US investment bank Goldman Sachs will invest 10 billion rupees ($201.6 million) in equity of Indian renewable energy start-up ReNew Wind Power, the Indian firm said on Monday.ReNew Wind Power was founded about 6 months back by Suman T. Sinha, a former chief operating officer of India's Suzlon Energy, the world's fifth-largest wind turbine manufacturer by capacity.ReNew expects to reach capacity of 1 gigawatt by 2015 and plans to expand its wind portfolio by 200-300 megawatts annually, the company said in a statement.ReNew was advised by SaVant Advisers for the Goldman deal.(Reuters)
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The Indian unit of Britain's BG Group is in talks with state-run Oil and Natural Gas Corp (ONGC) to acquire a stake in a gas block off the country's east coast, the BG India's president said on Wednesday."We had given a proposal to ONGC a while back. The ball is in their court," Walter Simpson, President and Managing Director of BG India, told reporters on the sidelines of an industry conference.ONGC's chairman said in June the firm was in talks with BG and Italian oil major ENI to sell up to 30 per cent in the block to help investment of about $7.7 billion to develop the gas field.(Reuters)
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The derisive response to real estate developers setting up a consumer redressal mechanism in Mumbai is understandable. Indeed, self-regulation by a scam-smeared industry can only be greeted by scepticism; but the move also underlines just how desperate the situation is for realtors. Releasing its code of conduct last week, the Maharashtra Chamber of Housing Industry (MCHI), an apex body of builders in the western region, said it had set up a mediation committee to resolve consumer complaints. The new code for builders will encourage full disclosure of the property titles, sale agreements based on carpet area, a clear time-line on possession, and disclosure of additional charges.It is, however, unclear how serious the effort is and how the MCHI expects to implement its code of conduct. Talking to BW, president of MCHI, and chairman and managing director of Mumbai-based Gundecha Group, Paras Gundecha, said: "Those not following the code of conduct will be immediately suspended." He was, however, unsure whether losing the MCHI membership was threat enough for recalcitrant builders. "We are not a court; we can only hope that 80 per cent of the disputes get resolved through mediation," Gundecha added. Click here to view enlarged image With Dussehra and Diwali round the corner, developers obviously want to tidy up and get sales going. Some are even considering a 10-15 per cent cut in prices to stoke crippled demand in the hope the coming festival season will help reduce their huge inventories. So far realtors have been grimly holding on to the price line and generating cash-flows either by bringing in high-networth investors (HNIs) or by selling land assets to reduce debt. Can this situation of both increasing inventories and prices hold on for long? Rising Inventories, Rising PricesThe housing industry faces a quixotic situation. One would have thought that the 12 interest rate hikes over 18 months and the consequent evaporation of home-buying would have led builders to lower prices. But recent data across six metros indicates a double whammy — falling sales and a steady rise in prices!Property market tracking agency Liases Foras' figures show that home sales in the National Capital Region (NCR) were stagnant since June 2010 and actually fell from 27 million sq. ft in the January-March 2011 quarter to 22 million sq. ft in the following April-June quarter (see ‘Building Blocks'). However, average prices soared 17 per cent over the six months — from Rs 2,679 per sq. ft to Rs 3,131 per sq. ft. In the Mumbai Metropolitan Region (MMR), sales have been steadily declining and fell from 9 million sq. ft in the January-March 2011 quarter to 8 million sq. ft in the following April-June period. However, average home prices in the MMR region inched up 5 per cent from an average of Rs 9,235 to Rs 9,716 in the same period. The correlation between sales and prices standing on its head can be best seen from the following Mumbai figures: In the first quarter of FY2010, Mumbai saw sales of 21,000 units at an average price of Rs 5,600 a sq. ft; in Q1 of FY2011, sales in the city were down to 12,300 units, but average price had gone up to Rs 7,742 per sq. ft; and for Q1 of FY2012, sales fell to 8,500 units but average sale price had marched on to Rs 9,700 a sq. ft. break-page-breakOnly Pune and Chennai recorded some growth since April 2010, driven by non-local, offshore demand from NRIs and others, says Pankaj Kapoor, CEO of Liases Foras. More than rising inventories, it is the falling ‘velocity' of sales that indicates recessionary conditions, says Kapoor. In a normal healthy construction cycle, a residential project should be constructed and sold over three years. This translates into an average ‘velocity' of 3 per cent per month. However, the current ‘velocity' of residential projects in most metros is around 1.5 per cent — indicating that a project will need a cycle of six years to offload its entire stock. "It is only Pune, with an average ‘velocity' of 2.75 per cent, which seems to be doing all right," says Kapoor."Home sales in the country are down by 75 per cent compared to April 2010," confirms Pranay Vakil, chairman of property broking company Knight Frank India. The commercial and office space market was probably in a worse bind with oversupply from projects that had been started in 2007-08 now coming close to maturity. "The oversupply is because of too many concessions to the IT sector," says Vakil. In Chennai, seven builders withdrew from the software technology park (STPI) claiming bankruptcy, according to Kapoor of Liases Foras. (From left) K.P. SINGH, chairman, DLF: Straddled with high debt, DLF is now selling some of its core assets (BW Pic By Tribhuwan Sharma)ARCHANA HINGORANI, CEO and executive director, IL&FS: Investment Managers The company has invested $1.7 billion in realty since 2006ANUJ PURI, chairman and country head, India, Jones Lang LaSalle: "HNIs have been fishing for big chunks at bargain prices"PRANAY VAKIL, chairman, Knight Frank India: "Home sales are down 75 per cent compared to April 2010" Unlike the residential market, the premium commercial or office space market has seen lease rentals decline over recent months. For instance, in Parel, Mumbai, yet-to-be-commissioned Indiabulls Finance Centre was sewing rentals at Rs 110-120 per sq. ft per month, which is a substantial rebate compared to the neighbouring commercial centre Indiabulls One, where rentals have been recently negotiated in the Rs 170-180 per sq. ft range. Holding The Price Line A variety of factors have contributed to this strange scenario of builders continuing to maintain or push up prices even as the Reserve Bank of India (RBI) and the banks have repeatedly advised them to bring down prices to generate sales. Developers cite an array of reasons for the high prices, including rising cost of raw material and land. The premium markets are seeing few fresh launches, which is pushing up prices of high-end residential property. Says MCHI president Gundecha: "In Mumbai, we are seeing just two new launches a month compared to 8-10 projects opening every month a year ago." Agrees Bharat Dhuppar, head of sales and marketing at Mumbai-based Omkar Realtors & Developers: "Fewer launches have kept prices stable." Another reason is that the spiralling cost of construction leaves very little scope of reducing margins any further, argue developers. An internal assessment by Godrej Properties, for instance, showed that the price of steel had risen 26 per cent in one year between March 2010 and 2011, while that of cement had moved up 13 per cent in the same period. High cost of land acquisition, too, has made rentals and capital values inelastic. Anuj Puri, CEO of property broking firm Jones Lang LaSalle (JLL), says rentals for commercial property had fallen in Whitefield, Bangalore, to an average of Rs 30 a sq. ft per month; to Rs 28 per sq. ft in Old Mahaballipuram Road, Chennai; to Rs 32 per sq. ft in Greater Noida and Navi Mumbai. "These assume a construction cost of Rs 2,500 a sq. ft and land acquisition cost of around Rs 3,000 a sq ft. Rentals cannot fall below these levels if developers are to recover their historic cost of land and investment," argues Puri. Though bank capital has dried up, builders have been able to hold their heads above water by selling equity in project-based special purpose vehicles (SPVs) to investment funds and HNIs. The perception that real estate will give better returns than most other sectors in the long run has kept cash-flows moving and the builders liquid. For instance, mid-size developer Omkar Realtors raised Rs 200 crore from India Reit Fund Advisors for a 30 per cent stake in a slum redevelopment project in Worli, Mumbai. About a year ago in August 2010, in one of the largest private equity deals in real estate, Mumbai-based Lodha Developers raised Rs 500 crore from HDFC Realty Fund for a 10 per cent stake in its 117-storey residential tower World One in Mumbai. Other investors in the project include Temasek of Singapore and the Abu Dhabi Investment Authority. In recent months, even film actors have become investors in realty projects. For instance, Ajay Devgn has taken a major stake in a suburban project in Mumbai with developer JP Infrastructure.Explains JLL's Puri: "HNIs have been coming in as investors with developers. This is what is holding up prices. They have been fishing for big chunks at bargain prices."Archana Hingorani, CEO of IL&FS Investment Managers, continues to be bullish on real estate revealing that as much as $1.7 billion or 55 per cent of the company's private equity investment of $3.2 billion has been in realty projects since the mid-1990s. The two real estate funds — of $525 million and $895 million — were interestingly raised as late as 2006 and December 2007, respectively. "The jury is still out on these investments considering permissions and timeframe of completion are an issue. But the size of the investments has made us more involved, more alert. The second round of investments has been more educated," says Hingorani. She adds that the Pune, Chennai and Bangalore markets have proved to be robust. Which Way Will It Move?For realtors, all signs indicate that things will get worse before they get better. The National Housing Bank (NHB) has predicted that disbursal of home loans will slow down over the next few months due to high property prices. NHB chairman and managing director R.V. Verma, speaking at a media meet in Mumbai recently, said home buyers were postponing purchases and home loan growth was down one percentage point to 16-17 per cent (compared to last year). He predicted this would slip another 1 per cent by the end of the financial year. break-page-breakMany like Verma are blaming the developers' greed rather than high interest rates for the sluggishness. "If property prices come down, there could be an increase in demand even if the interest rates go up a little," he said.That might still happen. As the festival season opens, industry pundits are predicting a 10-15 per cent cut in residential prices. Knight Frank's Vakil predicts a "possible 15 per cent correction" in prices. Puri of JLL agrees, but warns that "cuts will only be in new launches". Speaking for developers, Gundecha told BW that builders were now considering a 5-10 per cent reduction in prices.In the meantime, holding out against melting demand is taking a toll on developers. Those straddled with high debt — such as India's largest listed real estate company DLF (its debt is over Rs 20,000 crore) — have been selling non-core assets like hotel plots and land earmarked for amenities such as schools. But this has not been enough. It is now the turn of core, residential plots to be put on the block. For instance, DLF has been marketing residential plots in Sectors 70-A and 73 in Gurgaon. These plots are being snapped up by developers or are being offered as plotted colonies for self-development by home buyers. Debt pressure is hitting completion schedules too. "Companies like Unitech are deliberately not completing some of their projects even in cases where they are 80 per cent complete. These projects are mortgaged to banks and financial institutions, and the moment these are ready for possession, the developers will face payment calls," says a senior executive with a realty company. In this scenario, it will be interesting to watch whether the lifeline thrown by private equity funds and HNIs, which has held up the industry so far, will continue. For developers who have defaulted on timelines and delivery, the future seems bleak. Says JLL's Puri: "Those developers who have allowed investors to cash out and exit at the end of a project's construction cycle, will attract a flood of investors when they go for a second round of raising funds. But those who have not been able to give returns in the first round, may not be able to raise funds." Those who have exited from successful SPVs with builders with cash in hand include IndiaReit Fund Advisors, Red Fort Capital and Kotak Realty. But at the same time, there are many who have burnt their fingers and may never return. At the peak of the realty boom in early-2008, it was estimated that Rs 20,000 crore in PE investment had come in or was in the pipeline, including from international majors such as Blackstone and JP Morgan. Interestingly, talk of launching mass housing projects is back in fashion. Niranjan Hiranandani, co-founder and managing director of Hiranandani Group, and known for his baroque-look, top-end residential complexes in Mumbai, recently announced the opening of a series of mass, affordable housing projects in Mumbai shortly. Speaking at the opening of a specialty hospital in Powai, Mumbai, Hiranandani said these new projects will "increase volume and help stabilise the realty market". When builders speak of mass and affordable housing, it is a sure sign that recession is knocking on their front door. gurbir(dot)singh(at)abp(dot)in(This story was published in Businessworld Issue Dated 03-10-2011)
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Haryana Chief Minister Bhupinder Singh Hooda, who met Japan's Prime Minister Yoshihiko Noda at the India-Japan Global Partnership Summit in Tokyo Tuesday, stressed on combining the technological prowess of the Japanese with the enterprise and technical skills of Indians.He sought creation of new capacities in the manufacturing and infrastructure sectors, freer flow of high-end technologies and asked Japan to step up investment in Haryana.Hooda stressed the need for closer economic and social ties between India and Japan, an official statement said.Addressing a special session on Haryana in the evening, Hooda invited Japan to invest in Haryana, highlighted the achievements made by the state, and unfolded his vision of making Haryana Number 1 State in all respects.A high-powered delegation, led by Hooda, is taking part in the India-Japan Global Partnership Summit being held at Tokyo in Japan from September 5 to 7, which has been organised by the India Centre Foundation of Japan.The summit has attracted some of the top names of the corporate, policy-making, political, media and spiritual worlds, including Mukesh Ambani of Reliance Group; Rakesh Bharti Mittal of Bharti Enterprises; Sam Pitroda, Advisor to the Prime Minister; Prahalad Kakkar, Founder of Genesis Film Production; Amitabh Kant, CEO and MD of DMICDC; Sadhguru Jaggi Vasudev, Founder, Isha Foundation etc.The Haryana session in the evening generated enthusiastic response. It started with a speech by the Chief Minister who likened Japan's growth story with Haryana.Hooda stressed the importance Haryana attached to its relations with Japan and highlighted the strides made by Haryana during the last few years. This, he said, had been endorsed by independent studies and findings. He invited the Japanese to visit Haryana to catch a glimpse of its development and invest in the state.Capt Ajay Singh Yadav, Power Minister of Haryana, highlighted the initiatives taken by the State in generation, transmission and distribution of power, one of the most crucial segments of infrastructure.Industries Minister Randeep Singh Surjewala explained what made Haryana a preferred destination for investors.The state offers tremendous investment opportunities in view of infrastructure facilities backed by sound policy and peaceful law and order situation.The session was moderated by Rajeev Arora, Managing Director of HSIIDC, who made a comprehensive presentation on 'Destination Haryana.' It witnessed signing of MOUs by Indian and Japanese companies, including three MOUs by Navin Raheja of Raheja Developers with Zenrin Co.- Abacus Venture; Okamura Homes Co.; Abacus Venture-Quantum Leaps Co. The other MOU was signed by the Pranav Gupta of Parabolic Group with a leading Pharmaceutical company of Japan.Earlier during the day, Capt Yadav, Surjewala, and Rao Narender Singh, Health and Medical Education Minister, addressed separate sector-specific sessions and issues and also answered queries of the gathering.The official-cum-business delegation, led by Hooda, reached Tokyo yesterday. The delegation is on a visit to Tokyo for participating in the India-Japan Global Partnership Summit 2011 being held from September 5-7.Speaking at the opening session of the summit, Hooda highlighted the importance of building relationship between the two sides. He stressed the need for combining the technological prowess of the Japanese with the enterprise and technical skills of Indians.The Chief Minister said that a comprehensive economic partnership agreement between the two would create new opportunities for India's pharmaceutical industry in the Japanese market, and help meet Japan's growing demand for high quality and relatively inexpensive generic medicines.India welcomes greater Japanese participation in Indian industry through foreign direct investment. He sought creation of new capacity in India's manufacturing and infrastructure sectors and freer flow of high-end technologies.The Chief Minister also met Osamu Suzuki of Suzuki Motor Company of Japan. The two discussed issues relating to the investment proposals of Suzuki in Haryana. Suzuki also apprised the Chief Minister about the progress of the on-going projects in Haryana. The meeting lasted for about an hour.The Chief Minister later inaugurated the Haryana expo at the summit site, where the achievements and investment opportunities in Haryana have been displayed.(PTI)
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State-run explorer Oil and Natural Gas Corp has filed the prospectus for its follow on public offer with the markets regulator on Monday, the company said in a statement on Tuesday.The 5 per cent stake sale, valued at about $2.5 billion, will include an offer of 419.2 million shares to the public and a reservation of 8.55 million shares for employees, the firm said.ONGC's planned share sale, delayed by more than six months, is likely to launch on Sept. 20 and will close on Sept. 23, sources had told Reuters on Monday.(Reuters)
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BP Plc is confident of raising output from the key gas field of Reliance Industries Ltd in about two years, a senior executive at the British company said on Tuesday.In July, India's cabinet had approved Reliance's plan to sell 30 percent stake in 21 oil and gas blocks to BP as part of a $7.2 billion deal, making it one of the largest investments in India's oil and gas sector."We have just received the approval. We are studying the data. We are confident that there is more gas and output can be raised. But these things take time, it may take a couple of years," BP India head Sashi Mukundan said.Reliance Industries, the country's largest listed firm, has been under pressure over the past few months from an industry regulator and investors over slowing gas output from its main D6 block in the KG basin off the Andhra Pradesh coast.In May, the director general of hydrocarbons said the company was producing 48 mscmd (million standard cubic metres per day of gas) from the block, lower than 60 mscmd it produced last year and far off the planned peak capacity of 80 mscmd.But India's approval of Reliance's plan to sell stake in some oil and gas blocks to BP is expected to aid the Indian company in boosting output from the deepwater blocks.Shares in Reliance rose as much as 3.6 per cent on Tuesday in the Mumbai market that was up 0.6 per cent. The stock is down more than 20 percent so far this year, mainly triggered by concerns about slowing D6 output.(Reuters)
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Sri Lanka's state-run electricity board and India's biggest power producer, NTPC, on Tuesday signed an agreement to set up a coal-fired power plant joint venture worth up to $700 million in the island nation.The Ceylon Electricity Board (CEB) and India's state-run NTPC will invest at least $250 million each for the 500-megawatt coal power plant, Sri Lanka's second after a Chinese funded 300-megawatt plant which is in the north western coastal district of Puttalam.India also loaned $200 million under a concessionary term for Sri Lanka to build infrastructure related to the coal power plant, officials from the countries said."We have not yet come to the exact cost as yet, but it will be around $700 million," NTPC Chairman and Managing Director Arup Roy Choudhury told Reuters after signing the agreement.However, Sri Lanka's ministry of power and energy says the cost to be $500 million."Today we have signed the joint venture agreement for a $500 million, 500-megawatt coal power plant with the India's NTPC," said M.M.C Ferdinado, secretary of Sri Lanka's Ministry of Power and Energy.Both CEB and NTPC will invest 15 per cent or $75 million each in equity capital and will finance the balance via loans including commercial borrowing.The new power plant will be completed in two phases by 2017 in Sampoor, a village in the eastern port city of Trincomalee, where Tamil Tiger rebels had their military camps before they were wiped out from the East in 2007.The two parties have also planned to expand the capacity to 1,000 MW in future.Sri Lanka's first coal fired power plant with 300 MW capacity was built under a $455 million loan from China's Exim Bank and is expected to eventually expand to 900 MW. China has offered an $891 million loan to build the second phase.India and China have been increasingly lending to Sri Lanka, mainly for infrastructure projects, since a civil war on the island nation ended in 2009, as the Asian giants and rivals compete for influence on the island, which sits right off one of the world's biggest shipping routes.India has committed $800 million under a credit line to Sri Lanka mainly for infrastructure projects and the latest $200 million loan for infrastructure related to the coal power plant will be in addition to the credit line.India has already started $520 million worth infrastructure projects to rehabilitate railways, mainly in the war-hit northern region.(Reuters)
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BP Plc's India unit is confident of raising output from Reliance Industries' KG D6 block off the Andhra Pradesh coast, its head Sashi Mukundan said on Tuesday, but added that it could take two years.Mukundan told Reuters this year that output from the block in the Krishna Godavari basin, India's biggest gas producer, had slipped on technical problems to well below its target.In July, the cabinet had approved Reliance's plan to sell 30 per cent stake in 21 oil and gas blocks, instead of the 23 originally planned, to BP, making it one of the largest investments in India's oil and gas sector.(Reuters)
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