Rupee slump triggers Dubai’s Indians to rush for property back home

The Grand Arch, Gurgaon

The Grand Arch, Gurgaon

As India’s currency plummeted against the U.S. dollar, United Arab Emirates-based Indian expats, the biggest group of foreigners in the Gulf state, increasingly shun gold purchased and hunt for bargains in their country’s property sector.

Because the Emirati currency Dirham is pegged to the greenback at a fixed rate of 3.667 to 1, Indian expatriates in Dubai and the UAE in general are able to invest in property back home at a much more favorable rate than last year.

On Thursday, the Indian Rupee fell to an all time low at 65.29 to one dollar. Over the last 6 years, the Rupee lost two thirds of its value.

“Since early 2013 when the Rupee started tumbling, we have been receiving ample demand from Indian residents for property loans,” said Shabbir Gunerwala, a loan officer working for Indian bank ICICI in Dubai.

Santosh Tandel, the regional head Middle East of real estate firm Indiabulls, said, “Given the favorable exchange rates in the past months, remittances back to India have seen an upward trend.”

Read more: Xinhuanet

Realty investment trusts far away

Real estate investment trusts (Reits) aren’t likely to be launched in India within at least a year.

Reits are similar to real estate mutual funds where investors pool money to buy real estate assets; investors earn dividends through rental income. Reits, which can be listed on stock exchanges, enjoy tax benefits as these distribute most of their profits as dividend to shareholders.

Sources in the Securities and Exchange Board of India (Sebi) have indicated the proposal to allow such instruments isn’t being actively considered. However, there is a window under the newly-framed alterative investment fund (AIF) regulations that could allow investments in special purpose vehicles investing in properties. Sebi is considering providing some relaxations to such AIFs.

In 2008, Sebi had issued draft guidelines for real estate mutual funds, which were later withdrawn.

In the absence of such trusts in the country, Indian companies such as Indiabulls had launched listed property trusts in Singapore.

At an Asia Pacific Real Estate Association event on Reits held here on Saturday, real estate private equity players said regulations related to valuations, taxation, etc, had held back the launch of Reits. “Indian real estate assets do not meet existing regulations such as daily publishing of NAVs (net asset values).

Read more: Business Standard

New curbs on international investment

In uncertain times, preservation of capital becomes the key consideration for smart investors. Currency volatility and sustained weakness in the recent times has led the capital controls by the banking regulator in India. Over the last one month, four notifications specifically aimed at curbing the investor sentiment for gold and commodities have been issued.

Equities impact

Equity markets in India recently witnessed negative FII flows primarily because of the Indian rupee’s lack of stability, slowing economic growth and lack of Government initiatives with regard to reforms and resolving international taxation issues. The environment is becoming very complex for investors when it comes to making their investments work and yield good inflation-adjusted returns.

Over the last five years, equities have, on an average, yielded annualised returns of 5% (Aug 16th 2008 to Aug 16th 2013), whereas gold has given annualised returns of 13% (Aug 16th 2008 to Aug 16th 2013). Returns from bank deposits and bonds have been in the range of 9-10% annually. Annualised returns on real estate in cities like Mumbai and Delhi have been in the range of 40-55% (pre-tax and not inflation adjusted.)

Alternate avenues

If we benchmark these returns and make a quick comparison, it clearly reflects that real estate and gold have outperformed equities and bonds/ bank deposits. That said, many experts point out that the returns from real estate may not sustain at these growth rates going forward, considering that we are possibly at the mid or higher end of the growth cycle curve for this asset class.

Read more: DNA

Infrastructure

Would the PPP way work for NCR Rapid Rail Transport System?

While most public private partnership (PPP) infrastructure projects in the country face hiccups in execution, the first-of-its-kind NCR Rapid Rail Transit System (RRTS) project, worth Rs 72,000 crore, is set to go the PPP way, with 20-30 per cent funding coming from the private sector. But the recent experience of India with PPP in urban infrastructure projects narrates a tale of challenges ahead.

The private partner in the RRTS project is expected to be associated under the build-operate-transfer (BOT) model, widely used in the PPP model. The potent factors that will decide the fate of the project will be economic viability and revenues that the project will generate.

Expecting a daily ridership of 1.63 million by 2016 on the three proposed corridors, the major source of revenue for the project would be passenger fares. About 80-85 per cent of the revenue would be generated from fares, with the remaining to flow from advertising, rentals and property development, according to the feasibility report.

The major glitch in the Delhi Airport Expressline project, which is an example of why PPP does not work, was that its projected ridership was highly inflated and it expected 75 per cent of revenue to come from real estate development, which did not happen at the desired pace, making the project a loss-making entity. By analogy, although this project is not dependent for its major chunk of revenues from real estate and property development, it bets it all on ridership. By the figures used in the feasibility report, about 1.1 million vehicles cross Delhi’s borders in a day. About 30 per cent merely cross Delhi, with 37 per cent moving outside the city and 38 per cent heading towards it.

Read more: Business Standard

Economy

Indian economy to grow at 4.5% in Q1: Moody’s Analytics

The research and analysis wing of Moody’s, the global rating agency today said that the Indian economy will grow at 4.5% in the first quarter (April-June) of 2013-14.

Moody’s Analytics said that the the Gross Domestic Product data is expected to show further deceleration in this quarter, “highlighting the challenges faced by new central bank governor Raghuram Rajan.”

In its report, Dismal Scientist, it said, “The Indian economy has been steadily decelerating for the past three years and is now growing well below its trend rate.”

The GDP numbers will be released on Friday. Earlier, Finance Minister P Chidambaram had also said that the first quarter GDP growth would remain more or less flat.

“Growth slowed down to 5% in 2012/13 and we expect that the growth trend will remain flattish in the first quarter, but even so, we are in better health than many other countries in the world,” Chidambaram had said.

Read more: Business Standard

Steps to attract inflows likely soon, says finmin

After a meeting between finance minister P Chidambaram, finance ministry officials, bankers and foreign institutional investors in Mumbai on Saturday, the ministry said steps to attract capital flows to fund the current account deficit can be expected within a week or 10 days.

Though the FM did not speak to reporters, financial services secretary Rajiv Takru said, “All measures to attract fund flows are under consideration. I think you should see something coming up shortly, say within a week or in the next 10 days.”

Bankers present at the meet said the FM took suggestions to increase dollar inflows through NRI deposits. “The meeting was mainly to seek suggestions and ideas on what can be done on capital inflows. I think it was a good and positive meeting,” ICICI Bank’s Chanda Kochhar said. Bankers added that the FM emphasised the need to shore up NRI deposits

Those present included economic affairs secretary Arvind Mayaram, SBI’s Pratip Chaudhuri, ICICI’s Chanda Kochhar, HDFC Bank’s Aditya Puri, Citigroup India’s Pramit Jhaveri, Bank of India’s Vijayalakshmi Iyer, Canara Bank’s RK Dubey and StanChart India’s Anurag Adlakha.

Read more: Financial Express

Digital Economy/IT

Telecom imports rise to nearly Rs 54,000 cr in 2012-13

Telecom equipment imports, led by mobile phones, rose to Rs 53,971.01 crore in the 2012-13, Parliament was informed today.

The telecom industry had imported telecom gears valued at Rs 52,441.23 crore in FY 2011-12, according to data shared by Minister of State for Communications and IT Milind Deora in Rajya Sabha.

To a particular question on share of imports in total telecom requirement, the Minister said: “Since the total requirement of telecom sector pertains largely to the requirement of the private sector service providers, the information is not maintained,” Deora said.

The data showed that Rs 25,835.15 crore worth of “telephones for cellular networks or for other wireless networks” were imported in FY 2013 compared to Rs 27,715.83 crore such phones imported in FY 2012.

While fixed line connections in the country is on decline, the data showed imports of line telephone sets with cordless handsets increased to Rs 258.72 crore in FY 2013 from Rs 249.27 crore in FY 2012.

Read more: The Economic Times

Education

Higher education GER to be raised to 30 per cent by 2020: Pallam Raju

The government has begun efforts to enhance the Gross Enrolment Ratio (GER) in higher education to 30 per cent by 2020 from the current level of around 19 per cent, Union Minister for Human Resource Development (HRD) M M Pallam Raju said here today.

“We have a Gross Enrolment Ratio of close to 19 per cent, which is much below the 26 per cent average GER in global scenario. But we are certain that with the sustained efforts that began in 11th Five Year Plan we will be able to take our GER to 30 per cent by 2020,” he said.

Speaking at the fifth convocation of the city-based Maulana Azad National Urdu University (MANUU), Raju stressed the need to raise the education level right from schools to higher institutes with a focus on quality.

“That is exactly what the government is trying to do right now. There is a very clear plan and that plan must progress from school education through college education and through the universities. It is important to integrate that education with higher disciplines and bring an international focus on the campuses,” the ministr said.

The Centre and the HRD Ministry have been putting in efforts to encourage GER and no university must be left behind in these efforts, he said, adding that the focus should be on the quality aspect.

Read more: The Economic Times

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