Financial castles in the air-III

Builders are offering ‘guaranteed’ returns—and rebates— to home-buyers in return for upfront payments even for under-construction properties. This is the third part of a continuing series

DLF, the official sponsor of the Indian Premier League (IPL), is trying out different financial moves to run its core business, real estate. It is offering different rebates for its various properties if homebuyers pay almost 95% of the basic sale price (BSP) within one month of booking a property.  

A real-estate agent from New Delhi told Moneylife that DLF is offering 10% rebate on the BSP for its residential project −‘New Town Heights, DLF Gurgaon’, by offering a down-payment scheme. The customer has to pay Rs5 lakh at the time of booking the property; 97.5% of the sale price within 30 days and remaining 2.5% can be paid when the customer receives the occupation certificate. Currently, the price of the project is Rs2,150 per square feet.

Recently, the Delhi High Court asked market watchdog Securities and Exchange Board of India (SEBI) to probe a ‘mis-statement’ in DLF’s Red Herring Prospectus while it had launched its initial public offering (IPO) in 2007.

The developer is also offering a higher rebate of 10.50% for its ‘River Valley’ residential apartment project at Panjim in Goa, while it is offering a 10% rebate for its ‘Express Greens I & II’ project in Gurgaon, according to the real-estate agent.

For the River Valley project, the consumer is supposed to pay Rs2,50,000 for a one bedroom, hall & kitchen (BHK) flat, Rs4,00,000 for a two-BHK and Rs5,00,000 for a two-and-a-half BHK, at the time of booking. The remaining 95% of sale price has to be shelled out within two months after booking the flat. The remaining 5% including interest-bearing maintenance security (IBMS) charges, stamp duty & registration charges and other charges have to be paid at the time the company hands over the occupation certificate.

According to DLF’s website, for the ‘Express Greens I & II’ project, the applicant has to pay Rs5 lakh at the time of booking an apartment in the tower; 95% of sale price within 30 days; 2.5% of the sale price when the occupation certificate is applied for, and 2.5% of the sale price (including IBMS, stamp duty and registration) at the time of receipt of the occupation certificate. Currently, the prices of the Gurgaon apartments are Rs2,250 per sq ft.
(This is what DLF’s website says: See here)

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    3G or 4G: What will be the final call?

    Mobile operators in India are battling for 3G spectrum—while the world is getting 'hands on' experience on 4G technology. Moreover, going by the telecom minister's statement, mobile operators will have to be ready to shell out more money for 4G even as they roll out 3G networks

    Even as mobile operators in India are battling with each other for 3G spectrum, the world is gearing up for 4G technology. In February, the Telecom Regulatory Authority of India (TRAI) had also started consultation for the next level of telecom services or 4G, which offers download at faster speeds (ultra-broadband) and high-definition video on demand, among other such services.

    Even as the bidding process for 3G spectrum is going on, the minister for telecommunications A Raja's statement regarding 4G is sure to disturb incumbent mobile operators. According to media reports, Mr Raja has said that the auction for 4G spectrum will begin as soon as operators roll out their 3G networks. This means that operators, who are spending huge sums for acquiring 3G spectrum, will have to shell out even more for 4G spectrum—immediately after rolling out their 3G networks.

    "Given the supply-demand mismatch (for three 3G spectrum slots) and its importance from a long-term growth perspective, we expect significant overbidding to take place. We expect the auction amount to reach Rs80,000 crore compared with the base price of Rs35,000 crore at a pan-India level. We expect all the leading operators to strive to get 3G spectrum in most of the key circles such as ‘Metro’ and ‘Circle A’ areas. Failing to win 3G spectrum in these areas could place them at a disadvantage versus competing players. As a result, operators will likely end up bidding aggressively, incurring higher cash outflows," said Ambit Capital Pvt Ltd, in a research note.

    TRAI chairman, JS Sarma, while rolling out the consultation process for 4G, had said,"3G has been delayed badly. I don't want 4G or LTE (Long Term Evolution) to meet the same fate. Other countries are catching up with 4G and that is why we are taking advance action."

    In fact, a number of foreign players like US-based Motorola and Ericsson have already started testing 4G or LTE technology in various parts of the world. To be more precise, on 3 March 2009, Lithuanian Radio and TV Centre (LRTC) announced the first operational 4G mobile WiMAX network in Eastern Europe. This was followed by Swedish-Finnish network operator TeliaSonera and its Norwegian brand name NetCom (Norway). These network operators, on 14 December 2009, deployed the first commercial LTE in Scandinavian capitals Stockholm and Oslo.

    Back home, mobile operators are in dire need of cash flows, not only for deployment of 3G networks, but also to win the bids. According to the Department of Telecommunications (DoT), on Tuesday—the fourth day of bids—the price for a pan-India licence rose 31% to Rs4,582 crore over the base price of Rs3,500 crore. The Indian government has set itself a target of Rs35,000 crore by selling 3G spectrum and broadband and wireless access (BWA) services.

    The Gujarat circle, for the first time since the e-auction started, moved to the top in the provisional winning bid price at Rs459.52 crore against Delhi's Rs437.65 crore. Telecom players have been showing keen interest in Delhi, Mumbai, Maharashtra, Gujarat, Andhra Pradesh, Karnataka and Tamil Nadu circles out of the total 22 circles.

    Ratings agency CRISIL has said that large debt funding of the additional investment on 3G spectrum licenses may exert pressure on the financial risk profiles of CRISIL-rated players over the near to medium term. The pressure on the players’ financial risk profiles will be offset by their strong cash flows, underpinned by a mature pan-Indian presence for most rated players or support from their parents, it added.

    In technical terms, 3G allows simultaneous use of speech and data services and higher data rates of up to 14 megabits (Mbits) per second on downlinks and 5.8 Mbits per second on uplinks. On the other hand, 4G offers a data rate of at least 100 Mbits per second. While 3G allows services like wireless broadband access, multimedia messaging service (MMS), video chat and mobile TV—4G, in addition, can offer new services like HDTV content, minimal services like voice and data, and other services that utilise high bandwidth. 4G may also allow roaming with wireless local area networks, and can be combined with digital video broadcasting systems.

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    1 decade ago

    Its very information. A comparison table of 3G & 4G will be good if added

    Fidelity woos smaller intermediaries to expand operations

    Unable to expand through a combination of advertising and selling through national distributors, the fund house is empanelling smaller distributors now

    Fidelity Fund Management Private Ltd, the US fund management major which launched its India operations in 2005, was so far following a pan-India distribution model by selling mutual funds through national distributors like banks. It is now trying to woo smaller intermediaries to expand its distribution network and to garner a larger pie of assets under management (AUM).

    Earlier, Fidelity was only empanelling national distributors who could funnel Rs100 crore of AUM. A fund house may follow an ‘aggregation model’ wherein it ties up with national distributors who have a large distribution network of their own. This is a more cost-effective model for asset management companies (AMCs), wherein they don’t have to spend on resources like commercial office space, employees, etc. The AMC may cough up a higher commission to the national distributors for their services.

    “As an advisor we are supposed to sell all mutual funds which are doing well for our customers. It’s a major business issue for us. We approached Fidelity for an agency several times, but it said that it would not empanel IFAs (independent financial analysts),” said Ramesh Bhatt, a Chennai-based IFA.
    “This might be the case because Fidelity doesn’t want to operate with so many distributors across the country. In the UK, an intermediary needs to make a declaration every six months. An intermediary himself needs to follow all those rules. In India if you have an ARN number then you can get empanelled with any AMC,” said a top official from a leading fund house.

    According to AMFI (Association of Mutual Funds in India) data, Fidelity had an average AUM of Rs7,683.90 crore as on March 2010, compared to Rs6,172.90 crore for the corresponding month last year. “Earlier I was told that they would not empanel me. I had to contact officials in Delhi. They gave me a special approval,” said Vivek Rege, MD, VR Wealthy Advisors Pvt Ltd.
    Why has the company now decided to change its strategy? “They spent crores on advertising and brand building and now they find it difficult to get retail business. Brand recall does not guarantee business from customers,” said a Mumbai-based IFA, preferring anonymity.
    According to sources, Suraj Kaeley, director (sales & business development) of Fidelity is trying to expand the company’s India network. Mr Kaeley, was earlier associated with Franklin Templeton Investments and Metlife India Insurance Company Ltd.

    Earlier, small intermediaries who were not empanelled with Fidelity were routing their products through other large brokers. According to sources, Fidelity now carries out a stringent check on the intermediary’s bank details & creditworthiness, and investigates involvement in any litigation before empanelment.

    Today, a spokesperson from Fidelity told Moneylife: "As part of Fidelity's plans to build a long-term business here, broad-basing our distribution capability has always been a key element. To that end, we have been expanding our distribution footprint by regularly empanelling distributors over the last five years since we started business and continue to do so."

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    dillip swain

    1 decade ago

    you are only non-partial financial magazine in india.k.v.poojari(2nd comments) should know in india many investors turn part time agent not advisor & all FULL TIME advisors are investor.

    Fidelity/j.p.morgan/quantum mfs are in same boat.All india ifas' should boycot them.These type of AMC has no ethics regarding marketing of their products.Really if they are interested for less cost effective & more investors' benifit,they should follow benchmark m/f.KEEP UR ETHICS DON'T RUN AFTER IFAS'

    kishore ghiya

    1 decade ago

    the policy of selling through large brokers was bound to fail from begining. They were very arrogant right from their entry in india. They forgot the power of small distributor with their client, now sebi has removed the entry load, it is all over and start once again for fidelity in india. i hope they have learnt the lesson and be more polite to their small agents. Mutual fund distributor and life insurance agents sell because of their relationship with their clients.

    As a uti mutual fund equity based distributor wish them luck this time. They will need it.

    K v Poojari

    1 decade ago

    I am regularly following all your articles on your websitte as an investor.
    But i fail to understand how this article is relevance to investor.
    I am reading your website becasue i come to know inside of the advisors and commissions receivable by them form insurance and mutual fund corporations.

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