Real-estate construction stuck up under the Maharashtra Private Forest (Acquisition) Act since 2006 has now got a green signal from the Supreme Court, but further development will be possible only after a nod from the ministry of environment and forests
The Supreme Court of India has given a green signal to real-estate construction in Maharashtra for residential and commercial properties stuck under the Maharashtra Private Forest (Acquisition) Act, on Wednesday. But developers have to still wait for the clearance from the ministry of environment and forests (MoEF) before going ahead with construction or selling of projects in these forest lands.
“It is not an interim approval to all the projects built on forest land. It is only certain sections at Nahur and Bhandup which have got the green signal. Projects in Borivali, Goregaon and Kandivali (all Mumbai suburbs) still have to wait for clearance from the legal body,” said Pankaj Kapoor, founder, Liases Foras.
A bench comprising Chief Justice K G Balakrishnan and Justices Deepak Verma and B S Chauhan said that the interim order allowing construction activity is subject to the outcome of the pending petitions before it.
The Maharashtra Private Forest (Acquisition) Act came into force on August 30, 1975. Under the Act, land categorised as a ‘private forest’ could be acquired by the forest department to conserve forests.
Earlier, developers ignored the legislation till the Bombay Environment Action Group, a non-government organisation, filed a complain in the High Court stating that the state was ignoring the law and was not taking any action to acquire the 305 plots, that the state forest department had notified.
In 2006, the Brihanmumbai Municipal Corporation (BMC) had issued a stop-work notice to the projects on these plots, but a few developers went ahead with their projects.
“The developers have got a sign of relief from the judgement passed by the Supreme Court but have to wait for the MoEF’s decision. The MoEF will take some time to give a go-ahead to such projects. There will be proper due diligence. The developers have to wait till MoEF responds,” said Subhankar Mitra, AVP—strategic consulting, Jones Lang LaSalle Meghraj.
Earlier, the court had already announced that the developers had to pay a net present value (NPV) as a penalty for their properties. It also appointed a central empowered committee (CEC) to suggest a solution to this issue. The CEC recommended that residents living in houses constructed before 22 June 2005 pay an NPV of Rs8 to Rs12 per square foot for regularisation, while builders whose projects were completed before this date, but have not yet been given occupation certificates, pay five times the NPV—Rs40 to Rs60 per square foot. Builders who wanted to redevelop factories and commercial establishments into residential complexes were asked to pay an NPV of Rs80 to Rs120 per square foot.
“The judgement of the court was in favour of the customers who had booked their properties long time back but could not own them due to the litigation. At least, consumers will not feel that the developer has cheated them. Developers have got a positive signal from the legal body and we expect the MoEF will soon give the clearance,” said Mayur Shah, chief, sales business unit, Ackruti City Ltd.
According to media reports, there are about 150 large projects being constructed over about 200 acres of forest land in the city by builders, with a market value of Rs25,000 crore.
“It is a great relief for developers and a lot of actual users,” said Dharmesh Jain, chairman and managing director, Nirmal Lifestyle.
However, sounding a note of caution, Parimal K Shroff from Parimal K Shroff & Co, said, “It is an interim order which has been passed by the Supreme Court. The court has permitted a few people to pay the NPV in a certain period of time. Thereafter, the decision will be taken by the CEC appointed by the court.”
Binani Cement Ltd has admitted that it has faced heavy pressure on cement price realisation and high input costs. However, the company has reported a modest growth in net sales
Binani Cement Ltd has admitted to pressure on price realisation for cement due to over capacity, low demand from the commercial real-estate segment and high input costs. The company has registered a modest 12% growth in net sales of Rs423 million, from Rs3,600 million in Q3FY2009 to Rs4,023 million in Q3FY2010.
“In this quarter, the realisation of cement was less on the pricing side. There is a pressure on cement pricing everywhere. In addition, input costs—especially logistics costs—have increased,” said Vinod Juneja, managing director, Binani group of industries.
According to Mr Juneja, if it were not for the Dubai crash and the Andhra Pradesh turmoil, net sales could have been better by around 10%.
Mr Juneja attributed the pressure on cement prices to the turmoil in Andhra Pradesh. “For the last quarter, we do not have capacities in the south, but cement companies operating in (the) Telangana (region) and (the rest of) Andhra Pradesh started diverting supplies to Maharashtra and Gujarat. This resulted in a drop in the realisation of prices for cement. But we have still not incurred any loss.”
Cement prices all over India have stabilised, backed by the peak demand season for cement. Mr Juneja expects this rise in price to continue up to June 2010. The rise in cement prices started in December 2009, with significant price rise registered in the southern and western regions. Analysts expect this rise in price to continue till March-April 2010.
Before the recent rise in prices, cement prices all over the country were on a continuous downfall. In a short span of time between August to October 2009, cement prices had fallen from Rs230 per bag to Rs140 per bag. The southern region was worst affected by the downfall.
Binani also has huge investments in cement plants in Dubai. Cement production from Dubai has now been diverted to other countries. “Binani Cement Ltd was a major supplier to real estate in Dubai. To overcome the problem in Dubai—at least for the next one to two years—we are immediately opening our African markets and markets in Sudan, Kuwait and South Africa. Iraq and Oman will also be tapped,” added Mr Juneja.
On the fall in cement prices in Dubai, he added, “In good times, we were able to sell cement at around 350 dirhams per tonne of cement, which has now come down to roughly 240 to 250 dirhams per tonne. We are not selling it for a loss, but there are hardly any margins left.”
Binani Cement has reported an increase of 573% in profit after tax from Rs84.90 million in Q3FY2009 to Rs571.70 million in Q3FY2010.
Consolidated marketing & distribution costs down by 50%, but other expenditure rises 41%
There is a widespread belief that if the stock market does well over a prolonged period, TV18’s revenues would rise sharply. The assumption is that CNBC TV18’s extensive market coverage is bound to attract audiences to the channel and its various other properties, thereby boosting advertisements. TV18’s managers encourage this belief and analysts propagate this avidly too. However, this has turned out to be a false belief, as per its December quarter results. The Sensex has rallied by more than 100% from March 2009 to January 2010.
However, even after this strong rally, TV18’s revenue for the December quarter was down from Rs130 crore to Rs129 crore. Revenue from the core broadcasting operations was up by only 10%. Meanwhile, TV18 is still reeling from large losses. On a nine-month basis, coinciding with a massive bull market, the net loss has jumped 139% to Rs148 crore from Rs62 crore for the corresponding period of the previous fiscal.
In fact, losses have become so deep set that TV18 has had to slash costs in all four business segments it operates in. It slashed its distribution, advertising and business promotion costs by 50% in the December 2009 quarter, but clearly it still does not have its costs aligned to its weak business model. Its other expenditure has rocketed for the December 2009 quarter. TV18’s marketing and distribution costs are down by 50% to Rs13 crore for the December 2009 quarter from Rs26 crore in the corresponding year-ago period. Staff costs for the quarter are down by 31% to Rs39crore (from Rs57 crore). However, other expenditure has shot up to Rs71 crore from Rs48 crore, a rise of 41%. Saving on staff cost and distribution expenses on one hand and increase in other expenditure on the other hand leaves the company in no better position.
TV18’s flagship news channels, CNBC TV18 and CNBC Awaaz have registered a net loss of Rs21 crore in the December 2009 quarter from a net profit of Rs4.6 crore in the corresponding quarter of the previous year, which was boosted by Rs27 crore of other income. On a consolidated basis, TV18 has registered a net loss of Rs42 crore, up from Rs30 crore. TV18 has under its umbrella business brands like CNBC TV18 and CNBC Awaaz, Web18, Newswire 18, Infomedia 18 and IBN18, most of which are in the red since inception, irrespective of market conditions.
Last year, Infomedia launched the Forbes magazine in India. The magazine was priced at Rs50 in an inaugural offer, which is now sold at Rs100. Subsequently, it launched Entrepreneur, a magazine for the small-business segment priced at Rs75. These ventures have been a big drag on revenues.