Badal Encourages NRIs to Invest in Punjab

While urging the NRI Punjabis to undertake development projects in villages and the cities of the state, Chief Minister Parkash Singh Badal today said that the state government would bear 70% of the cost of such projects. The Chief Minster said this while inaugurating the state’s biggest senior citizens home, which has been built on a 19-acre land by NRI Anil Kumar Monga. He stressed that NRIs should focus more on improving the infrastructure of the villages and bring about other changes to modernize the villages while assuring that the state will put in its share in such projects. He added, “NRIs should also focus on opening skilled centres in various parts of the state to address the problem of unemployment. The state will give land free of cost in such projects and even a part can also be added as a share in making of that centre. The youth can hence get training from such centres and can get jobs in factories and other places. This will also help Punjab industry to address the problem of labour shortage.”

The senior citizens’ home, named as “Heavenly homes” is a 650-room project, out of which 400 have already been made. The senior citizens’ home will be having an auditorium for watching movie or some other programmes, a swimming pool, steam cooking centre, 24 hours water and power supply, 24 hours room service and much more, said Monga. This project is a part of the Dream and Beauty Charitable Trust set up Monga in year 1995. “Here, senior citizens can get all those facilties which they can not get at home and they can also enjoy with their group. So the idea is to enable them have a good time with better facilities. It has been made as per the global standards,” Monga said. Read More »

Banks Keep Home Loan Rates Steady despite RBI’s Hike in CRR

The Reserve Bank of India (RBI) hiked the cash reserve ratio (CRR) in the monetary policy review last week. Despite a more-than-expected hike in the CRR, banks have, in general, ruled out any immediate hike in lending rates. According to bankers, there is abundant liquidity in the system and they can absorb the increased cash reserve requirement.

In order to tackle the rising inflation rate, the RBI hiked the CRR (the amount banks have to park with the central bank) by 0.75 percent to 5.75 percent, but left the key rates untouched. The 75 basis points increase in the CRR to 5.75 percent is expected to draw out at least Rs 36,000 crores from the system . This move is mainly to check the food price inflation from spreading to other sectors. The RBI said the CRR will be increased by 50 basis points from February 13, and a further 25 basis points to 5.75 percent from February 27. The bank rate, used by banks to price long-term loans, remains unchanged at six percent. Read More »

Axis Bank Withdraws its Home Loan Scheme 2 Months before Schedule

The increase in the cash reserve ratio (CRR) has started taking a toll on interest rates, with Axis Bank withdrawing its teaser home loan scheme two months before schedule. India’s third-largest private bank had launched a fixed-cum-floating rate home loan scheme on January 6. It offers 8.25 per cent interest rate for the first two years. Thereafter, the loan is priced 3.5 per cent and 3 per cent less than the mortgage reference rate for loans up to and above Rs 30 lakh, respectively. A senior bank executive said given the emerging interest rate environment, the bank did not want to offer a fixed rate for two years. However, the 8 per cent fixed rate will continue for the first year.

The product was taken off the company’s website today. The sudden withdrawal surprised many. A direct selling agent who has submitted applications under the scheme said, “With Axis Bank suddenly withdrawing its teaser rate scheme, I am approaching other banks.” Axis was one of the last banks to offer such a scheme. Last year, a number of banks, led by the country’s largest, State Bank of India, launched these products. A senior SBI executive said while cost pressures were emerging, the bank would fulfill its commitment and continue to the offer the product till the end of March. Read More »

Real Estate Developers Reviving Big-Ticket Projects in Kolkata

Real estate developers are reviving big-ticket projects in Kolkata after securing a commitment from the West Bengal government that “some kind of incentive” would be offered to help them emerge from the downturn. The projects had been halted for at least 18 months. States such as Maharashtra, Gujarat and Uttar Pradesh have already announced incentives for real estate developers. Maharashtra has raised the so-called floor space index, or FSI, a measure of the amount of covered space that a developer can set up on a plot of land. Uttar Pradesh is asking developers to put up a smaller amount than before at the time of allotment for state government projects.

“Demands (for incentives) from real estate developers are reasonable,” said Asok Bhattacharya, West Bengal’s minister for urban development. “We are examining the legal aspects and hope to announce some kind of incentive soon.” Road to recovery: An under-construction complex in Rajarhat, Kolkata. Consultants say real estate prices in Kolkata have begun to firm up. Road to recovery: An under-construction complex in Rajarhat, Kolkata. Consultants say real estate prices in Kolkata have begun to firm up. Among those restarting construction of key projects in Kolkata are Emaar MGF Land Ltd, which plans to build two 250-room hotels under the JW Marriott and Holiday Inn brands, and local players such as Dhoot Developers Pvt. Ltd, South City Projects (Kolkata) Ltd and Merlin Projects Ltd, which are building large commercial complexes in partnership with the Kolkata Metropolitan Development Authority, or KMDA—an arm of the state government. Read More »

Banks Expected to Take Action over RBI’s Concern on Home Loan Rates

RBI deputy governor Usha Thorat has said the central bank has made clear to banks its thoughts on teaser rates on home loans, and banks are expected to take action. Speaking on the sidelines of a finance conference on Monday, Ms Thorat said: “Banks should have taken whatever message was given,” when asked about further progress on the regulatory front on teaser rates. The central bank has flagged of its concern over teaser rates twice in less than 30 days. Last month, in the second week of January, Ms Thorat had warned banks: “Teaser rates are increasingly being offered which is a cause for concern,” she said.

Last week, another deputy governor, KC Chakravarty, had highlighted RBI’s concern about the lack of uniformity in rates offered to different customers of the same bank. Teaser rates refer to a step-up pricing structure on loans where banks offer a low fixed rate of interest in the initial years of the loan. However, after 2-3 years of the disbursement, the interest rate on the loan gets aligned with the prevailing rates in the market. What this means is that if the interest rate environment does not change, the borrower would end up paying a higher rate of interest after the fixed rate period comes to an end. Such promotional offers are common internationally. Read More »

RBI Rules Out Restructuring of Bad Real Estate Loans

The Reserve Bank of India (RBI), worried about soaring asset prices, has ruled out one more round of restructuring of bad real estate loans which may increase non-performing assets of banks, but bring down prices of homes as developers sell off properties to pay lenders, said at least two people familiar with the matter. “Let them lower the prices and clear their inventory,” a senior RBI official had told bank chief executives ten days back. The banks were seeking permission continue classifying some bad real estate loans as standard assets even after developers failed to pay. One more restructuring would rather be a boon for developers to hold on to prices and profit, while hurting consumers, the official had said.

“Banks are wary of the risk associated with commercial real estate because demand for commercial space such as malls has come down and (at the same time) there is a decline in demand in the residential sector across all income groups,” said AC Mahajan, chairman and managing director of Canara Bank. “This problem cannot be solved by repeated restructuring of loans, but by reviving the market by lowering the price, making property more affordable and showing the customer some economic value in their purchases.” The RBI allowed banks to restructure loans to both manufacturers and developers and continue showing bad loans as standard assets to save banks and developers from financial strain after the collapse of Lehman Brothers in 2008. Read More »

DB Realty Issues IPO at Rs 468 per Share

Real estate developer DB Realty has fixed the issue price of its initial pubic offer (IPO) at Rs 468 per share, the lower end of its price band. Mumbai-based realty firm’s Rs 1,500 crore initial pubic offer (IPO) that closed on February 2, was subscribed nearly three times. The issue would constitute 13.18 per cent of the fully diluted post-issue capital of the company, DB Realty said in a public announcement on Thursday.

DB Realty entered into the capital market with an issue size of 3.20 crore equity shares in a price band of Rs 468-486 a share with face value of Rs 10. The issue, which opened on January 29, was subscribed 4.4 times from the qualified institutional buyers (QIBs) portion. The proceeds of the IPO would be utilised towards new projects, pre-payment of loan and general corporate purposes. Read More »

PE Firm Red Fort to Invest in Greater Noida Project

Red Fort Capital, an India-focussed private equity (PE) firm, on Thursday announced a Rs 200-crore investment to pick up an undisclosed stake in a residential housing project to be developed by Noida-based real estate firm, 3C Company. The funds will be used to develop around 3,500 apartments in the project, spread across 41 acres at Sector 110 in Noida.

ET was the first to report the news in its edition dated February 3. Although the exact stake picked by Red Fort Capital could not be ascertained, a senior executive in the real estate sector familiar with the development said the PE firm bought around 50% equity in the project. Read More »

Real Estate India still has Potential

Rajeev Malik, Head, India and ASEAN Economics, Macquarie Securities Group, gave his views on where to invest money. Well for me personally, real estate in some cases still looks more attractive. At the end of the day, it is very much an individual risk appetite and portfolio requirements as such. Equities would be an important point. Bonds look rather risky in the sense that even if you look at the US, it has already had a pretty good run with the broader dynamics, there, it is difficult to see why yields are not going to go higher, especially with the monetary cycle a few quarters down the line shifting gears.

In India, specifically you come into the broader issue that from a foreign investor perspective, equity markets remain the most open and they have had the best possible run. I also think specifically with equities in India, there is a sizable number of foreign investors who have not had a chance to gain exposure to the extent that they would want for a kind of a secular story and that’s emerging in India, which perhaps might explain why every time you see some correction, 10% or so, it always tends to trigger a bit more buying.

Mumbai Top Real Estate Destinations in Terms of Price Escalation

Property-seekers might think Delhi-NCR has the maximum appreciation potential within a year’s time. However, according to the latest property index released by real estate portal Makaan.com, it’s the Mumbai real estate market which beat all Indian cities in terms of price escalation over a period of 12 months. Mumbai has bucked the economic slowdown by witnessing a whopping 24.7 per cent jump in prices between January and December 2009. During the same period, realty rates in Delhi-NCR rose by 8.8 per cent.

But other emerging residential destinations such as Hyderabad and Bangalore have witnessed a fall of 7.7 and 2.2 per cent, respectively, the index added. However, Pune market gained significantly by 9.9 per cent. The survey revealed that all these five cities — Delhi- NCR, Mumbai, Pune, Hyderabad and Bangalore — witnessed a drop in property prices in the first six months — January to June — due to slump in the market. But the subsequent gain came following the launch of various affordable units. These units have now achieved premium value across India. Read More »