Indian Road-Building Hits Record Pace

http://mobile.bloomberg.com/news/2012-02-26/india-highway-building-hits-record-pace-as-contactors-pay-to-work-freight.html

Indian Road-Building Hits Record Pace as Contractors Pay to Work: Freight- Bloomberg
Indian Road-Building Hits Record Pace as Contractors Pay to Work: Freight
By Karthikeyan Sundaram February 27, 2012 12:50 AM EST

India is awarding highway- construction contracts at a record pace, and saving taxpayers money, as builders stop asking for subsidies and instead offer fees to lay and operate new toll roads.

Competition among builders such as GMR Infrastructure Ltd. (GMRI), Larsen & Toubro Ltd. and IRB Infrastructure Developers Ltd. (IRB) has helped the National Highways Authority of India win payments, or premiums, for at least 23 of the 35 projects it has offered since April 1, said G. Suresh, its chief general manager for finance. He didn’t elaborate. The body will award tenders for 7,300 kilometer-lanes of highways this fiscal year, worth about 570 billion rupees ($12 billion), and 9,000 kilometers next year.

“Many of the projects where we thought we’ll have to pay subsidies, we actually got premiums,” said B.K. Chaturvedi, who headed a government committee on highway development and a member of the state Planning Commission. “It’s a good thing there’s competition.”

Construction companies have stepped up bids for highways as growing vehicle ownership is spurring traffic and because of a slowdown in other sectors such as building power plants. The work will improve roads (LT) ranked worse than Botswana’s by the World Economic Forum and ease congestion that contributes to about 440 billion rupees of harvested foods going to waste each year, according to government estimates.

“India’s road network is barely adequate to maintain its current growth trajectory,” said Shailesh Kanani, an analyst with Angel Broking Ltd. in Mumbai. “Positively, the political will to acknowledge and address this issue is now visible.”

$1 Trillion Spending

India’s investments in roads could rise to $145 billion in the five years to 2017 from about $69.8 billion in the previous five years, according to a PricewaterhouseCoopers LLP. study. The country plans to spend a total of $1 trillion on roads, railways, airports and other infrastructure in the period.

The national highway system, a predominately two-lane network linking major cities, carries 65 percent of India’s freight and 80 percent of passenger traffic. In about six years through October 2011, the highway agency oversaw 5,182 kilometers of construction, including new highways and improvements.

Prime Minister Manmohan Singh in August 2009 set a goal of building 20 kilometers of highways a day. The nation has added 823 kilometers, or about 2 kilometers a day, since then as construction slowed, Tushar A. Chaudhary, junior road transport and highways minister, told lawmakers in parliament Dec. 12.

Tenders Online

Construction is now speeding up, partly because the agency has made it easier for builders to compete for projects by accepting tenders online and by creating a list of prequalified bidders. Winning bidders get to collect tolls for as long as 30 years before transferring the highways to the state, Suresh said. Toll fees are decided by the National Highways Authority.

The highways have become more lucrative for builders and the government as the rising number of cars and trucks boosts traffic and tolls. India’s car sales in the year ended in March jumped 30 percent, the biggest gain in at least nine years, according to Society of Indian Automobile Manufacturers. Sales may triple to more than six million by 2018, Rothschild forecast in a December report.

“Traffic risk is something to be taken on by the developer,” said Virendra Mhaiskar, chairman of IRB Infrastructure, which has constructed roads including the Mumbai-Pune highway. If the builder is confident of generating enough tolls to cover costs and make a profit, it can offer the extra anticipated funds to the government as premiums to secure the contract, he said.

Overestimating Traffic

Builders run the risk of overestimating future traffic and tolls, which could cause them to pledge unprofitable levels of fees, said Parvesh Minocha, managing director, transport division at Feedback Infrastructure Services Pvt., which advises clients on construction projects.

“The premium bids are increasingly becoming a cause for worry,” he said. “The worry will start manifesting a couple of years down the line when you have to give the NHAI what you promised and also put in money to build the roads.”

L&T, the nation’s biggest engineering company, decides to make premium bids for projects based on factors including traffic expectations, competition from other roads, the type of traffic the highway will attract and the ease of construction, said S.N. Subrahmanyan, director and senior executive vice president of its construction division. He didn’t say how much premiums the company has so far paid.

The builder changed hands at 1,298.60 rupees, down 3.7 percent, as of 11:14 a.m. in Mumbai trading, after declining as much as 4.4 percent. It’s fallen 14 percent in the past year. IRB Infrastructure fell as much as 2.9 percent and GMR Infrastructure dropped as much as 3.7 percent today.

Reliance, Adani

Builders may also be chasing road projects to help replenish orderbooks amid a slowdown in power-plant orders, said Manish Agarwal, an executive director at the Indian unit of PwC. Reliance Power Ltd. (RPWR), Adani Power Ltd. and other electricity generators have delayed building $36 billion of power stations because of concerns about coal supply.

L&T, based in Mumbai, has orders to build 100 billion rupees of roads, Subrahmanyan said. The builder boosted the number of road projects to 7,171 lane-kilometers in the first nine months of this fiscal year from 5,701 lane-kilometers a year ago, according to company presentations on its website. The number of power projects remained unchanged at 5 during this period.

Power Plants

That means power plants now account for 29 percent of L&T’s orderbook, compared with 37 percent a year ago. Roads and other building projects’ share has jumped to 40 percent from 32 percent.

“For investors, a company’s valuation seems to be driven by its orderbook,” said Agarwal. “If a company wins a bid, they see it as fantastic.”

Welspun Infratech Ltd., a unit of JPMorgan Chase & Co.- backed Welspun Corp. (WLCO), has won road projects worth 10 billion rupees since 1999, including a 185-kilometer stretch in the central Indian state of Madhya Pradesh, without offering premiums, said Assistant Vice President Rajeev Kumar. Still, the company is willing to offer fees.

“We aren’t averse to offering a premium to win a deal,” he said. “If the deal is good, why not?”

To contact the reporter on this story: Karthikeyan Sundaram in New Delhi at kmeenakshisu@bloomberg.net To contact the editor responsible for this story: Neil Denslow at ndenslow@bloomberg.net Arun Gupta

Realty prices to stay high as demand rises-News

http://m.economictimes.com/markets/real-estate/news-/prices-to-stay-high-as-realty-demands-rise/articleshow/12011521.cms

Realty prices to stay high as demand rises-News -Real Estate-Markets-The Economic Times on Mobile

Realty prices to stay high as demand rises
24 Feb, 2012, 1326 hrs IST, Sobia Khan & Ravi Teja Sharma, ET Bureau


BANGALORE | NEW DELHI: Home prices are unlikely to fall this year as sales have picked up across most metros in the past few months, according to bankers and realtors.

Property sales across major cities, such as Bangalore, Chennai, Gurgaon and Noida, rose on increased buyer interest, Bank of America Merrill Lynch said in its report for the fourth quarter of 2011. While sales in Gurgaon averaged 5,200 units over the last eight quarters against an average of 6,100 units on offer in the same period, Noida saw a marginal rise in home purchases. Quarter-on-quarter home sales in Mumbai, however, fell 25%.

"Sales volumes across cities (Mumbai being an exception) surprised us positively. Mumbai is headed for a sharp correction by another quarter or two while other property markets may remain stagnant due to rising unsold stock," the report said.

The Confederation of Real Estate Developers" Associations of India (CREDAI) also said sales have picked up despite builders continuing to hold on to prices. "Sales have picked up in the last few months and developers have not reduced prices as input costs have gone up. At first chance, they will increase rates by 10-30% across markets," said Lalit Kumar Jain, president of the 6000-member association.

"With inflation easing and chances of the cash reserve ratio coming down, builders are not so desperate (to cut prices) anymore as they have been able to generate sales," said Renu Sud Karnad, managing director of HDFC Ltd, one of India"s biggest housing finance companies. Besides, builders are unlikely to reduce prices as they are managing to break even with 40-50% sales.

Prestige Estates Projects has sold 30% stock in its newly launched property in Chennai in just a month. "We have clocked total sales of 1,464 crore in the last nine month as compared to 1,385 crore in financial year 2011," said Venkat K Narayana, CFO.

Mumbai-based property firm Lodha Developers said it has seen an uptick in sales since January. "People have been waiting for a price correction but chances of that happening are very slim," R Kartik, chief marketing officer, Lodha Developers.

"Properties in the range of 25-30 lakh are moving faster but the chances of NPAs in that segment is more. Our experience shows property prices have always been on the upside. A correction, if any, would be too small," said SP Singh, general manager (retail), Punjab National Bank.

Since last two quarters some 125 million sq ft has been added in new launches in the country"s top six markets. Bangalore and NCR saw the highest number of new launches at 48 m sq ft and 31 m sq ft each followed by the Mumbai Metropolitan region with 16 m sq ft, Pune 16 m sq ft and Chennai 12 m sq ft. Continued Arun Gupta

Practical savings opportunities

http://m.economictimes.com/opinion/comments-analysis/no-need-to-go-physical-simple-financial-products-backed-by-gold-or-real-estate-assets-to-deepen-savings/articleshow/11998812.cms


Practical savings opportunities: Consumers should be offe

World Of Warcraft Gold Secrets...highest 75% Payout!

red products backed by gold or real estate

23 Feb, 2012, 1305 hrs IST

Alok Kshirsagar & Naveen Tahilyani

Indian households have had high savings, but put more than half into physical assets such as gold and real estate - a significantly higher amount than most other countries. This is understandable as investment returns on physical assets in the past decade have outpaced equity markets.

But there is often a 15-20% gap between perceived and actual rate of return on these assets, given commissions, bid-ask spreads and illiquidity. What"s more, future investments will require very large, lumpy commitments: 3-5 times the levels of a decade ago. The existing preference for physical assets also drives higher trade deficits (via gold imports), and lowers funds available for capital creation.
What are the ways to meet the consumer"s desire to invest in gold and real estate while mitigating the disadvantages of investing in physical assets? A recent McKinsey study, conducted pro bono with the ministry of finance and the Indian Banks" Association to identify practical solutions to these issues, researched over 1,200 consumers across India, assessed different banks, NBFCs and informal sector models such casino nederland as jewellers and builders" savings schemes, and reviewed relevant international practices.

Our findings indicate a substantial opportunity to deepen savings through financial alternatives with lower-ticket sizes, greater liquidity and potential to generate new capital for the country. This could lead to annual flows twice the size of the mutual fund industry and, in the next five years, add more than 1,20,000 crore for infrastructure and priority sector lending. Beyond deepening existing products like mutual funds, there are two types of innovations worth prioritising for financial services firms and policymakers:

Capture new savings flows with simple financial products backed by gold or real estate assets.
Gold ETFs and mutual funds have only tapped a relatively small, trading-oriented customer segment rather than the larger savings-oriented base. New alternatives such as gold accumulation products and gold bonds would work similar to a monthly recurring deposit scheme, with customers ultimately obtaining certificates to purchase gold or receive cash.

If manufacturers (e.g., banks and asset managers) are allowed to back 80% of the assets under management with physical gold and hedge the remainder, this would unlock significant productive capital.

McKinsey"s research showed high willingness among middle- and upper-middle-income customers to consider real estate investment vehicles that delivered stable rental yields from reputed asset managers (rather than current schemes that are designed for wealthy investors interested in capital appreciation on new construction). Both types of products have been successful in markets such as China, Japan, and Singapore, and can be adapted to India.
Arun Gupta

India companies may dole out 12% salary hike this year: Study - The Times of India on Mobile

http://m.timesofindia.com/business/india-business/India-companies-may-dole-out-12-salary-hike-this-year-Study/articleshow/11982944.cms

India companies may dole out 12% salary hike this year: Study - The Times of India on Mobile

NEW DELHI/ MUMBAI: Despite talk of a slowing economy, improved sentiments of late have warmed India Inc to the prospects of another year of double digit salary hikes. Indian companies plan to dole out an average of 11.9% salary hike this year, compared to 12.6% last year, according to a survey conducted by human-resource consulting firm Aon Hewitt.

Despite the moderation in hikes, salary increments in India will remain the highest in the Asia-Pacific region. While salaries in China are expected to go up by 9.5%, in Philippines employees will get a 7% hike. Globally, India ranks among the top five countries with maximum salary hikes.

"The year 2012 will be a growth oriented year for most companies and salary increases are more probable this year. While the projections for the increase are marginally less, the situation is much better than it was during 2007-2008 crisis," said Sandeep Chaudhary, practice leader, Compensation Consulting for Asia Pacific, Aon Hewitt.

With the rupee appreciating considerably over the past one month and consumer spending on better lifestyle on the upside, the survey shows that companies are concentrating on allocating the surplus cash to reward employees, who contribute significantly to their organisations" growth.

Even as the average salary hike is expected to be in the 12% range, the survey pointed out that the hikes given to critical talents will be 2%-3% more than the overall increments in an organization, a trend which has been witnessed across organizations in the last three years.
The trend continues for 2012, with a projected increase of 15.1% for this employee group.

Moreover, the salary increase for employees rated as "far exceeding expectations" is almost two times the salary increase compared to those "meeting slots online spielen expectations".

B S Murthy, CEO Leadership Capital, a boutique executive search firm, said that while the IT industry may see muted growth this year, growth across industries like FMCG, real estate, finance and others will be relatively better leading to good salary hikes. "For IT industry, hike in salary will be around 7%-10%, slightly lower than last year. Other industries, however, will see increase in the range of 8%-12%."
As far as sectors go, this year"s salary increase will be the highest for the Indian pharmaceutical industry, with a projection of 13.3% hike. The engineering design/services ranked the second highest on the salary hike table with a projected increase of 13%, which is 1.1% higher than the India average. The lowest hikes are expected to come in for the telecom and financial services sectors with an11% and 10% increase respectively.

Another big trend across India Inc has been the increasing focus on variable pay as part of total compensation. Top and senior management see 23% of their total compensation as variable (up from 16% in 2001) and even the lowest-rung entry staff get approximately 13% of their total compensation (up from 10% in 2001) as variable pay, said Aon.

However, high attrition rates are expected to plague companies owing to high inflation rates. "Companies are adopting different strategies to boost growth and rationalizing manpower is an option they may look at," Chaudhary said. Overall attrition rate is projected to be at 19.8%, with financial sector to top the charts at 29.3%.
Arun Gupta

Realtors hope Budget to make business briskier

http://www.business-standard.com/india/news/realtors-hope-budget-to-make-business-briskier/465343/

Realtors hope Budget to make business briskier

Realtors hope Budget to make business briskier
Want green development, end to hardening of interest rates
Vikas Sharma / New Delhi/ Chandigarh 

Feb 22, 2012, 00:26 IST

The real estate players are all ears to the upcoming union budget, as all of them are anticipating measures that would trigger a growth in the sector.

They also foresee an end to hardening of interest rates, as the developers are looking for the union budget to feature measures that would help ease the monetary policy.

The players are also seeking incentives for the promotion of green development, which would help reduce carbon footprints.
The third quarterly result reflects the concerns on sales and profits, while retiring debts remain a significant challenge for the real estate players.

While the net profit for Parsvnath Developers Limited had declined by 28 per cent in the third quarter, DLF continues to struggle with a debt which is still above Rs 22,000 crore.

Looking ahead, most of the real estate players are anticipating a benign interest rate regime that would ease some pressure.
High costs of funds is one of reason that Pradeep Jain, as chairman of Parsvnath developers, says has put pressure on the margins for the company.

Jain, who also heads the Confederation of Real Estate Developers’ Association of India (Credai), says the palyers were anticipating the forthcoming Union Budget to leave room for the RBI to address the issue of easing the country’s monetary policy. “Besides a benign interest-rate regime,” he said, “the Credai has also sought an extension of tax holidays for housing projects under Section 80IB (10) of the I-T Act, enhancement of the benefit to individual home buyers and extending I-T benefit to affordable housing projects.”

As for DLF expectations from the budget, its executive director (north) Rahul Mehta notes that the construction sector is among the largest employers.

The growth in the sector has a direct impact on ancillary industries such as steel and cement, thus creating a ripple effect in the market. Hence, as the budget needs to provide the requisite stability to the economy, it now needs to focus on strengthening the real estate sector. Brotin Banerjee, managing director and CEO of Tata Housing Development Com-pany Ltd (THDCL) says it is time the government started announcing sops for green projects that could lead to increase in the green projects.

The sector contributes to 5 per cent of global carbon emission. Also, consumers opting for green developments should be incentivised by reducing stamp duty, Banjeree added.

In the case of houses raised under a budget of Rs 35 lakh from the current cap of Rs 20 lakh. This is considering the rising property prices, Banerjee said.

The realtors believe more customers could be incentivised by an upward revision in the interest on the deduction limit of home loans -- under Section 24 of the Income Tax Act: from Rs 1.5 lakh to Rs 2.5 lakh.

Lowering the I-T rate on rental income on residential units from current rates as per tax slabs to a special rate of flat 15 per cent or increasing the standard deduction from the rental income under Section 24 of the I-T Act from the currently 30 per cent to 50 per cent, he added, would “encourage rental housing and thereby help overcoming the situation of un-affordable housing”, he added.
Arun Gupta

NRIs seek stability in real estate

http://postnoon.com/2012/02/21/nris-seek-stability-in-real-estate/30814

NRIs seek stability in real estate
Om Ahuja

Recently an acquaintance – a fund manager by profession – relocated to India to set-up a domestic private equity (PE) fund here. He had invested in a Mumbai residential property strategically located close to the primary business district and an international school for his kid. This investment, done a few years back, helped him crystallize his plans for relocation to India and start his venture without spending time in finding the right location, house and school.

What I found most interesting was that he had not even considered eventually relocating to India when he bought this apartment. He had simply done it for investment five years previously.

To date, I have not met a single non-resident Indian (NRI) who is not keen to buy real estate in India. Home ownership in this country is one of the most satisfying means available to them to stay connected to their motherland. Very often, such investments in their country of origin help them to maintain their relationships back home while they make their fortunes abroad.

A few weeks back, I met another NRI businessman – earlier based out of Madrid and now relocating to NCR on the heels of the Euro crisis – who was seeking to build a local business base here. Achieving this while resettling family on all fronts has not been an easy task for him. He is on the lookout for the ‘best’ location for a residential property in NCR and naturally finds the cost of properties in the prime areas staggering and beyond belief.

He had not considered investing in a property earlier. Completely out of synch with the market dynamics back home, he blithely assumed that his foreign-earned savings would make finding a luxurious home a breeze. He was ill prepared for the astronomical ticket sizes that now prevail.

Own a home here

Over the past few years, we have noted that NRIs are investing into residential real estate specifically in large Indian cities to build a back-up base in the country. This particularly applies to NRIs with professional/entrepreneurial ambitions who intend to set up businesses in these cities in the future.

Post the 2008-2009 global financial crisis (GFC), India has stood out as a showcase example of financial stability, specifically in terms of its conservative banking sector. More than anything else in the past, the GFC caused NRIs to seriously contemplate owning homes in India as their rattled confidence in all things foreign gave way to a yearning for familiarity and stability on both on the personal and professional fronts.

No one can exactly predict the fate of any currency, or the stability of any economy. Economies are notoriously ‘subject to market risk’ – for instance, no one had expected that west Asia would see political uncertainty a few years back. However, when it comes to personal and career stability, there must be no margin for error. The trends suggest that more NRIs are taking important decisions with regard to owning real estate in India.

Rules of engagement

NRIs have no restrictions limiting them with regards to how many commercial or residential properties they can own in India. However, there are restrictions on the repatriation of sale proceeds, which is limited to two units. Effectively, this means that NRI face no restriction while investing into commercial or residential real estate in India. However, when a NRI decides to sell and take the money back to the country of residence, he can do so with the sale proceeds of only two units.

NRIs can invest into real estate by remitting funds to India through normal banking channels, or by invest through funds in a Non-resident external (NRE)/ Foreign currency non resident (FCNR)/ Non- resident ordinary rupee (NRO) accounts maintained in India. They cannot make payment via travellers’ cheque or foreign currency notes. They are also restricted from making any payments outside India or settling payments through exchange of funds outside the country.

NRIs can avail home loan from Indian institution approved by the National Housing Bank (NHB), and loan repayment can be done either through inward remittances, debit to a NRE/FCNR/NRO account, via rental income earned in India or by borrowing from close relatives residing in India. NRIs can also avail of home loans from the employer in India, provided specific terms and conditions listed by RBI are met.

NRIs can mortgage residential property in India with an Indian financial institution without any approval from RBI. They can also mortgage it with a foreign financial institution with prior approval from RBI.

NRIs can rent out their residential property without the approval of the RBI in India. Rent received can be credited to NRO/NRE account or remitted abroad. Authorised dealers have been empowered to allow repatriation of current income like rent, dividend, pension, interest, etc. of NRIs/ a person of Indian origin (PIOs) who do not maintain an NRO account in India, based on appropriate certification by a chartered accountant confirming that the funds proposed are eligible for remittance and that applicable taxes have been paid or provided for.

RICS launches best practice standards for realty

RICS launches best practice standards for realty

by CW India Staff on Feb 20, 2012

In an effort to enhance professionalism in the industry, RICS has launched its Red Book of Valuation Standards and Global real estate agency and brokerage standards at the recently concluded real estate conference in Mumbai.

The RICS standards, which have already been adopted in a number of countries, look to provide an overarching international framework for all property brokers worldwide. Based on 12 high level principals towards fairness and transparency; the purpose of these standards is to ensure that clients receive objective advice, delivered in a professional manner that is consistent with internationally recognized standards. Four international property consulting firms– CBRE South Asia, DTZ India, Colliers International and Re-MAX– having their operations in India, have decided to adopt RICS real estate standards.

Sachin Sandhir, MD, RICS South Asia said, “RICS has been a strong advocate of change and professionalism, in an otherwise non transparent and fragmented Indian real estate market.

I am happy to note that leading IPC firms, which have been at the forefront of professionalism, have decided to adopt the RICS Global real estate agency and brokerage standards.”

RICS Red Book of Valuation Standards (India edition), which was also launched during the conference, set out six principle based IVS-compliant valuation standards that provide professional benchmark (or an effective ethical and practice framework) for Indian valuers to undertake reliable valuations.
“One of our guiding principles at CBRE has been to maintain the highest standards of service and ethical conduct while working with clients. It is the cornerstone of our business and what we believe sets us apart from the others. We are therefore happy to work with RICS to further adopt the RICS Real Estate and Agency brokerage standards for all our brokerage departments across India,” said casino netherlands Anshuman Magazine, Chairman & MD, CBRE South Asia.

Anuj Puri of Jones Lang LaSalle feels it’s a good move from RICS whose ‘contribution as a global standard setting professional by way of globally consistent yet locally relevant standards is significant. “RICS Real estate Agency and Brokerage standards, which provide the first ever international framework for best practice in execution and delivery of real estate agency services, are to be encouraged, as they demonstrate a culture of fairness and transparency, leading to higher investor and consumer confidence. JLL welcomes this important initiative,” he added.
The day-long conference saw some of the stalwarts of the real estate industry taking part in panel discussions on a number of key issues concerning the industry.

Arun Nanda of Mahindra and Mahindra spoke about the significance of instilling trust as well as the importance of timely project delivery to win trust and confidence of consumers.

Speaking about policy reforms for urban growth and mission transparency, Lalit Kumar Jain, president, CREDAI voiced his concerns for proposed real estate regulatory authority as well as long delays in the project approval processes and advocated the need for a single window clearance process to avoid delays in execution.

Talking about his vision for Indian Real Estate 2020, Niranjan Hiranandani, CMD, Hiranandani Constructions gave examples of the rapid transformation India has undergone over the last few years. Given this, he shared encouraging words about the potential of the sector to build enormous quantum of housing required to meet housing shortfall in the country.