To discuss about how to imply relaxation on the norms related to external commercial borrowing (ECB), officials from both Finance ministry and the Reserve Bank of India, may meet this week. Continue reading
NEW DELHI: Last week, all parties expressed their consensus on Land Acquisition Bill. However the land bill had to undergo many amendments to receive the consensus of all parties. Continue reading
The latest Economic Survey reveals that the share of the housing sector to the overall GDP is likely to rise by one per cent to 6 per cent on increased investment. Currently, about 5 per cent of India’s GDP is contributed by the housing sector. With institutional credit for housing investment growing at a compounded annual growth rate of about 18-20 per cent per annum in the next three-five years, the housing sector’s contribution to GDP is likely to increase to 6 per cent.
As every rupee that is invested in housing and construction, Rs 0.78 gets added to the GDP. Investment in housing and real estate activities can be considered a barometer of growth of the entire economy. Unfortunately, the 2012-13 Budget does not recognise this. Although the finance minister’s speech concludes by reiterating the fact that there is a need to create an “enabling atmosphere” and that India is on the brink of “resurgence”, he has done precious little to make that happen.
India’s GDP has not been growing as it was sometime earlier was the topic of the finance minister before presenting the Budget. His five-point objective does not really lay any emphasis on the housing and real estate industry. While he has tried to restrict central subsidies to fewer than 2 per cent of GDP to improve the quality of public spending, he has failed to provide for measures which will give impetus to the industry at large, housing and real estate in particular.
The finance minister has permitted external commercial borrowings (ECBs) for low cost affordable housing projects. One wonders if this would do any good, since players in this industry are not used to taking the ECB route for affordable housing projects. This provision therefore does not make sense.
Extending the scheme of interest subvention of 1 per cent on housing loans up to Rs 15 lakh (on houses costing up to Rs 25 lakh) for another year also does not make sense, unless and until the limit of Rs 25 lakh is increased.
Tata Housing is in initial talks with 2 PE funds, Sequoia Capital and Atlanta Equity, to raise funds for its multiple affordable housing projects, signaling that the PE players were willing to return to the real estate projects that offer good customer demand and less risk.
Sequoia and Atlanta have begun talks with the Mumbai-based realty firm to pick up minority stakes into its existing low-priced housing project in Boisar near Mumbai and three other affordable housing projects expected to be launched.
The two PE players want to pick up stake in Tata’s projects because they are low-risk projects with decent returns, the person close to the development said, adding that PE players could expect a return of 20-30% in these projects.
Sequoia Capital had marked around $1.8 billion out of its total ten billion dollars to India. If a deal with Tata Housing goes through, it could perhaps be its first in the real estate. Ditto for Atlanta Equity, an Atlanta-based $109-million fund founded in 2007.