Companies & Sectors
First quarter performance of real estate sector expected to be subdued on high prices, costs

Brokerages say high property prices curbing sales growth; higher costs of inputs and funds putting pressure on margins

The performance of the real estate sector will remain subdued due to low sales and execution on account of high property prices in the first quarter of 2011-12. Margins will remain under pressure due to a rise in input costs and the sharp increase in the cost of funds for developers.

IDFC has estimated a 2.5% y-o-y decline in top line of the real estate sector, led by HDIL (Housing Development & Infrastructure) and JIL (Jaypee Infratech). EBITDA margins are expected to fall to 40% (versus 51% in the corresponding quarter of the previous year as Jaypee reports normalised margins of 45% versus 83% in the year-ago period). However, margins are expected to compress across the whole sector.

PAT is expected to decline 31% y-o-y for the sector, led by JIL and HDIL. PAT margin has been impacted by higher interest cost. In the case of DLF, revenues would be boosted by plot sales in Gurgaon (about Rs700 crore) with EBITDA margins expected to return to higher than 40% levels. IDFC believes that leasing could witness some slowdown as the focus shifts to achieving higher rentals. In the case of JIL, revenue recognition is to come from group housing projects - 'Klassic' and 'Kosmos';  EBITDA margin should stabilise at 43%-45% levels (against 83% in the quarter last year, entirely from plot sales).

According to Angel Broking, during first quarter of financial year 2011-12, the BSE realty index widely underperformed the Sensex by 1,049 basis points on the back of corporate governance, restricted credit flow to the sector, and the expected increase in cost of funding for future projects.

Moreover, the RBI's (Reserve Bank of India) measures to tighten liquidity and curb speculative demand have further dampened the performance of stocks. It is believed that the recent correction provides a good entry opportunity into realty stocks with stocks trading at a significant discount to the one-year forward NAV, stability in volumes and comfortable balance sheet position. Angel has named Oberoi Realty, Anant Raj Industries and even HDIL (in contrast to Motilal Oswal) as best placed in the sector.

According to Motilal Oswal, which has interacted with real estate agents, the Mumbai real estate market remains sluggish, the National Capital Region market is worrying, but in the southern cities of Bengaluru and Chennai the market is steady. No major price correction is likely in any of the major metros, rather there could be a price uptick of 10%-15% in Bengaluru.

The brokerage has gathered that volumes are recovering in the commercial vertical and there are early signs of rental appreciation in the CBDs (central business districts). Commercial real estate buyers are likely to be attracted by superior product positioning and developers with significant near-completed commercial assets at attractive locations. Home buyers, too, are likely to bet on developers with established track records. Motilal Oswal has picked Oberoi Realty, Prestige and DLF among the better performers in the sector.

According to Motilal Oswal, rentals are strengthening marginally in city-centric micro-markets, but in the peripheral market rentals are under pressure. Steady leasing volumes would ensure a boost in rentals late in 2011-12. There is an increase in inquiries at in malls. But only completed/nearly-completed malls are gaining retailer response and closing transactions.

Motilal Oswal has also made a comparison of key cities in the real estate sector. The end-user driven Bengaluru residential market has been steady, with sales volumes up 50%-70% y-o-y, due to traction in new launches and moderate price appreciation. Volumes are likely to grow by about 30% in Bengaluru in the backdrop of a strong launch pipeline in the mid-income segment. However, delays in the approval process would defer most of the launches to the second half of 2011-12.

Chennai would remain a stable market with steady volume improvement and no major price increase. There were several new launches in Chennai and sales velocity remained steady (with a seasonal dip over the past couple of months). Volumes grew 30%-40% YoY and prices were stable.

After strong sales in the fourth quarter of the previous financial year , there has been a dip in volumes in Gurgaon over the past 2-3 months. Higher proportion of underwriting by real estate brokers and a large proportion of sales to investors could result in increased risk of secondary market supplies. Sales volumes in Mumbai are weak, with no meaningful signs of rationalisation in prices (though prices have not appreciated either). Delays in obtaining approvals, slow execution and low investor demand have impacted absolute volumes.


2G case: Court allows CBI to quiz Raja, 2 others

The court allowed the agency's application that in the interest of the case, it required to interrogate key accused afresh for the on-going probe

New Delhi: A Delhi court today allowed the Central Bureau of Investigation (CBI) to interrogate afresh former telecom minister A Raja and two other accused in the second generation (2G) spectrum allocation case in the Patiala House court complex, reports PTI.

Special CBI judge OP Saini allowed the CBI, which is yet to file its second supplementary charge-sheet in the case, to interrogate Mr Raja, former telecom secretary Siddhartha Behura and Reliance ADAG Group MD Gautam Doshi for one hour each, in the lock up, at the court complex.

The three accused will be interrogated for one hour each between 2 pm and 5 pm today.

The CBI had on 16th July pleaded before the court to allow it to quiz them.

The court allowed the agency's application that in the interest of the case, it required to interrogate key accused afresh for the on-going probe.

"Further investigation is being carried out and three accused are required to be examined in judicial custody in interest of the case," the application said.

It had also sought the court's permission to submit a total of 28 additional documents and a list of 11 witnesses to support its charge sheets filed on 2nd April and 25th April.


Has Corporate India finally woken up to the people’s sentiments against corruption?

Graft is an issue in which all Indians have to be involved—be it politicians, India Inc or we, the people—the larger issues of the day to fix corruption are electoral, police and educational reforms. But Corporate India has to speak up—loudly

Slowly but steadily, it seems as though the chattering classes in India are moving back into the "fight against corruption" mode, as timelines get closer to the deadline for the Lokpal Bill set by Anna Hazare.

The reopening salvo was sounded, as expected, at the Prakash Kardaley Memorial lecture in Pune on 15th July. Over 4,000 people packed the Balgandharva Rangmandir auditorium to almost four times its capacity to listen to Kiran Bedi and Anna Hazare at a function to mark the 4th death anniversary of the person many, including this writer, consider to be "The Master" in matters pertaining to probity in public life, the RTI (Right to Information) Act, and a corruption-free environment.

Prakash, a cult figure in Pune, who was known to call a spade a spade, would always remind us that without the support of two vital arms of society, commerce and religion, we could never hope to even dream of cleaning up society in India as we knew it. Based in the city which has also given India the joy of producing leaders who symbolise and brilliantly use the bridge between politics, commerce, religion and more—people like Sharad Pawar, Suresh Kalmadi, Raj Thackeray and others—Prakash certainly knew what he was talking about.

Likewise, after having helped organise the ladies of the local RWA in carrying out an impressively noisy demonstration of over a hundred people against corruption at the Anna Hazare fast site at Jantar Mantar in April this year, I was nursing a tall and cool one at the club bar later in the evening when I met some of their husbands. They are friends of mine, too, some since childhood, and they had a simple question—it was good that their wives were fighting against corruption, but could I please explain to them how they were supposed to exist without being part of what one called the "corruption supply chain"?

Then followed an interesting discussion and reality check lesson on the intricacies of the "corruption supply chain", and how it was a finely balanced process, which probably worked fine as long as it remained within the country. The problem, as many of them freely admitted, was that this "corruption supply chain" was now fitted with multiple heads, limbs and tails that were located abroad, and there was increasingly heavier "leakage" in that direction. Which, they agreed, was not good.

Corruption, apparently, costs domestic corporates more and international corporates less. Because the international companies arrive on the scene with their centuries of experience, as well as massive support from their religious joint ventures. This benefit was not available to domestic Indian corporates. For them as Indian corporates, the writing was on the wall, some day somebody from abroad would come and swallow them up. Simply because they were smarter at portraying themselves as less corrupt, but were actually past masters at the game, which is also a fact.

Further explained: the moment domestic Indian corporates tried to work, for example, with the support of domestic religious entities, the 'secular' media would throw Baba Ramdev, Imam Bukhari or the Bishop of Palar at them. So, in effect, domestic religion had to subsidise its offices abroad, which then re-entered India as foreign investments.

An example of a particular NRI brand of Hinduism literally riding the top of the FDI (foreign direct investment route), apart from the usual references to the Vatican, Church of England and various Islamic sects, were given.

But what could they do? The Indian media, firmly in the grip of the foreign corporates, would simply not do anything about this intricate linkage between religion and corporate worlds. Despite figures like Rs100 lakh crore being notched up out of only one temple or church or mosque in Kerala, or similar. Or maybe, much more. I mean, only Rs11 crore (in cash) from Sai Baba's fortunes? A good second hand car dealer carries that much around, nowadays.

So it was with a feeling of great expectations and high hopes that I landed up at the India Habitat Centre in Delhi on 16th July to attend a debate on the subject: "Until Corporate India cleans up its act, is corruption-free India a fantasy?" More so, because the debate had been organised by the alumni association of the Indian Institute of Management-Calcutta (IIM-C). In addition, Nripjit "Noni" Chawla and Pradeep "PG" Gupta, who were going to be moderating the event, are known for being much more than simply successful corporate chiefs in their own right.

Here it is important to point out that the various industry bodies, chambers of commerce and other corporate groupings have, largely, maintained a deafening silence on the subject of fighting or even accepting the realities of corruption in India lately. On the other hand, we have seen how Tarun Das of the CII (Confederation of Indian Industry) was figuratively apparently almost sweeping the floor with his tongue when apologising on national television, for having mentioned something about efficiency on corruption in context with Kamal Nath on the Niira Radia tapes.{break}
So, the upside here is that full marks to the IIM-C Alumni Association for having taken what was obviously a very big and bold step within Corporate India—accepting that there was a problem, to start with, and that Corporate India was in the midst of it. Probably the main reason for it, too, but that was for later on.

Surprise No.1: There were hardly 75-100 people present. This, in reality, is corporate India, especially in Delhi, for you.  

Surprise No.2: The panel appeared to be loaded with people who were mostly going to not make waves. IIM-C is known to have produced some very interesting and erudite people- and it was apparent that many from IIM-C who might have spoken with more fervour and candour, were simply absent—or relegated to the background.

And surprise No.3: There was a total skew towards males on the dais, including some gender-insensitive references by people who should have certainly known better.

The meet was opened by Arvind Bagga, alumnus of IIM-C, who promptly set the tone by making a very strange statement—he claimed that as he was "in advertising", he and his industry were removed from corruption. This is very interesting and requires a separate debate-as anybody who has tried to hire a hoarding or push forward a controversial product or service will tell you.

Corruption, like pornography, is not something which has a singular definition. It is also incorrect to assume that somehow those who speak with the correct accent and have brilliant syntax and grammar, or for that matter those who are "in info-tech" or similar new-age corporates are less corrupt than those not blessed similarly.

Ideally, coming from the leading MBA institute in the country, some time and effort could have been spared to first setting up a broader definition of corruption. Selling tobacco products in India, under the infamous "Operation Berkshire", for example-as people who have worked for ITC will admit-could have been used as a fine example and also as some sort of coming out with similar truths by Corporate India, on previous acts of corruption by corporates in India.

Fore more click on this link:

Likewise, the reality that much of India's info-tech business, the STPI (Software Technology Parks of India) scam primarily, was also aimed at real-estate scams-is never discussed. But it does not vanish, nor is it not a reality in the corruption stakes, so generalised assumptions are not acceptable to an audience who can check facts online and send text messages to panellists where and when they go wrong right away.

(If there was one aspect that grated on the nerves throughout, it was this patronising assumption—that "us" from the English-speaking elite public schoolwallah type backgrounds were not corrupt. Because we could, probably, afford better PR.)

After that Nripjit "Noni" Chawla went through a round of introductions. He also said that that he believed that the business sector had capitulated and provided the Ambanis as an example of all that was wrong with corporate India. This is something I find strange at most corporate type meetings—the Ambanis are pushed forward as though they invented the art forms of lobbying and motivating successive Indian governments, while there is deep silence on the role of MNCs, foreign banks and other similar entities.

The almost compulsory statement from Anu Aga at all meetings like this was then read out, which said nothing new, the usual "I love my country" bit.

We then had AK Agnihotri, ex-civil servant, who presented us with a history of corruption as seen by somebody who had worked in Mumbai for a major part of his life. He walked us through the era of silver & gold smuggling, the advent of hawala, and some very straight talking on home truths in context with the role of the Arab countries in shaping things up- until and until the DTAA (Double Taxation Avoidance Agreement) with Mauritius came along and changed the rules of the game totally.

A very interesting aspect, which is again not spoken about much, was his submission that in times of global economic problems, it was the lubrication from the 'black' economy which helps countries like India and China through difficult times. Some of us find that a very feudal and almost colonial way of saying-be thankful for the scraps we throw at you when the nights are cold. Especially when it is neglected in mentioning in passing that we were robbed blind by the same people when times were good. But anyway, that was his view, and it really did not answer the question of the evening.

Speaker after speaker, with the possible exception of Paranjoy Guha Thakurta and Arvind Kejriwal, neglected to answer the question. It was almost as though the question of the evening, printed behind the speakers on a huge banner, had been forgotten, as speakers got down to presenting their point of view on (a) how they/their company/their views were not to be blamed and (b) how somebody else was to be blamed.

Kaushik Dutta tried to explain the concept of laws and enforcement and then took us through MGNREGA and UIDAI, with pot-shots at judicial activism and media. He then tried to put forward a hypothesis that corruption was actually going down by trying to link actual prosecution, which we all know is dismal. People in jail as under-trials, even if they are MPs or corporate chiefs, are not good examples. As yet. Small steps, certainly, under the present laws. But these might not be the best examples of anything other than, possibly, elements of selective vindictiveness.

Kaushik also had a view that the laws in India were good, actually great, but it was implementation that was lacking. This matched the little woolly hairs on his head, is all that one can say, in astonishment. One is tired of hearing this oft-repeated line that "our laws are good", delivered with eager seriousness by a variety of people, who have obviously no clue of what they are talking about.

We then saw Noni come back in command for a while to try and rescue Kaushik, by steering the conversation towards something about transparency in corruption and how was business supposed to carry the burden of corruption, when there was no certainty of punishment.

After that, Paranjoy Guha Thakurta, who is always a delight to listen to, walked us through his views on scales of corruption in India, the emergence of the new era oligarchs, the relationship between high growth and corruption, the argument for 'corrupt plus efficient' versus 'corrupt plus inefficient'. And the way that despite others saying that laws in India were good and implementation was bad, the fact remained that the laws (take for example—the yet unframed Benami Act of 1998) were not good enough.

In Paranjoy's Brave New World, where Huxley's world of over-indulgence appears to beat Orwell's world of denial, corruption in India goes way beyond personal greed. He left the important question open—if not personal greed, then what? And the simplistic explanation by others, that cost of elections was the reason for corruption in India, was knocked down by simple numbers—the annual budget for the IPL (Indian Premier League) exceeded the cost of national elections. So, was IPL the main cause for corruption in India? This is an interesting point of view.{break}
Noni called this 'Paranjoy's Paradox', but barring Arvind Kejriwal's delivery at the end, this was the main unanswered question of the evening. As well as the one that got many thinking, too.

We then had Bharat Wakhlu putting forward what can best be called the "Tata worldview" (but please don't look at Pallonji and others, and certainly do not refer to the opium trade origins) which is another one of those "if you say it enough number of times then the world will believe it as the truth" kind of deliveries. However, to be fair to Wakhlu, he did put forward a point of view that the 600-pound gorilla in the room was that corruption is a game in which we are all present together, and that the larger issues of the day to fix corruption were electoral reforms, police reforms and education reforms.

After this we had Pradeep Gupta "PG" who spoke about how he agreed that the numbers were no longer generated only by electoral reforms or corporate survival, but simply by greed. For more and more. Towards this, he proposed we look at the education system, where everything is about winning, greed and vested interests.

He also submitted that a differentiation be made between "retail corruption" (going down, by the parameter of phone connections, railway tickets, gas, etc.) and "wholesale corruption" (going up, bigger scams like 2G, mining, civil aviation, etc.). I will only say that this is an amazing proposition, and I think he has not been on the road or in the back of beyond lately, to see how "retail corruption" is killing people in India, and can not be trivialised with mobile phones. Can the poor eat mobile phones?

Noni Chawla then submitted that he proposed that Ministries be auctioned to the highest bidders. One can only hope that he was joking—or unaware that Ministries are actually already traded, somewhat like what he proposed. In any case, Ministries are mostly for Ministers, and they are there to collect money. For themselves. Because, as Kejriwal explained later, there is no law in India, as yet, where money "earned" through corruption, can be recovered from the guilty!

Next, we had Dr Dipankar Gupta providing an academician's point of view. The interesting aspect he brought out was that corruption was also required to win elections from the point of view of paying for violence and the technology needed to win elections. One presumes he was not referring to the way George Bush managed to steal a victory, but closer home, how dark rumours about the way EVMs (electronic voting machines) are and can be rigged keep surfacing.

Dr Gupta also spoke about how greater income equality reduced corruption and conversely, greater disparity increased corruption. He brought out the example of Sweden, somebody from the crowd said "Bofors", and that was the end of that hypothesis.

So finally, after a lot of expectations, we got to hear Arvind Kejriwal. Frankly, he was not given enough time, and the organisers should know we came to hear him, and hoped they would hear him, too.

Arvind, as is his style, waded into things straight away. According to him, corporates do not want to accept that elections are only the most visible cause for corruption, but the real cause is simply greed in society—extended by multiples to corporates. Corporates in India are corrupt because they are greedy and therefore they like being corrupt seems to be the message he was putting across.

In example after example of corporate corruption, he successfully demolished the populist argument that politics was the reason, and showed how it was nothing more than corporate greed for more and more profit which was the real and only cause. Taking things to the next level, he then showed how corporate India was actually framing the evolution of the individual Indian and Indian society, especially as a result of advertising which was now assumed to be always not truthful.

From there Arvind moved on to explain how, despite everything said to the contrary, it was corporate India which benefitted the most from the fact that there was hardly any real deterrence against corruption in India. Pithy realities of life as far as CBI, CVC and internal vigilance formations in government were well known—but what sort of internal vigilance publicly displayed did private corporates have?

Especially when private corporates, despite being so substantially financed by public money, stayed clear of accepting the basic tenets of the RTI Act on themselves—even for corruption-related cases.

Arvind also made a strong case that it was about time corporate India stopped subscribing (the words he used were "beg to differ") to the oft-repeated lie that India had "adequate laws", and that it was corporate India's role to ensure that we actually got adequate laws.

Included in this was a submission that the Jan Lokpal Bill was likely to provide all that India, including corporate India, wanted to fight corruption. Not mentioned, but certainly a point of view that was understood, was that the lack of support from corporate India to the Jan Lokpal Bill, said more than anything else on whether corporate India really wanted to eradicate corruption or not.

Which brings one to the key takeaway from such a meeting.

To this writer, and other observers at this seminar, corporate India is still in some sort of la-la land, where utilising for its own benefit the current state of corruption in India overrides any corrective, despite some small noises here and there.

To the larger question, which I repeat, was "Until Corporate India cleans up its act, is corruption free India a fantasy?"—the answer one got from between the lines in the post seminar discussion was this—as long as the corporate benefits, what does it matter whether there is corruption or not?

The big danger with this approach is that:

(a)    The people who vote are not fools. At some stage or the other, they will realise that it is due to corporate India that they are suffering. No amount of free mobile phones or colour TVs are going to work then, as election results in Bihar, West Bengal and Tamil Nadu and possible election results in Gujarat next year will show.

(b) Corporate India itself may wake up one day to find itself swallowed up by corporate East India Companies, for whom the stakes are simply cyclical and transitory—the example of the tobacco pushing Operation Berkshire being just one example.

Frankly, Arvind Kejriwal should have been given more time; the Q&A should have been handled so that more questions could have been asked.

But, despite everything, this was a very brave beginning by corporate India, which so far has maintained an ostrich in the sand kind of attitude towards the storm against corruption sweeping through India. For that, alone, salutations to the IIM-C alumni Association are in order.

But it has to be more than 75-odd people. Take this national, put it on the Web, use the corporate tools at your disposal. When 4,000 people can assemble in a city like Pune, driven by a few volunteers with hardly any resources, corporate India should be able to do multiples of that with their organisational skill-sets.

If they are serious, of course. Otherwise go back to making as much as you can today, because tomorrow is nobody's day, and the myth of the top-man being clean carrying the mess of pottage below him called the corporate is no longer a viable proposition.



Adi Daruwalla

6 years ago

Corprate India need to do more than just speak up. It first needs to put up banners that say don't give and we don't take. Then it needs to practice what it preaches. The rot has reached every crevice of India. Spying happens on an interdepartmental and inter colleague basis also via the technology department. The tools available are of such high grades that even there is misuse to capture other peoples computer screens for your own personal benefits with friends in the technology department. There are non disclosure and privacy agreements signed by all employees but the techies flout them the most for personal benefits accruing to them from such clandestine spying. Governance failures on all counts need to be corrected even at HR levels of VPs and AVPs. There have been instances of their morals and values being bought over for a few lakhs or high end home appliance gifts or holidays



In Reply to Adi Daruwalla 6 years ago

Thank you for writing in. I think corporate India needs to first of all admit that it really messed up and that corruption in India is now a hydra headed monster which will swallow them up and then spit them out for whichever East India replacement lands up next to grab the cake. Next it needs to figure out that destroying the country with all these so-called first world disasters like tobacco products, chemicals and worse in processed food, GM seeds, excessive private transport - all these and more - is just going to destroy its own customer base.

More on this soon. Once again, thank you for writing in. VM

Adi Daruwalla

In Reply to malq 6 years ago

Yes admit and acknowledge that the train is off the track and start immediate corrective measures to bring it on the track. Also as you mentioned GM seeds etc, there are even projevts recommended by Parsi gentlemen with foresight of a garland river project where all the rivers that are there in India especially the ones of the north whose water flows into the seas can be converted to connect the rivers of the south, whereby water supply to all farmlands (india agrarian economy) will never be in short supply. But this can happen only if the govt would have stopped filling pockets 40 years ago and gave serious thought an implementation impetus to the project, then you would not have needed GM seeds for food production.


6 years ago

Any mass change could be brought only if the mass participates. Small drops make an ocean. Have we started resolving '' NOT TO BRIBE'' for our day to day needs of things to be done be it small or big. Unless we public create a " DO NOT GIVE BRIBE" MOVEMENT as a mass movement akin to our freedom fight there wont be any salvation from corruption. This mass movement requires only WILL POWER and nothing elese. When the movement succeds then every politician will be our worker and not our master as of now.

Voice of India

6 years ago

100 me 99 politicians in India are Baiman(CORRUPT),phir bhi MERA BHARAT MAHAN. It is a matter of great shame for all those honest people of India"THAT WE ARE CITIZEN OF INDIA-THE MOST CORRUPT COUNTRY OF THE WORLD being largest democracy on this earth.
Solution :-All corrupt politicians,Breuocrats & gratifier(bribers)must be hanged.

suneel sardana

6 years ago

Can any reader or UPA leader count the name(s) of non corrupt or 100% honest ministers of U.P.A.Government with full confidence?
Corruption is omnipresent in India & none seems to be serious to eradicate the same.Anna Hazare Andolan of Lokpal bill will be crushed like Ramdev movement as stated by Kapil Sibal,Digvijay & many other leaders of Congress.This proves how serious is our govt.?
Inefficency is the biggest act of corruption & we have most non performance & dummy P.M. in India.
What a pity?



In Reply to suneel sardana 6 years ago

Dear Mr. Suneel, thank you for writing in.

I think we all have to work towards a solution, which is certainly complex, but not impossible. If all of us do our little bit or bits, then slowly but steadily we may be able to make a change, no?


Jojo Chandi

6 years ago

Why does the Government not insist that all remittances from abroad must be accompanied by :
for individuals either indian pan details or the citizenship details of the individual if not Indian
for corporates the incorporation details from the country of incorporation
I suppose that is the only way that off-shore funds legitimate or otherwise could be identified.
The Banking system in the western world has been used to obfuscate ownership details of funds from after the First World War. They are masters at this game.
India is the safest investment destination in todays world (2011) . This is the time we could put in the required laws



In Reply to Jojo Chandi 6 years ago

Dear Mr. Chandi, thank you for writing in, your points are valid and one can only hope that the voters of our country exercise their powers with more awareness in the future.


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