

Prices of properties in the countryside, coastal locations and ski resorts, often bought as second homes, fell by at least 12%. The biggest declines were in Dubai, in the western part of Portugal’s Algarve, in Palma on the Spanish island of Mallorca and in Dublin. Values in each of those markets fell at least 22%. 

“Cities tend to perform better because they are necessity driven, whereas resorts and country pads are more discretionary purchases,” said Liam Bailey, Knight Frank’s head of residential research. 

Luxury apartments and houses in cities appreciated by an average of 0.4%, led by a jump in values in China, Hong Kong, Singapore and Jakarta, the broker said. 

“Boosted by China’s quick recovery from the global recession, the price of prime properties in Shanghai, Beijing and Hong Kong rose at a phenomenal rate last year,” Bailey said. Shanghai Booms Shanghai had the biggest increases, with property prices averaging $500 to $700 a square foot, or 52% more than a year earlier, the survey showed. It was the 13th most expensive luxury-home location among cities. There were 8,438 properties sold there last year for more than $735,000, making it China’s largest prime residential market. 

Luxury-home prices in Beijing rose 47%. Hong Kong values increased 41% to average $2,000 to $2,500 a square foot, making it the fourth most-expensive city in the study. China is already taking steps to rein in the real-estate market as price increases accelerate. The government in January reimposed a sales tax on homes sold within five years of their purchase and the People’s Bank of China raised the proportion of deposits banks must set aside as reserves to reduce lending. 

Property prices in China rose 10.7% in February, the most in almost two years, prompting the World Bank to urge the central bank to lift interest rates to prevent a bubble. While government measures may damp demand, “strong economic growth and limited stock should keep prices stable” this year, said Xavier Wong, Knight Frank’s head of research for greater China and Hong Kong. 

In Monaco, where residents include Formula One champion Jenson Button and billionaire Philip Green, prices fell by about 15% last year. The average cost of a luxury apartment or house in the low-tax state on the Riviera ranged from $4,300 to $5,900 a square foot at the end of 2009, Knight Frank said. 

L ondon’s luxury-homes market was the best performer in Europe as the pound’s weakness and a yearlong slump in values encouraged investors to

compete for a shrinking number of homes for sale. In the US and Canada, luxury home values fell by an average 7.7%, led by San Francisco, while in the Caribbean they decreased 13%. 

Knight Frank’s report was accompanied by a survey on Citigroup Inc’s private bank, which showed that 91% of its customers expect their net wealth to be either unchanged or to increase “slightly” this year. Half of the respondents in the Citi Private Bank survey said they expected better returns from residential real estate this year than from other types of property. Real estate accounted for about a third of the assets owned by the bank’s clients, more than stocks and other investments. 

Property is expected to be the third-best performing asset class in 2010, after stocks and hedge funds, the survey showed. “Although relatively few respondents were planning to purchase a new primary residence this year, a significant proportion do see buying opportunities in the current market,” said David Poole, head of the UK arm of Citi Private Bank. Source: ET

HDFC to pick up 49 per cent stake in Godrej Estate Developers

ET; 22 Mar 2010, 1609 hrs IST, PTI

MUMBAI: Godrej Properties on Monday said it will transfer 49 per cent stake of its subsidiary Godrej Estate Developers to HDFC for Rs 45 crore. 

The company has entered into agreements with HDFC PMS to transfer 49 per cent of the equity share capital of its arm Godrej Estate Developers for a consideration of Rs 45 crore, Godrej Properties said in a filing to the Bombay Stock Exchange. 

Further, Godrej Properties has assigned the development rights of its project at Chandigarh to Godrej Estate. 

Shares of Godrej Properties were trading at Rs 499 on BSE, down 1.43 per cent from the previous close.

Pvt Banks to Offer Tax-Free Core Bonds

India’s private banks and non-banking finance companies (NBFCs) appear set to join a list of select stateowned firms which will be allowed to offer tax-free bonds to investors, as the government seeks to broaden its avenues to raise long-term funds to build more roads, ports and power plants. The country will need over a trillion dollars over the Twelfth Plan period (2012-17 ) to improve its infrastructure.

Finance minister Pranab Mukherjee said that given the constraints in financing key projects, the government has decided to open up the window for issuing tax-free infrastructure bonds to private firms also. So far, only state-owned companies were allowed to issue such bonds.

In this year’s Budget, Mr Mukherjee has proposed that investors could put money in tax-free infrastructure bonds over and above the ceiling of Rs 1 lakh for specific investments such as in the public provident fund and equity-linked savings schemes. Investors who park funds in the proposed infrastructure bonds will get a tax break of Rs 20,000 annually. However, the bonds are expected to have a long tenure in excess of 10 years.

Private sector banks and NBFCs, particularly those providing finance to infrastructure sector, may be among the beneficiaries of the latest move, a finance ministry official who did not wish to be named told ET. The Indian central bank, or the RBI, recently introduced a new category of NBFCs — ‘Infrastructure Finance Companies (IFCs)’ which will be largely lending to the infrastructure sector. These specialised NBFCs are tipped to be the first off the block in this bond issuance. The cost of funds raised through infrastructure bonds is low, as the rate of interest offered is low, but the effective return to investors is high because of the tax benefits.

A number of governmentowned entities have issued tax-free bonds at 7.5%. If a private sector entity floats such bonds, the cost could work out to 8-9 % which is still lower than raising money from banks at close to 11%,” said Vishwas Udgirkar, executive director at consulting firm PricewaterhouseCoopers. In the early half of the decade, infrastructure bonds were a hit with investors, but changes in laws in Budget 2005-06 made them less attractive and practically killed the retail market for such bonds which was worth Rs 15,000-20 ,000 crore then. In a way, Mr Mukherjee appears to be reversing the policy pursued during the time of his predecessor, P Chidambaram, when tax-free bonds were discouraged.

Institutions such as the state owned Rural Electrification Corporation were regular issuers, earlier managing to raise funds at 6% rate. Only institutions like the government-backed IFCL now issue tax-free bonds that are picked up by institutional investors. The Budget announcement was in keeping with the demand of banks that sought access to such bonds to lend to the infrastructure sector. Infrastructure projects, typically, need debt for 15-20 years, but banks do not have access to long-term funds, as the deposits they raise are of shorter duration.

Banks can raise five-year deposits that are eligible for tax deduction . The benefit will be available to taxpayers after the passage of the finance bill and subsequent notification of the provision by the finance ministry. The move to allow private players to issue infrastructure bonds will also help in the development of a long-term bond market that now lacks both depth and liquidity. However, experts said this may just be the first step, and more measures would be required to generate retail interest.

“Infrastructure sector is stretched for capital and this move will open one more big avenue for borrowers to raise fund from retail . To create appetite for such bonds and deepen the market, these bonds could be sliced into two categories based on their level of risk. One category could be to raise funds to finance new projects and other one by securitising cash flows from existing infra projects which will be more secure,” said Jai Mavani, head, real estate and construction, KPMG. Deepening of the bond market will require more participation from pension funds, said experts, something which the finance minister did not lose sight of on Tuesday.

Record Land Deals in Ahmedabad-Rs900 crore, 15 days

Some big realty companies, including Savvy Infrastructure, Goyal Construction, Gala Group and SN Group, have led this spectacular realty surge. The land deals clinched in the past fortnight include the Rs150 crore worth deal in which the Delhi-based realty giant, Parsvnath Developers Ltd, sold off 27,000 sq meters in Satellite. Shrenik Shah of Space Management Ltd confirmed the phenomenon. “Land deals worth Rs9,00 crore signed in Ahmedabad within a fortnight is a 10-year high for the city,” he said. “The realty market has been showing positive sentiments, and the boom is the result of that. Not only developers, even investors are bullish about investing in land.” Shah added that money from abroad may have been pumped into some of the deals.

Market sources said that Goyal Constructions and Dhiren Vora — both of whom are partners in Gokul Dham, a scheme on Sanand Road — are reported to have sold 1.5 lakh sq yard of land to Gala Group. Similarly, the Savvy Group, which is better known by its Shapath brand of commercial schemes, is believed to have bought, for a new project, about 5,300 square yards of land opposite the Gujarat high court. Realtors say the rate of land in the area could be anywhere between Rs55,000 and Rs60,000 per square yard. Around 3-4 land parcels have been sold in Prahladnagar area and on the 100-feet road in Satellite. Market sources said that a majority of the land deals had taken place for residential projects, while a few were for commercial and hospitality constructions.

Shubhankar Mitra, assistant vice-president with the global real estate consultants, Jones Lang Lasalle Meghraj (JLLM), said land owners had been offering land at realistic rates. “The rates are relatively lower than what was being demanded till last year,” Mitra said. “Also, the land involved in all the deals is located in strategic areas of the city.” Mitra said one reason for the spurt in the realty sector is the rapid pace of industrialisation. Another reason is the NRI summit next month that has been proposed by the state government. Commenting on the sudden realty boom, director of Real Estate Studies and Management Academy (Resma), NK Patel, said, “There is great demand for property in the residential segment,” he said. “That may be one reason for the unexpected surge in land deals.”

Budget 2010 comes up with Good Investment Opportunities for NRIs

India’s budget yet again demonstrates to NRIs that investing in their homeland is probably the best option right now. The West is still struggling to climb out of one of its deepest recessions and provides low returns, while India’s growth story promises healthy returns. Surely, it’s time to wake up and smell the Indian coffee. Soon after the budget was read, the Indian stock exchange gave it a thumbs up sign without delay as the market climbed up by a hefty 175 points. The return on Indian equities in the past year has been calculated at 87.4 percent by The Times of India. If an NRI invested in real estate stocks for the last year, the returns would be a whopping 139 percent

The auto sector was not far behind as the returns on wheels was 184 percent. Again, consumer durables and the IT sector would have raked in returns at 150 percent and 125 percent respectively. Now, where would an NRI get his investment almost doubled in one year? As far as returns on fixed deposits are concerned, NRIs can reap much higher returns of eight percent for term deposits if they convert their currencies into Indian rupees. This compares with two to three percent when they keep their funds in hard currencies in India or abroad. Considering that over 100 banks have failed in the US following the meltdown and a number of British banks were also shaken. NRIs hastily sent their savings to India and the country’s foreign exchange reserves are hovering at a bulging $280 billion now.

Properties could be our biggest biz: Adi Godrej

Posted: 23 Mar 2010 12:18 AM PDT

Riding on India’s growth story, the century-old Rs 13,000-crore Godrej group has been undergoing a metamorphosis of sorts as it gets ready to herald a new era where real estate could become its biggest business. This comes even as it claims to be the only Indian company with the largest consumer touch-point in the country with 470 million consumers.

Besides, the group has also managed to retain its relevance in the marketplace and this has a lot to do with the induction of the fourth generation of the Godrej’s into the group. However, while on one hand, the group is poised to attain a youthful exuberance, on the other, like all family businesses, it is going through a phase of succession planning.

The third-generation Godrej’s in the supervisory position have been engaged in internal discussions for some years now on this matter. The Godrej family council, which was set up a decade back, has now inducted two external directors, Keki Dadiseth and Naushad Forbes. What shape the discussions take only time will tell, but the seriousness with which the family has undertaken this exercise epitomises the transparency in its culture that has been handed down from one generation to the other.

The Godrej’s are among the few families which have followed a structure of equal ownership for decades. In an interview with Namrata Singh, group chairman Adi Godrej, who turns 68 this year, spoke at length on how the group is charting its growth path. Excerpts:

Over the last few years there’s been a visible change in the Godrej group. Is it a conscious decision to change so that the group remains relevant even as it turns 113 years old this year?
Over the last few years we had a relook at our strategy and when we saw four years of 9% plus growth, it led to an internal realisation that we needed to revisit our strategies in many areas. The important changes we’ve made include the new strategy cell that we have created. Secondly, we decided to form a FMCG leadership team for the three FMCG businesses (Godrej Consumer Products, Godrej Sara Lee, Godrej Hershey Foods & Beverages), which would look at synergies in each business and opportunities for inorganic growth. The third thing we did was to have a relook at our brand Godrej and its positioning across companies. We formed a team led by my daughter Tanya [Dubash] and partnered with Interbrand, a brand consultancy firm, about two years ago. We decided to go in for property development, which has been added as a major focus area for the group. We also worked over the last 2-3 years to take Godrej Properties public, which we were able to list in January.

You would ask why now? There are two or three reasons. One is that India’s growth rate has accelerated well. We think that the next decade is going to be the best ever for India. We expect growth rate over the next decade to be 10% plus. Over the last 2-3 years, we’ve also inducted a lot of younger family members into the business. Or, they’ve been working in the group and have now taken strong leadership positions. They’ve driven a lot of this change too. All in all, this encompasses our desire to bring about the changes.

Your eldest daughter Tanya Dubash has been with the group for long, Nisa has taken an interest in HR, while your son Pirojsha is keen on the real estate business. What kind of future roles do you have in mind for them?
Tanya has been there for almost two decades. Nisa is active on HR and strategy. Pirojsha is currently involved in Godrej Properties. He’s the executive director on the board of the company. These are the current roles. Their roles will evolve over time.

Do you see Tanya emerging as a future leader of the group?
We have not enunciated anything of this sort.

That brings us to the question on succession planning. Anil Sainani (a former civil servant who runs his consulting business on family governance) has been working on this matter for sometime now. What has been the progress?
He’s not only working on succession, he is also the advisor to our family council. There we keep meeting regularly. We don’t want to comment on family business matters.

Source: MagiucBricks

India needs $1tn for infrastructure development

To achieve a share of 9.95 per cent as a proportion of GDP, this amount is needed to pump in infrastructure segment

Published on 03/23/2010 - 06:50:18 AM

New Delhi: An investment of over US $1 trillion is required in the infrastructure sector during the 12th Five Year Plan (2012-2017), Planning Commission Deputy Chairman Montek Singh Ahluwalia said.

"A preliminary assessment suggests that investment in infrastructure during the 12th plan would need to be of the order of about US $1,025 billion to achieve a share of 9.95 per cent as a proportion of GDP," he said in a report on the sector.

The investment requirements of the 12th Plan are twice more than amount investment during the current plan. About US $500 billion will be invested by the end of the 11th Five Year Plan with the telecom sector attracting more than expected investments, reports IANS.

Lack of infrastructure is among the main challenges faced by the growing Indian economy today.

The government showed resolve in bridging the gap as it allocated 46 per cent share of the total budget allocation for the next fiscal towards new and ongoing infrastructure development projects. Source: igovernment.in

DLF Gets Ready for DAL listing

DLF has completed the merger of Caraf Builders & Construction, which owns investment trust DLF Assets Ltd (DAL), with another offshoot DLF Cyber City, a move India’s biggest realtor says is logical to listing DAL on the Singapore Stock Exchange (SGX). A company spokesman confirmed the development while two senior executives involved in the listing process said DAL, set up to acquire properties from DLF and other developers for leasing out to third parties, is likely to be listed on SGX in the first quarter of 2010-11 .

Though DAL’s listing was not dependent on the merger, it was important that the integration with Cyber City, a wholly-owned subsidiary, was completed before the listing as the move is also aimed at further streamlining all commercial assets under one head, said the first executive on condition of anonymity. Under SGX norms, a company planning to list cannot reveal listing plans before its draft prospectus is approved.

Merging DAL, which buys and manages commercial assets on the lines of real estate investment trusts, with Cyber City will ringfence DLF from the uncertainties of the property market as it guarantees a steady stream of revenues, said the second executive. DLF acquired Caraf from promoters KP Singh and family last December in a share swap deal and decided to give it a 40% stake in its Cyber City. By consolidating the group’s rental assets, that transaction too was aimed at ensuring a steady cash flow.

The rental business of DLF and Caraf together generated annual incomes of Rs 700 crore and Rs 550 crore in the current fiscal. Post-merger , the rental business is expected to give DLF an annual come of Rs 1,500 crore in 2010-11 , which should be 20% of the total income, said the second executive . As the merger is effective from March 19, its effect will not be reflected in the current financial year, he added.

DLF offers Rs 4 crore flats in Delhi

24 Mar 2010, 1624 hrs IST, PTI

NEW DELHI: Hotting up competition in the luxury residential property segment, country's largest realty player DLF today said it will offer flats with a price tag of Rs 4 crore per unit at the heart of the National Capital. The firm is offering 150 luxury apartments following the launch of the third phase of a housing project -- Capital Greens -- at Shivaji Marg, close to Moti Nagar (near Central Delhi). The flats are offered at Rs 11,000 per sq ft. "There is very strong demand for luxury products and if we offer a good product at a competitive rate, it will sell," DLF Group Executive Director Rajeev Talwar told PTI. Although the flats are priced very high, these are still very competitive to what other developers are offering in the city in the luxury segment, he added. Rival Parsvnath has two residential projects in the National Capital -- one at Subhash Nagar (West Delhi) priced at Rs 7,500 per sq ft and the other at Civil Lines (North Delhi) tagged at Rs 10,000 a sq ft. Another developer Emaar MGF is selling apartments at Rs 12,700 per sq ft in its Commonwealth Games project. Talwar said DLF's third phase will comprise only 4-BHK apartments, sizes of which will be about 3,000 sq ft. "We have already received bookings for 70 units. We will open the bookings till all the flats are sold," he added. The company had last year launched its first and second phases with 1,400 and 1,250 units respectively. While the apartments in Phase-I were available at a price of Rs 4,500 per sq ft (2-BHK) and Rs 5,500 per sq ft (3-BHK), the company offered its flats in Phase-II at Rs 6,750 per sq ft (2-BHK), Rs 7,500 per sq ft (3-BHK) and Rs 8,000 per sq ft (4-BHK). In 2007, DLF had acquired 38 acres from DCM Shriram and Lohia Group for Rs 1,675 crore, and the 'Capital Greens' is being developed on that land.