Companies & Sectors
Crisil projects higher realty growth in smaller cities

Research suggests growing economic, commercial activities and price stability is attracting big developers to cities like Surat, Nagpur, Bhopal, Jaipur and Coimbatore. Estimates sales of Rs180 million in ten such cities in 2012

A recent report released by CRISIL Research, titled 'Real(i)ty Next: Beyond the Top 10 Cities of India', estimates the sales of new residential apartments in ten smaller cities at around Rs180 billion in 2012. Collectively, these cities will see a supply of 354 million sq ft of residential space in the next three years. Surat, Bhopal and Jaipur are going to profit the most, both in terms of growth and value appreciation.

In a teleconference on Wednesday, Prasad Koparkar, head-industry and customised research, CRISIL Research, said, "Price stability and growth prospects of smaller cities are attracting large real-estate developers. Developers are diversifying from metro cities with an eye on future growth." He said, as markets are more stable in these smaller cities, they have seen less appreciation in the last one and half years, and hence, the impact of RBI rate hikes will also be less.

The survey covered Bhopal, Bhubaneswar, Coimbatore, Indore, Jaipur, Lucknow, Nagpur, Surat, Vadodara and Visakhapatnam. While residential units saw a price appreciation of 25-30% in Delhi-NCR and Mumbai, the smaller cities saw a hike of only 10-12%. Among these cities, Bhubaneswar saw the maximum hike, whereas the least increase was in Coimbatore and Visakhapatnam. Most of this market is driven by purchases by end-users and not investors.

Vadodara and Lucknow, Mr Koparkar estimates, will see a maximum appreciation of 8-10% in two years, because of a higher demand-supply gap. On the other hand, Coimbatore and Visakhapatnam will see a moderate hike of 3%-4%. On the other hand, Surat and Bhopal will see more supply.

"The market in these cities is boosted by growing economic and commercial activities, and properties are very reasonably priced," Mr Koparkar said. "We are also seeing a growing demand for apartments, rather than standalone houses, with growing population in these areas boosting volumes growth." The demand is most for the mid-income segment, with 2-3 BHK apartments of 1,100-1,200 square feet area. On an average, these flats are priced at Rs2,000-2,500 per sq ft.

While big developers like Unitech, Ackruti and DLF are extending their presence to these markets, local builders still command the maximum space. As the cities grow, these local builders are also scaling up their operations. However, these cities face the same problems that the metros face—whether it is poor infrastructure or delay in getting approvals.

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Is nobody buying clothing? Low demand affects textiles, cotton

Due to the ban on exports, the country has excess stock of cotton and prices are falling. However, due to sluggish demand in domestic as well as overseas markets, the textile industry is suffering

In our earlier articles (Slowdown spreading across all core sectors in India: ) and (Sluggish demand impacts cement and realty sectors ), Moneylife had written on how sluggish demand has been impacting a number of industries.

Another major sector—the textile industry—has also been impacted by the same issue. The industry contributes around 14% to industrial production, 4% to GDP (Gross Domestic Product), and 17% to the country's export earnings. However, as per the IIP (Index of Industrial Production) data, the apparel index has declined from 182.81 in April 2010 to 180.61 in April 2011, a drop of 1.20%. There has been a slack in demand and cotton prices are falling. Garment export growth has not been great either.

In 2010, the Indian government responded to excessive exports of cotton yarn by imposing an export ban. The ban reduced domestic prices and enabled surplus stock to be consumed internally. This led to a fall in prices of cotton yarn. With the reduction in cotton prices, one would expect the industry to pick up, but there has been a fall in demand.

Sanjay Jain, managing director, TT Limited—a major player in the textile sector—told Moneylife, "There was an unprecedented rise in the prices of cotton mainly because of crop shortage in Pakistan and China in 2010-11, this led to a rise in prices across the value chain from yarn to fabric to garments. (The) government had abruptly stopped yarn export registration from 1 December 2010 which resulted in accumulation of cotton yarn. The same was only allowed from mid-March again. However, a supply overhang was created and (this) has led to sluggishness in the sector over the past three months—this is the key reason for sluggish growth in the sector. India is one of the largest exporters of yarn in the world and 20% (of domestic) production is normally exported, this sudden stoppage reduced market size by 20% and it wasn't possible for the domestic market to increase demand overnight. Yarn manufacturers have now cut down on their production and inventory cost."

He further explained, "(The) summer season is almost over, however, demand is expected to pick up in the festive season. This year a bumper cotton crop is expected across the world and this is expected to have a downward impact on the prices of textiles. So far, prices have corrected by around 25%-33% and some further correction is expected. This phenomenon will continue for 3-4 months."

A Rajkot-based cotton exporter (preferring anonymity) told Moneylife, "Prices have been crashing, as there is no demand in India as well as in the export market. When prices were high, manufacturers preferred polyester yarn over cotton yarn. 'Sankar-6', (a benchmark quality) in one month, has come down from Rs61,000 per candy (356kg is one candy) to Rs42,000. Prices are likely to fall further."

One would expect the garment industry to grow with the benefit of these reduced prices-but that does not seem to be the case.

Readymade garments account for almost 45% of total textile exports. However, Indian apparel exports could not keep up with the growth in demand from the US. The total apparel imported by the US from India grew by just 9.33% from $2,846 million in 2009 to $3,112 million in 2010, as per the US Department of Commerce. The total apparels imported by the US across all countries were valued at $63,105 million, which improved by 13.10% to $71,398 million in 2010. From January to April 2011, US imports from all countries grew by 13.56% over the same period in 2010, but imports from India grew by just 12.65%. This just shows the textile industry was not able to keep pace with growing demand, despite the fact that it has grown by nearly 13%.

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I-T dept asked to start prompt action against tax evaders

Empowering the tax authorities with such a step will also help India showcase its seriousness to the international financial enforcement community on addressing issues of black money and illicit funds

New Delhi: Taking a step forward against black money, the finance ministry has asked the Income Tax (I-T) Department to launch immediate prosecution action in tax evasion cases wherein tangible assets and investments are located in foreign shores, reports PTI.

The department has been asked to do away with the norm of taking permission from higher authorities to initiate legal action and begin proceedings against tax evasion.

The finance ministry’s foreign taxation division can now ask the I-T range concerned to begin prompt prosecution action and issue summons to the depositor based on the evidence provided by the financial enforcement wing of the foreign nation concerned.

“The Central Board of Direct Taxes (CBDT) has issued orders in this regard as this will help in initiating quick action in cases where foreign accounts or assets have been traced by investigators,” a senior I-T officer said.

The step is also aimed at ensuring seamless flow of information between the investigating officer and the party under prosecution.

Sources said the step has been taken in the backdrop of CBDT obtaining for the first time investment data of few Indians who had accounts in Germany’s Liechtenstein Bank, recently.

According to sources, empowering investigators with such a step will also help India showcase its seriousness to the international financial enforcement community on addressing issues of black money and illicit funds.

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