Over the years, we have been treated to new investment vehicles every century/decade or two. Since cave man days, there has been real estate. Banks brought us savings accounts, followed shortly by brokers selling bonds and stocks. We then heard that placing large bets on individual stocks was too risky so we invested in mutual funds. And when we got the news that most mutual funds underperformed their closest index, we bought ETFs. At least that is what happened in the US and most of the developed world. But how about emerging market countries? Will they follow the same path?
A very interesting study was done on this subject several years back by McKinsey & Co., and much of the data that follows comes from the report. The question is relevant inasmuch McKinsey estimates that emerging market countries already own 21% of global financial assets and projects that by 2020 they will own 36%. And if you add in real estate, they are already the world’s largest asset holders. In what follows, I discuss several aspects of this continuing transformation and offer some hypotheses for the future.
Table 1 gives estimates of the relative importance of the different asset holdings of households. While real estate is the largest asset holding in both Germany and India, financial assets are more important in the US, as are its supporting services, both pension funds and insurance companies.
Real estate would be even less important in the US (14%) if mortgages were netted out. My sense is that real estate constitutes at least 50% of household assets in most emerging market countries. While financial markets are developing rapidly in China, many city dwellers even today purchase real estate for capital gains rather than equities.
Table 1. – Household Assets, 2010
Read more: Seeking Alpha
Real estate investment is prudent any time: CREDAI’s Babu
Investment in real estate properties is prudent at any point of time. Its value can appreciate upto 10-15% on an average every two years in India, says T Chitty Babu, secretary – CREDAI, the national body for real estate developers in India. In an exclusive interaction to moneycontrol.com, he who also heads Akshaya, a Chennai based developer, underscores the need of reform measures by the government. Such action is likely to reduce home prices while easing the tedious process of project approvals.
Q. How do you explain the current state of real estate?
A. In India, we are seeing year-on-year growth in the real estate sector. The growth is not disturbed other than the slowdown in 2008. After that, there is a steady growth driven by demand.
We do not contribute the real estate growth to IT sector any more. Today the demand is coming from every sector like auto mobile, telecom, textile, leather, auto mobile ancillaries, healthcare, tourism and educational institutions. All of them are also fueling growth particularly in the residential sector. There is a shortage of about 2.7 crore homes. It has been accumulated over the last three decades. To meet this shortage, we require enormous efforts and good number of policy changes.
Q. What kind of policy changes are you looking for?
A. One important thing is the single-window clearance for approval. Today a real estate developer has to go through minimum 52 clearances and approvals before launching a large project. The final approval comes after 24-36 months. And it is costing money for the end-consumer.
When a builder invests money in the land and design and if approval takes 24-36 months, the accumulated interest of the holding cost of the land and design is 10-15% of the project cost. So, if a product is selling at Rs 4,000 per sq ft, straight away the consumer will save Rs 400-600 per sq ft under the single window system wherein approval would come within a week or month’s time. The end consumer is actually bearing the burden as of now.
Moreover, the single window clearance system will certainly help eradicate corruptions from the industry.
Read more: Money Control
Step by step guide for NRIs to sell inherited property in India
In an earlier article we looked at how Non Resident Indians (NRIs) can transfer title on inherited property to their name. Having done that, selling inherited property can be quite challenging, especially if you have left India many years ago and are not familiar with the procedure. In this two-part series, we outline the entire process step-by-step, beginning from the time you inherit the property. In part one, we will look at what documents you need, how you can arrive at the sale value and how to complete the sale transaction. In part two, we will look at tax implications and repatriation rules.
Step 1: Transfer title of inherited property to your name
When you inherit property, the first thing you must do is to transfer the title of the property to your name. You can do this by a process called ‘mutation of revenue records.’ You would need either a copy of the Will or in absence of a Will a Succession Certificate issued by the local court.
Read more: The Times of India
Govt may relax lending norms for cash-strapped reality sector
The Finance Ministry is considering a proposal to relax funding norms for the realty sector so that good housing projects are not starved of funds.
“The Ministry is actively looking at options … How to ramp up demand in the housing sector. We are studying all the possible impediments,” an official source said.
“We are of the view that good project will be funded,” the source said.
Banks are cautious in lending to the real estate developers because there is a huge mismatch in price and demand.
While dismissing general perception of holding on to inventories, real estate developers have been expressing concern that many projects are stalled due to lack of funds.
Finance Minister P Chidambaram in his meeting with heads of public sector banks last month had pointed out that close to 5 lakh flats were lying vacant in Mumbai despite robust demand for housing.
Read more: Zee News
Maruti Suzuki hikes Gurgaon workers’ salaries by 75 per cent
Maruti Suzuki has hiked salaries of its workers by an average 75%, or Rs 18,000/month as part of the three-year wage settlement, which will catapult employees in its Gurgaon plant to the highest paid in the manufacturing sector in the country.
The hike in total salary benefits range from 14,000 to 22,000, a month, in line with the experience and seniority of the workers. The Gurgaon plant-based workers union, Maruti Udyog Kamgar Union general secretary Kuldeep Janghu told ET: “This is the highest-ever hike in Maruti’s 30-year history. We have signed an agreement with the management where even the probation of new technicians will come down to two years from the earlier three (years) and the periodic medical benefits to all workers have also been doubled.”
Read more: The Economic Times
Ford bids to take on rivals with new compact
Ford Motor Co is planning a multi-pronged strategy for the high-volume Indian compact car market and may drive in a new entry-level small car as well as a premium one, above best-seller Figo, to capture higher volumes.
The company, which has seen a slowdown in growth on the back of stiff competition and rapid shift of the market to diesel, feels that models based on global, proven platforms are the way forward to build up mass volumes in India, Joe Hinrichs, president of Ford’s Asia Pacific and Africa Head, said. “Hatchbacks are a high-volume segment in India and you need to have products in that segment to be a bigger player and that is our plan and our intention,” Hinrichs-seen as one of the possible contenders for the top job at Ford after Alan Mulally retires next year-told TOI here.
Asked if the plan will also include a new car in the Maruti Alto category and priced below the Figo, the current entry-level model from the company, he said, “We continue to look at all the segments in India, including at lower price points… It is something we study and are capable of doing.”
Read more: The Times of India