Rural demand to soften blow for two-wheeler makers: Report
Improving rural prospects, downtrading in a subdued income environment, and greater preference for personal mobility will support sales of motorcycles in the economy segment (53 per cent of sector volume last fiscal), thereby limiting the slide in overall two-wheeler sales to 15-17 per cent(s) this fiscal, Crisil Ratings said on Thursday.
 
As per a CRISIL study of 5 manufacturers, accounting for 80 per cent of the sector's sale volume, better prospects of the agriculture sector in the cropping seasons would ensure higher disposable income in rural India that would boost two-wheeler sales, largely in economy segment, and will also drive up the segment's share by 300 bps to 56 per cent of the overall pie.
 
Hinterland, which accounts for half of two-wheelers sold, saw good traction in the kharif (summer) sowing season supported by a good and evenly spread monsoon. With water reservoirs also at healthy levels of 87 per cent on average, the tidings are good for the rabi (winter) crop, too. As a result, agriculture GDP is seen growing 2.5 per cent even as India's GDP is estimated to contract 9 per cent in the current fiscal.
 
Additionally, hike in the minimum support price (MSP) for key crops will also boost rural income and discretionary spending.
 
Hence, rural demand for two-wheelers is seen recovering faster, with sales estimated to grow 500 basis points (bps) more than urban, where income growth is more tepid.
 
This is underscored by data on rural two-wheeler retail registrations during April-September 2020.
 
The economy motorcycle segment generates 75 per cent of sales from the rural market, and should benefit the most, given the milieu. Furthermore, price hikes of 10-12 per cent to comply with BS VI emission norms have increased the pricing gap between economy motorcycles and other segments, which is driving up preference for the former.
 
While the Covid induced lockdown has been lifted across the country, public transport remains somewhat restricted. With sharper focus on social distancing, preference for personal mobility is rising. This in turn is benefitting motorcycle demand, especially the economy segment.
 
Gautam Shahi, Director, CRISIL Ratings, said: "Due to these reasons, the economy motorcycle segment is expected to see lower volume contraction of 11-13 per cent compared with 15-17 per cent overall in two-wheeler sales this fiscal."
 
Despite decline in overall two-wheeler sales for two consecutive fiscals resulting in multi-year low capacity utilisation, operating margin of players will see only 200-300 bps decline to 12 per cent this fiscal. Cost rationalisation efforts including higher transport by rail, and pruned advertisement spends will help partially offset higher cost BS VI compliant vehicles.
 
Sushant Sarode, Associate Director, CRISIL Ratings, said: "While the two-wheeler sector has seen few weak business cycles in the past decade, credit quality of manufacturers has largely remained unaffected due to strong balance sheets, limited debt, negative working capital cycle, and robust liquidity of players. Ergo, even two consecutive years of weak demand is unlikely to materially impact their credit quality. They also have sizeable cash surpluses (Rs 35,500 crore for the sample set), to help mitigate cash flow challenges."
 
A reduction in GST rates, even if temporary, would come as a tailwind to sales across segments. And any further increase in Covid-19 afflictions in hinterland, and its socio-economic impact, will be the key monitorable.
 
Next fiscal, a low base effect along with expectation of improvement in economic activity and gradual waning away of pandemic may spur growth for two wheelers to 10-12 per cent(s).
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.
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    MahaRERA Orders Developer To Refund Money with 9% Interest since Project Stuck due to Defence Curbs
    Maharashtra Real Estate Regulatory Authority (MahaRERA) has ordered the developer of a project to refund Rs47.46 lakh at 9% pa (per annum) interest to a home-buyer. The developer was also directed to pay Rs20,000 to the home-buyer towards cost of the complaint. Construction of the Kanjurmarg project was stopped since they could not obtain the naval NoC (no objection certificate) because of its proximity to a naval housing colony. 
     
    MahaRERA member Bhalchandra Kapadnis issued the order after hearing the case based on a complaint by Snehalata Deokar who had booked an apartment in the 25-storey Avante project by Sanjeevani Vyapar LLP.
     
    As per the project website, it was proposed to be developed under a joint venture between the Ashwin Sheth group and Emami group. 
     
    Ms Deokar had booked the apartment (flat number 1201 in C wing) in 2015 by paying Rs47,26,785 out of the total cost of Rs1,53,41,500 and the developer had promised possession by December 2019. The developer had agreed to hand over possession by 31 December 2019. 
     
    Ms Deokar’s lawyer, advocate Sameer Bhandari said that she now wished to withdraw from the project since the developer could not deliver possession as promised by December 2019.
     
    Advocate Pragathi Malle, the counsel for Sanjeevani Vyapar LLP, argued that there is still time for the revised project completion date of 30 June 2022 and, hence, the complaint was not maintainable. She added that the Bombay High Court (HC), in its 27 February 2019 order in Tirandaz Shubha Niketan Cooperative Housing Society case, had said that the NoC from the naval department was not required for construction near the naval housing colony.
     
    However, despite the Bombay HC ruling, the commencement certificate was not granted by the municipal corporation of greater Mumbai (MCGM). In 2019, the developer had challenged the MCGM letter refusing a commencement certificate (CC) in a writ petition which is still pending before the High Court.
     
    The developer’s lawyer explained that her client had kept the complainant informed through emails with respect to the current status of the project including the status of the Naval NoC and commencement certificate. 
     
    She claimed that the developer company was within its rights to forfeit the earnest money paid by the complainant if the sale of immovable property fell through due to the default of the purchaser and asked for the complaint to be dismissed.
     
    MahaRERA member Mr Kapadnis held that the developer accepted almost 30% of the total cost of the apartment, in violation of both Maharashtra Ownership of Flats Act (MOFA) and Real Estate (Regulation and development) [RERA] Act which authorises the acceptance of not more than 20% and 10% of total cost of apartment, respectively, without first executing and registering the agreement for sale. 
     
    Mr Kapadnis mentioned that the developer has mentioned 31 December 2019 as the proposed date of completion (on the project webpage) and it would be considered as the agreed date of possession. He said that “the revised date unilaterally declared by the developer while registering the project with MahaRERA is not a material date but the agreed date is important to compute the delay in the ratio laid down by Bombay HC in the Neelkamal realtors Pvt Ltd vs Union of India. Hence this case comes u/s 12 of RERA”.
     
    He noted that the premises in which the complainant was residing has been demolished for redevelopment and the complainant had to shift to rental premises by paying a huge rent. 
     
    He observed that “There is no dispute on the point that the planning authority MCGM has not granted the commencement certificate because the naval authority has not granted NOC for construction of the project... Without the commencement certificate, the respondents should not have launched the project and accepted the booking.” 
     
    As per Section 4(2)(c) of RERA, at the time of registration of a project, the authenticated copies of the approvals and commencement certificate from the competent authority obtained in accordance with the law, as may be applicable for the respective project, are to be uploaded. In this case, the respondent launched the project without obtaining the commencement certificate. 
     
    Mr Kapadnis said “Since the respondents have defaulted in obtaining the commencement certificate, the money deposited by the complainant cannot be treated as earnest money liable for forfeiture as contended by the respondent.” 
     
     
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    m.prabhu.shankar

    4 weeks ago

    Excellent Excellent

    Borrowers to Get Difference Between Compound and Simple Interest as Ex-gratia for Lockdown Period: FinMin
    The Indian government has decided to waive interest on interest on loans up to Rs2 crore during the six-month moratorium period. The categories of loans up to Rs2 crore include the medium, small and micro enterprises (MSME) loans, education loans, housing loans, consumer durable loans, credit card dues, auto loans, personal loans to professionals and consumption loans. All borrowers, whether or not they have availed the moratorium, are eligible to receive the difference between compound interest and simple interest on their loans. 
     
    The relief will be given to borrowers in the form of a grant of ex-gratia payment of the difference between compound interest and simple interest for six months from 1st March to 30 August 2020. This means, during this period borrowers will only pay simple interest on the loan and would receive refund for the excess compound interest payment paid, if any, during the six months. 
     
    However, to receive the ex-gratia interest payment, the loan account should be standard and not a non-performing asset (NPA) as on 29 February 2020, says a notification issued by the department of financial services (DFS) in the ministry of finance (FinMin).  
     
    "The rate of interest would be as prevailing on 29 February 2020 and in case the rate of interest has changed thereafter, it shall not be reckoned for the purpose of his computation. The payable ex-gratia amount shall have to be credited to the account of the borrower by the respective lending institutes as ex-gratia payment under the scheme," it added.
     
    The notification says, "The lending institutions shall credit the difference between compound interest and simple interest with regard to the eligible borrowers...irrespective of whether such borrowers have fully availed or partially availed or not availed of the moratorium on repayment of the respective loans as announced by the RBI..."
     
     
    All lenders, including all banks, all India financial institutions, non-banking finance companies (NBFCs), and housing finance companies (HFCs) are directed to implement the scheme. 
     
     
    Earlier, the union government, in an affidavit before the Supreme Court had said that the relief on the waiver of compound interest during the six-month moratorium period should be limited to the most vulnerable category of borrowers.
     
    The Centre had said it is impossible for the banks to bear the burden resulting from the waiver of compound interest without passing on the financial impact to the depositors or affecting their net worth adversely, which would not be in the larger public interest.
     
    After the recommendations of an expert committee, the Centre had altered its stand. Previously, the Reserve Bank of India (RBI) and the Centre had argued against waiver of interest on interest, as it would be against the interests of other stakeholders, especially depositors, and also unfair to those who have paid their dues.
     
    A bench comprising Justices Ashok Bhushan, RS Reddy and MR Shah had urged the Centre to have a re-look at its decision against the backdrop of financial hardship faced by many amid the ongoing Covid-19 pandemic, even though the top court had agreed to not waive interest altogether.
     
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    COMMENTS

    Rupesh Chatterjee

    1 month ago

    If this ex-gratia credit applies only to the interest on interest element, I find it difficult to understand, how does this benefit someone who has been paying their EMI on time.

    Isn't the interest element of the EMI computed only for the principal that is remaining after your last emi payment.

    EMI's do not carry any interest on interest component in it unless a default has been made and a new EMI gets calculated adding the interest on interest element for the moratorium period if availed.

    I think there will be more follow up to this decision from the FM office.

    sactel

    1 month ago

    Will the borrower have to initiate any formal process for availing the cashback or will it be done automatically by the bank ?

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