Sensex takes 18,000 mark on strong global idea

After a lacklustre start, the Indian indices have made a strong up move rising 1 per cent. At 12.05 pm, the Sensex was trading 179 points higher at 18,018 and the Nifty rose 54 points to 5,419. Realty stocks have been a laggard but they bounced back sharply today. Parsvnath rose 4.72 per cent while India's largest real estate company DLF gained 2.62 per cent to top the BSE Sensex.

Auto stocks rose 1.37 per cent led by India's largest car manufacturer Maruti Suzuki that was trading 2.45 per cent higher. Maruti has been under selling pressure since the Japan Quake on concerns of a rising Yen and a disruption in imports. M&M and Tata Motors gained 1.4-1.6 per cent. The BSE oil and gas index was trading 1 per cent higher. Market bellwether RIL rose 1.36 per cent and was the biggest contributor to the Sensex.

Banking, metal, capital goods and IT stocks were also trading higher. On the Sensex, 28 stocks were trading higher. Jindal Steel and TCS were marginally lower. The market breadth was strong with 80 per cent stocks rising on the BSE 500 index. The markets have been tracking global cues that have largely been positive. Overnight, the Wall Street rose 178 points to close above the 12,000 mark on the $39 billion AT&T and T-Mobile deal. The Asian markets rose today on the back of a strong rebound on Japan's Nikkei that was trading 4.36 per cent higher.

KCR encourages Real Estate Boom

Telangana Rashtra Samithi (TRS) President K Chandrasekhar Rao on Sunday sought to dispel apprehensions that the real estate prices will crash in and around Hyderabad after Telangana state is created. "On the contrary, the real estate will see a boom with the prices sky-rocketing," KCR stated.

Speaking at a function to welcome the members of the Communist Party of India (Marxist) in the TRS fold, KCR said that Hyderabad will be recognized as a 'happening' city on the international map. He said that the influence of leaders from the Seemandhra regions will come to an end after the formation of Telangana. As a result, investors will not hesitate to come to the city, and the newly carved state will see dramatic development.

Recalling that the erstwhile Nizam's dominion was the richest in the world, the TRS chief said that over the years, the Seemandhra rulers had exploited the region and made money for themselves. Claiming that the Telangana region was totally neglected after the formation of Andhra Pradesh on November 1st, 1956, KCR said that the sustained exploitation had resulted in Mahabubnagar district alone losing around 1 lakh crores in revenue.

The TRS chief also pointed out that former Prime Minister Jawaharlal Nehru had assured the Telangana people that they can take 'divorce' from Andhra Pradesh as and when they choose to. He said that the time has come to end the 'unholy matrimony.'

Manmohan reveals to Reduce stamp duty to limit black money inflows in realty

In order to check flow of black money into real estate sector, Prime Minister Manmohan Singh on Friday said stamp duty needs to be reduced, a step that realty players welcomed, stating it will bring in more transparency. “I think as far as black money in real estate is concerned, unfortunately that is a reality and one way out of this would be to lower the stamp duties,” Dr. Singh said at the India Today Conclave here. Replying to a poser on black money transactions in the real estate sector, the Prime Minister said stamp duties in the country are a “big obstacle to cleaning the mess with regard to transactions in real estate.

“So that’s one way, in which we can work towards a system whereby black money would be less of a menace in transactions relating to real estate.”  The Prime Minister’s statement has been welcomed by private players in the sector, saying it will help cleanse illegal funding. “Whatever the Prime Minister has said, is absolutely true. There has been rampant use of black money in the real estate sector. I think, this is a welcome move and will help the sector,” Tata Housing Development Company Managing Director and CEO Brotin Banerjee said.

Stamp duty is a property tax, to be paid in almost every deal at a prescribed rate on the transaction value or calculations based on circle rate, whichever is higher. It varies from state to state. This particular tax varies from around 4 per cent in Mumbai to about 13 per cent in Kerala. Haryana charges 6 per cent as stamp duty on properties, while it is 8 per cent in Uttar Pradesh. Most of the states charge around 6-8 per cent. The industry players have been asking to reduce stamp duty for a long time, terming it an unfavourable levy on the way to offer affordable housing to consumers. At present, stamp duty is charged from both consumers and developers.

Banerjee, however, said Tata Housing does not indulge in trading black money in developing projects and utilises funds that are generated in a “transparent” manner. “Reduction of stamp duty will benefit both consumers as well as developers. Currently developers pay stamp duty while registering the land and consumers again pay stamp duty while taking possession of the flats,” he said. He also said rationalising of the duties to around 4 per cent will also help discouraging the firms in under-quoting the property prices, thereby, checking revenue losses to the government.

Private Equity leaves From Real Estate

Private equity exits in Indian real estate are expected to surge this year as several funds hit the typical three-five year end-of-investment horizons. The first wave of foreign direct investments in the sector was in 2005-06. So far this year, there have been six exits worth a combined $124 million, according to research firm VCCEdge. In 2010, there were eight exits from realty investments worth $1.2 billion (54.24 billion rupees) mostly through share buybacks, mergers and acquisitions, and one initial public offering (Nitesh Estates Ltd). This year's sales took the share buyback and the mergers and acquisitions route.

The spurt in exits is expected to boost investor confidence in the Indian real-estate story as funds start returning money to their investors, or limited partners. Many of the exits this year are expected to be by early investors selling their stakes to late-stage investors. "We [could start seeing] late-stage investors stepping into matured projects with lower risk, from where on there is only capital appreciation," said Ajit Krishnan, partner in the real estate practice at consultancy firm Ernst and Young.

"More exits would happen this year because lot of projects would have completed their lock-ins and reached closure, thereby opening up sale opportunities," he added. Among the 2010 exits, the largest was DLF Assets Ltd's $694.3 million stake buy-back from Symphony Capital Partners Ltd; and Och-Ziff Capital Management Group Llc sale of 17 million shares in Nitesh Estates, a 24.3% stake, for $40.61 million through an initial share sale. Returns on realty investments have ranged between 1.5 times and 4 times this year.

Indiareit Fund Advisors Pvt. Ltd exited an office project in Kurla, in suburban Mumbai, with returns of $100 million on an investment of approximately $32 million made in 2006; Milestone Capital Advisors Ltd saw a return of 1.5 to 2.5 times from two of its exits. Kotak India Real Estate Fund-I sold its stake in Peepul Tree Properties Pvt. Ltd to Tata Realty Initiatives Fund-I for 3.85 billion rupees, four years after it invested 950 million rupees. Now, several private-equity firms including Kotak Realty Fund and HDFC Property Ventures Pvt. Ltd are eyeing multiple exits. Kotak Realty has sold investments worth about $175 million since 2009, and has another $50 million of exits lined up for 2011-12, said V. Hari Krishna, a director at the firm, including investments in hospitality chains Lemon Tree Hotels and Pride Hotels, and a commercial property in Noida, a suburb of New Delhi.

Indiareit Fund Advisors Pvt. Ltd plans to sell its holdings in a special-economic zone in Pune for 10 billion rupees, and two other investments, said CEO Ramesh Jogani. Meanwhile, HDFC Property has put multiple office projects on the block to sell its investments to another fund or individual investors, said a person familiar with the development, asking not to be identified. Vikram Utamsingh, executive director at advisory firm KPMG India Pvt. Ltd, said exits would be easy in properties that generate steady rental income and have quality blue-chip anchor tenants. "While commercial assets will generate more interest, retail assets that haven't started churning out profits may not see the same," he said.

Paid FSI encourages real estate

The debate is on in the Pune Municipal Corporation (PMC) to introduce paid Floor Space Index (FSI) instead of Transfer if Development Rights (TDR) in the new Development Plan of the city and this proposition is getting thumbs up from the developers' community. Not only this, the PMC Standing Committee Chairman Ganesh Bidkar, too, admitted that the PMC has seen a lot of scams under TDR policy.

Rohit Gera, joint managing director with Gera Developments, said, "Process to generate TDR is cumbersome, takes lot of time and creates an overall fluctuation in the market. Paid FSI on the other hand is a simpler process. It smoothly facilitates the process of demand and supply of property. In the fringe villages, where most of the real estate development is now taking place, if paid FSI is introduced, supply of houses will increase and prices will automatically come down, directly affecting the end-buyer. PMC too will rake in healthy revenue if paid FSI is implemented."

According to Satish Magar, president of Confederation of Real Estate Developers Association of India (CREDAI), Pune chapter, TDR availability is already very low in the city. "There have been cases when real estate prices touched astronomical prices because of TDR. Paid FSI can keep a check on this and the common man will be able to buy an affordable house."

Mayor Mohansingh Rajpal, however, was in favour of TDRs. "The concept of TDR is not faulty but the problem lies with its implementation. If it is implemented and used in a systematic manner, its ill-effects can always be countered." Rajpal further added that several Slum Rehabilitation Authority (SRA) schemes have been successfully implemented because of TDR along with several development plans of the PMC and the state government," said Rajpal.

Leader of the House Nilesh Nikam and Congress leader Abhay Chhajed said both TDR and paid FSI had their pros and cons. "Instead of making it a political issue, it should be made administrative issue", said Nikam.

ASEAN to keep growth momentum in first quarter

The Association of Southeast Asian Nations (ASEAN) economies are likely to maintain growth momentum in the first quarter of 2011, the Organization for Economic Cooperation and Development (OECD) said Monday. "In particular, relatively positive developments in Indonesia, the Philippines and Thailand are associated not only with strong export demand but also sound domestic demand and improved business sentiment," the Paris-based OECD said in a quarterly report.

Thailand posted the highest composite leading indicators at 104.2 points in February with consumption contributing to the strong expansion. The indicators for another two booming ASEAN member countries, namely Philippines and Indonesia, stood at 101.6 points and 100.8 points respectively. However, the expected strong economic performance would be shadowed by eventual risks of negative impact of the OECD's economic uncertainties and inflation pressure due to soaring oil costs.

"ASEAN economies in the first half of 2011 (and beyond) are facing the double policy challenges of tightening interest rate policy to quell inflationary pressures, while avoiding additional capital inflows and maintaining competitiveness," the OECD said. In the report, the OECD conclusively warned inflationary pressures are also mounting in China from soaring real estate prices, and in India from rising food prices.