FDI in construction sector will help the cash-starved realty sector raise funds, says Nomura in a research note
The government on 29th October relaxed rules for allowing FDI (foreign direct investment) in the construction sector including housing by reducing the minimum built-up area and capital requirement for foreign investment in such projects — a move that will help the cash-starved realty sector raise funds, says Nomura in a research note.
The specific changes in regulations include:
(a) The government is now permitting 100% foreign ownership of projects in the construction sector through an automatic route.
(b) It has also eased the requirements on the amount of land, built-up areas and certain capital requirements for foreign investment in the construction sector.
(c) It will now also allow investors to exit on completion of the project or after three years from the date of final investment.
(d) Investors can now bring in minimum FDI of USD5mn within six months of the project’s commencement and the investor can provide the remaining amount of investment committed over 10 years.
(e) Further in the case of an investor committing 30% of the capital for low cost housing, the requirements on minimum built-up areas and on exiting the project have been relaxed further.
(f) Also, the government may in certain cases permit repatriation of the investment or transfer a stake from one non-resident investor to another before completion of the project.
The Department of Industrial Policy & Promotion (DIPP), under the Commerce and Industry Ministry, moved the proposal to attract more foreign investment in construction and real estate sector that is facing a slowdown and liquidity crunch since last 2-3 years. Although 100% foreign direct investment is allowed in townships, housing and built-up infrastructure and construction developments since 2005, the government has imposed certain conditions.
Between April 2000 and August 2014, the construction development including townships, housing and built-up infrastructure, received FDI worth USD 23.75 billion or 10% of the total FDI attracted by India during this period.
According to Nomura, the new measures are intended to lower the threshold for new investment and facilitate larger FDI inflows in the construction sector, which accounted for about 10% of total FDI inflows in India over the last decade. The measure will aid developers and boost the government’s longer-term reform on affordable housing and smart cities. Additionally, this should boost growth in the construction sector, which is critical for India's infrastructure development plans.
As long as Nifty remains above 8,030, the uptrend may continue
Yesterday we had mentioned that the indices are currently directionless. After a gap up opening the benchmark moved in range up to 2.42 pm after which it gained further up momentum. In line with the positive closing of the US indices on Tuesday and Asian indices today, the benchmarks back home also closed in the positive.
Sensex opened at 27,017 and moved in the range of 26,972 and 27,126 and closed at 27,098 (up 217 points or 0.81%) while Nifty which opened at 8,077 moved between 8,052 and 8,098 and closed at 8,090 (up 63 points or 0.78%). The NSE recorded a volume of 78.64 crore shares – higher than yesterday’s. India VIX fell 2.38% to close at 13.0050.
Market may remain volatile tomorrow on the expiry of October 2014 futures & options segment series.
According to a latest survey by Nielsen, India remained the most bullish consumer market, while Italy became the most pessimistic, according to reports. The Nielsen Global Consumer Confidence Index rose 1 point in the third quarter to 98, according to the survey conducted between 13 August and 5 September 2014. The index has been steadily rising since the first quarter of 2012 and the latest reading headed closer to the 100 mark that signals optimism among consumers.
Moody's have retained its negative outlook on the India’s banking system, citing high leverage in the corporate sector that may prevent any meaningful recovery in asset quality. The negative outlook pertains mainly to the public sector banks as they represent more than 70% of total banking system assets. These banks have experienced higher growth rates in non-performing and restructured loans, as well as greater weakening in profits, than their private sector peers, Moody's said. It also said GDP will pick up moderately this fiscal, but will remain constrained by the high interest rates due to inflation.
Subsidised cooking gas (LPG) rates have been hiked by Rs 3 per cylinder after the government raised the commission paid to dealers.
SRF (19.72%) was the top gainer in ‘A’ group on the BSE. The stock also hit its 52-week high today. It has posted a net profit of Rs 76.85 crore for September 2014 quarter as compared to Rs 47.77 crore for the September 2013 quarter. Revenue has increased from Rs 843.89 crore to Rs 928.17 crore for the relevant quarter.
Jubilant Life Sciences (10.95%) was the top loser in the ‘A’ group. Its consolidated results posted a net loss of Rs 94.11 crore for September 2014 quarter as against a net loss of Rs 80.58 crore for September 2013 quarter. Revenue has decreased from Rs 1,437.27 crore to Rs 1,371.10 crore for the relevant period.
Among the leading gainers in the Sensex 30 pack were Hindalco (5.95%), Tata Steel (4.60%) and Tata Motors (3.41%). Tata Motors was recently in the news with its announcement of the pricing of a dual-tranche US$750million senior unsecured notes following strong demand aggregating USD 4.50 Bn for the offering that was launched and priced within a single day on 23 October 2014. The proceeds from the issuance and sale of these notes will be used to refinance external commercial borrowing of the company, incur new additional capital expenditure and for general corporate purposes.
Dr Reddy’s Lab (1.11%) was the top loser in the Sensex 30 stock. It posted weak September 2014 quarter result which pulled the stock lower.
US indices closed in the positive on Tuesday. US consumer confidence data, hit its highest since 2007 in October. The report overshadowed a separate read that showed new orders for capital goods by US businesses fell the most in eight months in September.
A two-day meeting of the Federal Open Market Committee on US monetary policy review ends today. All the Asian indices closed in the positive. Seoul Composite (1.84%) was the top gainer. The latest data showed a sharp rebound in Japanese industrial output last month. Industrial production in Japan rose 2.7% in September from the previous month, the latest data showed. Industrial output had contracted 1.9% in August.
China's focus on meeting short-term growth targets could hamper reform efforts it needs for sustaining longer-term economic expansion, the World Bank said today, 29 October 2014, in its China Economic Update. The World Bank praised Beijing for tightening credit growth, reducing excess capacity and grappling with pollution, adding these necessary steps toward economic rebalancing had also contributed to slower growth this year. China's gross domestic product grew a year-on-year 7.4% over the January-September period.
European indices were trading in the green while US Futures were trading marginally lower.
An SC bench headed by Justice TS Thakur gave a free hand to the Tribunal to take action against polluting units including forcing them to shut down
The Supreme Court asked the National Green Tribunal to take action against industrial units polluting Ganga, including snapping water and power connections to them, while slamming Centre and State Pollution Control Boards for their “failure” to punish erring units.
An SC bench headed by Justice T S Thakur gave a free hand to the Tribunal to take action against such units including forcing them to shut down.
“This is an institutional failure and your story is a complete story of failure, frustration and disaster. You need to stand up against the polluting units. It will take another 50 years if the task is left to you,” the bench said on the Pollution Control Boards.
“It is our duty to ensure purification of the river. There is no gainsaying that river has significance not only in religious and spiritual psyche of the people but it is also a lifeline of people,” the bench said.
The bench asked the Tribunal to file its report after every six months on the actions taken by it in controlling industrial pollution and posted the case for further hearing on 10th December, when it will pass further order to curb domestic effluents.