Investmnet in construction sector may improve post polls

Mumbai: A stable government at the Centre after the general elections would improve the investment in the construction sector in the third quarter of the current fiscal, according to a report.

The report by credit rating agency ICRA said that inordinate delays in environmental clearances, high land acquisition cost, fuel supply shortages, precarious financial health of distribution utilities, tariff-related impediments for port sector and dwindling interest from private players have put the construction sector in a tight spot, 

However, until September 2014, execution challenges will persist and the revenue growth of construction firms will continue to remain muted on the back of poor performance of companies in the infrastructure sector,  it said.

"We expect revenue pressure to continue till the first half of the fiscal after which improvement in the investment cycle could be closely linked to the election outcome and perceived stability of a new government,"  said.

Companies engaged in sectors like roads, airports and power have not been able to achieve their set business targets, a PTI report quoting the rating agency’s observation, said.

"In fact, companies in the construction and infrastructure sectors form the highest proportion of CDR cases approved in FY13 and first half of FY14," the report said.

According to ICRA, NHAI was able to award just 15 per cent of its targeted 7,500 km amid dwindling interest from private players coupled with increasing difficulties in achieving financial closure; relatively less remunerative stretches in the offering and delays  in environmental clearances and land acquisition.

The power sector continues to face multiple concerns relating to mine development permissions, fuel supply shortages, financial health of distribution utilities, delays in finalisation of standard bidding documents for power procurement and lack of fresh power purchase bids by state discoms, it said.

In the ports sector, a total of 32 projects aggregating Rs 6,760 crore were awarded in FY13, a healthy growth over the three projects awarded in FY12, though this fell short of the planned target of 42 project awards for 2012-13.

Due to the declining trend in private participation, new project announcements during April-December 2013 have de-grown by 12 per cent on y-o-y basis after a massive 50 per cent y-o-y de-growth to Rs 4.7 trillion in FY'13.

"However, there is a silver lining in construction companies witnessing business opportunities in the railways, ports, urban infrastructure and airports sectors. Given the importance of the projects and stated focus on implementation, the dedicated freight corridor is expected to provide significant opportunities to construction companies," the report said.

Around 76 per cent of land for the Eastern DFC and 86 per cent for the Western DFC were acquired as of June 2013 translating into overall land acquisition progress of 82 per cent for the project, the report said.

As per the FY'14 targets, the government expects to undertake construction of around 51 low-cost airports in Tier 2 and 3 cities on cash contract basis in addition to eight on PPP basis.

"However, the dismal state of road project awards in FY'13 continued well into FY'14 especially in case of BOT projects.

 

NHAI expects to catalyse private sector interest in the sector by awarding projects on EPC basis wherein construction is funded by NHAI but undertaken by the private sector without assuming traffic risks," it said.

Steel demand records lowest in four years

India's steel consumption grew by just 0.6 per cent in 2013-14 fiscal, its lowest in four years, to 73.93 million tonnes (MT), mainly impacted by a slower expansion of the domestic economy and lower imports.

"India's real consumption of total finished steel was up by 0.6 per cent year-on-year in April-March 2013-14 at 73.932 MT, impacted primarily by the slowdown in the domestic economy and a sharp decline in imports," Joint Plant Committee (JPC), a unit of the Steel Ministry, said in a report.

"The low growth rate in domestic steel consumption indicated that base level demand conditions continued to be weak during 2013-14," a PTI report quoting JPC having said.

Construction sector accounts for around 60 per cent of the country's total steel demand while the automobile industry consumes 15 per cent. Both the sectors were plagued by a slowdown in the economy which according to the Central Statistics Office estimates grew by 4.9 per cent in 2013-14, against the growth rate of 4.5 per cent in 2012-13.

The previous fiscal was also not that impressive for the steel industry as well with consumption growing by a mere 3.3 per cent on subdued demand due to slackening of the economy and high interest rates.

Steel consumption grew by 5.5 per cent in 2011-12 and 9.9 per cent in 2010-11, according to Joint Plant Committee. The consumption of steel depends on the growth of the economy. A sound economy ensures higher consumption. User industries such as construction and consumer durables had a bad run last fiscal resulting in dip in demand, an industry expert said.

"The demand for steel in March was not good either as it expanded by only 0.7 per cent to 6.738 MT over March 2013, dampened by the impact of the slowdown and a 34.2 per cent decline in imports during this period, which the decline in exports by 23.6 per cent and a modest rise in production for sale (4.8 per cent) could not outweigh," JPC said.

The month-on-month trends however, were different and saw real consumption go up by 10.2 per cent in March 2014 over February 2014, encouraged primarily by a supply-side push as both productions for sale and imports recorded strong growth though exports also shoot up by 33.6 per cent.

Tata Steel Managing Director T V Narendran recently said India's steel consumption is likely to grow by 5-6 per cent in the current fiscal. However, his assumption is based on the projected 5-7 per cent economic growth of the country.

"Typically, steel demand grows by 1.2 to 1.3 per cent of the GDP growth. If the GDP growth is 5 per cent, I am expecting demand should grow by 6 per cent," he had told PTI in late March.

In the last two fiscals, this thumb rule did not materialise though.

Office space demand goes down in 1Q2014

NEW DELHI: Office space absorption across Indian cities fell by five per cent, while supply declined by 34 per cent during January- March quarter as companies continue to remain cautious about their expansion plans, according to global property consultant CBRE.

"Office space demand slowed down in the first quarter of 2014, with around 6.3 million sq ft of office space getting absorbed across the leading cities as against 6.6 million sq ft in Q1 2013 -- a drop of about five per cent," CBRE said in its recent report.

An overall 6.6 million sq ft of office space was completed in the first quarter of 2014 compared to about 10 million sq ft in the corresponding period of 2013.

"Overall, the commercial real estate market in India saw sluggish transaction activity and a low level of new completions during Q1 2014. Leading cities continued to see heightened caution from corporate occupiers, resulting in subdued leasing activity during the first three months of the year. The majority of these deal closures took place for small to medium-sized office spaces," the report noted.

IT/ITeS, financial and services segments continued to drive demand for office space, the report titled India Office Market View Q1 2014, said.

As for as cities are concerned, the transaction activity was dominated by the NCR, Bangalore and Chennai -- representing about 70 per cent of the total space transacted during the quarter.

"New office space supply in the leading cities was also affected due to existing vacancy levels and lower demand," CBRE noted.

A media report quoting CBRE South Asia Chairman and Managing Director Anshuman Magazine having said: "Occupiers continue to remain focused on optimal space utilization and cost saving strategies."

Going forward, he said, the demand is likely to be concentrated mostly in the peripheral micro-markets of leading cities, owing to abundant availability of cost effective quality space options.

"The ensuing general elections and the formation of a new government are expected to affect the corporate market as well. In the short to medium term, we can expect firms in the IT/ITeS, banking/financial services and pharmaceuticals to remain key contributors to overall office space absorption across major cities," Magazine said.

"Rental values in the Central Business Districts of Bangalore, Delhi, Pune and Chennai appreciated in the range of 2-5 per cent quarter-on-quarter (q-o-q) due to increasing occupier interest in leading Grade A properties," CBRE said.

In Mumbai, feeble demand levels continued to have a negative impact on rentals across markets, with values dipping by 2-5 per cent q-o-q in Bandra-Kundra Complex, Prabhadevi, Worli and Nariman Point mainly due to existing vacancy pressures and weak occupier demand.

Godrej Properties to launch township project in Bengaluru

Bangalore : Godrej Properties Ltd (GPL), the leading Mumbai-based property developer, has entered into a partnership to develop a 100-acre residential township in North Bengaluru. 

Spread across 100 acres, the project offers a potential saleable area of 9.4 million sq. ft. Close to the new international airport, the project is proposed to be developed as an integrated township with a mix of residential unit types as well as a school, convenience retail and other amenities to ensure an integrated self-sufficient lifestyle for residents.

The proposed site is strategically located between the Bangalore International Airport and Hebbal and has easy access to the city from the new signal-free corridor created on NH7. The location is also close proximity to several IT parks and schools and is one of the fastest developing areas in the city. As with most GPL projects, this project will be developed as a profit sharing partnership, according to a press release.

Speaking on the new project, Pirojsha Godrej, MD & CEO, Godrej Properties said, "We are happy to have entered into an agreement to develop a large township in Bengaluru. This will be our third township project after in Ahmedabad and Mumbai and we will seek to create an outstanding destination. We are currently developing several projects in Bengaluru, which has been India's best performing real estate market and this new development will substantially strengthen our presence in this important city. This project fits well with our strategy of developing world class residential projects in key markets across the country.

How to refinance your property

Is it advisable to go for refinancing your property? Will it reduce your debt burden considerably? These are the questions that come in to one’s mind when one decides to go for refinancing an existing home loan. First, one should know what is refinance is all about.

Refinance is the method in which a person, who is having a housing loan, in an effort to reduce his burden, makes some adjustment in agreement, interest rates, amount of loan, etc. He can also burrow fresh money from the same loan account to meet the present day’s obligations.

People generally go for refinancing the existing loan when the prevailing interest rate is much lower compared to the higher rate, which was existed when they took up the loan. The borrower, thereby, want to reduce the EMI burden and banks too allow such switchover options with or without moderate fees. People go for loan against loan when interest rate of some other bank is much lower or when the latter introduces attractive switchover options.

People go for refinance to switch interest types during a favourable interest regime. This is a very good reason to go for refinancing. If the borrowers had opted for fixed rate loan at the time of disbursal of loan and they can encash the declining interest rates after few years by going for floating rate.  They can also adjust the loan period.

Looking at the fact that home loan occupies the major portion of the monthly expense of most of the Indian households, the decision to refinance needs threadbare understanding of one’s financial status and future plans. There are a lot of advantages and disadvantages refinance would bring in, hence a careful consideration of experts’ opinion is necessary before plunging into further financial commitments.

There can be many reasons for those who opt for refinancing. A mortgage is made generally for long term
and during the time span lot can happen. People can make the most of the presently owned assets by going for refinancing. Through refinance, they can borrow more money on additional assets.

To be precise, one may have several loans during the years and one can pay off with a new loan. The catch is the new loan may be acquired with much reduced interest rate compared to the previous ones. So, it is advantage to go for refinancing at floating rate when the interest rate is at rock bottom.

Advantages of refinance

• If carefully planned, the refinance will help to reduce the EMI by changing the rate of interest
• Maturity term of the loan can be changed
• It improves the overall cash flow
• The risk on existing loan will be reduced
• With the help of refinance one can pay off new liabilities on high-interest debt like credit card debt and monthly recurring bills.

Refinance is of two types - No-closing cost and Cash-out. In no-closing cost refinance, an upfront fee should be deposited to get new mortgage loan. This refinance type is suitable when the current market rate is less than the existing interest rate by at least 1.5 % points.

Cash-out is used for improvement purposes as well as debt consolidation and credit card payments. Larger amount can be borrowed from the additional sureties than the existing mortgage. One can use the cash difference, if any, in any way as desired. He can even invest in some stocks or jewellery.

Casa Grande launches Chennai’s first sport villas

Chennai: Casa Grande Private Limited, a Chennai-based real estate developer, today launched ‘Casa Grande Arena’, a sport villa community at fast developing Oragadam Main Road, adjoining the satellite town of Sriperumbudur.
 

Conceptualised to create healthy form of leisure and entertainment in a villa community spanning 30 acre, the community will be made to engage age group of people in a sporting arena.

Touted to be chennai’s first sport villa community, the project will have 440 independent villas giving ownership of land with garden and more space. Each villa has been priced at Rs 47.5 lakh. The project will also have 150 studio apartments having one BHK denomination and priced at Rs 21 lakh.

The developer has planned to include 20 sports facility for the residents of Casa Grande Arena, which include football ground, tennis courts, basket ball court, volley ball court, squash, cricket and golf areas, to meet every age group.

Speaking on the launch, Arun Kumar, founder and managing director of Casa Grande, said, “The project, as a concept will address people’s inner desire to engage in sport and games. This will also help the community bounding between residents through sports. The project also gives individuals the sense of ownership of land, own private garden and terrace. We have also priced each villa at Rs 47.5 lakh, which is very competitive.”

Each villa, which will have a build up area of 1450 sq ft and land area of 1250 sq ft, will have three bedrooms, two family rooms, dresser, exclusive car parking area and landscape garden on a G+1 design structure. The 1BHK +study apartments are available from Rs 21 lakh onwards.
 

'SC order on Land Act has drawn clear lines on implementation'

New Delhi: Rural Development Minister Jairam Ramesh today said the Supreme Court judgement upholding the retrospective clause of the new Land Acquisition Act has drawn "clear and humane lines" for the implementation of a significant clause in the law.
 

He said that the March 14 judgement by a two-judge Supreme Court bench deals with land acquisition which had been pending for over the prescribed five year period (in the retrospective clause-section 24).
 

"In this case, the award had been passed in 1995 and the parties had still not accepted compensation or  parted with possession. In light of this, the Supreme Court, relying on the retrospective clause, ordered the return of the land to the original owners," the Minister said in a release.
 

The Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act 2013, enacted by Parliament in September last year to provide just and fair compensation to those whose land is taken away for constructing roads, buildings or factories, had come into force from January 1, replacing the 120-year-old legislation.
 

Ramesh also said that the Supreme Court had passed a similar judgement on the new law on February 2.
"This judgement also relates to the operation and interpretation of Section-24 --the retrospective clause. The learned bench overturned a 2004 judgement of the Punjab and Haryana High Court (which had upheld a long pending acquisition) and quashed the quashed the acquisition, returning the land to the original owners," he said.
 

Welcoming the judgements, the Minister said, "This demonstrates the Hon'ble Supreme Court has drawn clear and humane lines for the implementation of a very significant clause in the law."
 

"These add to the growing list of important precedents which will have a far-reaching impact on those who have suffered historically from arbitrary acquisitions and give life to the intention behind the new law," he said.