Fundamentals June 5, 2013

Nik's Diary

The Indian markets opened on o negative note tracking weak cues from SGX Nifty and most of the Asian indices on concerns that the Federal Reserve will scale back stimulus efforts as the U.S. economy improves. The US markets experienced continued volatility over the course of the trading session on Tuesday before ending the day mostly lower. The lower close on Wall Street came as traders continued to express concerns about the timing of the Fed's plan to scale back its stimulus program. The markets were concerned after recent comments from some Fed officials that the central bank may taper the program within the next meetings. While traders largely shrugged off a report on the US trade deficit, anxiety ahead of the release of some more closely watched data later in the week generated some negative sentiment.Meanwhile, Indian shares erased early gains to end modestly lower on Tuesday, with strength in the rupee and renewed hopes that the Federal Reserve would not taper its bond-buying program anytime soon helping to limit the downside to some extent. Going ahead, trading on Wednesday may be impacted by the release of some key economic data, including reports on private sector employment, labor productivity, and service sector activity. The Federal Reserve is also scheduled to release its Beige Book, a report consisting of anecdotal evidence on economic conditions in each of the twelve Fed districts.

Cabinet clears real estate regulation bill

said  The cabinet on Tuesday cleared the Real Estate (Regulation and Development) Bill 2013, which seeks to set up real estate regulators in states to protect the interests of homebuyers, ensure fair practices and accountability, besides fast-track dispute resolution. The Bill proposes that developers register their projects with state regulatory authorities by declaring their building plans, timeline and other details of a project. This will then be posted on the regulator’s website. Developers have to declare this information in advertisements related to a project. A misleading advertisement by a developer, with representative pictures and not actual ones, is proposed to be a punishable offence. India’s real estate and housing sector is largely unregulated and opaque, and home buyers do not have access to complete information. The builders lobby, however, said it was against the proposed law in its current form. “We have been opposing the Bill in its current form from the beginning. We are disappointed with the way government is going ahead without addressing our concerns,”Anil Kumar Sharma, president, Confederation of Real Estate Developer’s Association of India, National Capital Region (CREDAI-NCR). “According to us, said Bill is neither benefiting the consumers nor other stakeholders. If this Bill would have covered other regulatory and approving authorities, then it would have been much beneficial for everybody.” The Bill, initially planned for the entire real estate sector, including commercial real estate, was amended after the urban development ministry objected to the inclusion of commercial real estate, and now covers only residential real estate. The provision of depositing 70% of the money raised for a project in a separate account and using it for the development of that project has been diluted. This has been replaced by “70% or such lesser percentage, as notified by the appropriate government”, under the Bill. It also says builders can launch projects only after they acquire all clearances. Brotin Banerjee, managing director and chief executive, Tata Housing Development Co. Ltd, said that while the move was a positive step, the government should also improve self-discipline in some ways, the most important of these being to give project approvals on time and avoid unnecessary delays. An official from the housing and urban poverty alleviation ministry said the issue of faster clearances for projects is also being addressed by the ministry by working towards single-window clearance for the sector. The official, who requested anonymity, also said that while the state governments will set up respective regulators, the case will be different only for Delhi. “In the case of Delhi, the urban ministry will decide the regulatory authority,” the official said. Under the Bill, not sticking to deadlines will attract a penalty and repeat offences will invite a jail term. One or more real estate regulatory authorities will be set up in each state and union territory with specified functions, powers and responsibilities, as per the Bill. Once the Bill comes into force, there will be a standard definition of carpet area for the entire country, the official added. Under the proposed Bill, all property brokers must obtain a licence to conduct business. The official added that the Bill would benefit those who have already bought a house. “If there is delay and cost escalation for ongoing projects, then the consumers can approach the adjudicating authority (or regulator) to settle the dispute,” the official said. The Bill will provide much-needed transparency in the sector and provide relief to home buyers, experts said. The Bill proposes that the buyer should have the right to refunds with interest, in the case of delays. These provisions ensure that buyers cannot be taken for granted by the developers, said Pankaj Kapoor, managing director at real estate research firm Liases Foras, adding that greater transparency will help the market mature and developers will benefit in the long run. In another decision, the cabinet approved a proposal to instal mobile towers at 2,199 locations in nine states including Andhra Pradesh, Bihar, Chhattisgarh, Jharkhand, Maharashtra, Madhya Pradesh, Odisha, Uttar Pradesh and West Bengal, which are affected by left-wing extremism (LWE), identified by the ministry of home affairs. The project will be executed by Bharat Sanchar Nigam Ltd (BSNL), a government statement said, adding that BSNL has already installed towers at 363 locations. The Universal Service Obligation Fund (USOF) would fund the capital and operating expenditure net of revenue for five years. The maximum outgo from the USO Fund is estimated to be Rs. 3,046.12 crore. Finance minister P. Chidambaram said installation of the towers would be completed in 12 months. The strengthened telecom network will result in increase in penetration of mobile connectivity in the country, especially LWE affected areas and other areas facing security challenges, resulting in affordable and equitable access of communication, information and governance to people. In another decision, the Cabinet approved the implementation of All India Council for Technical Education (AICTE) 2010 norms, further notified by AICTE “in regard to pay scales and service conditions etc. in the National Power Training Institute (NPTI), for its teachers/faculty members to the extent as applicable in the case of Technical Institutions”, the government said. The implementation of the norms will help in fulfilling mandatory guidelines laid down by AICTE and also increase the standards of education and training, and will lead to protection of public interest and fulfil NPTI’s accountability to the public at large. The financial implication is approximately Rs.1.61 crore to Rs.2.34 crore per year. With a possible eye on coming elections, the cabinet committee on economic affairs approved the proposal of the ministry of minority affairs for restructuring and its implementation of the Multi-sectoral Development Programme (MsDP) to bring more people under its ambit. “After restructuring, the MsDP would be implemented in 710 identified Minority Concentration Blocks (MCBs) and 66 towns and cities falling in 196 districts of 26 States and union territories against 90 Minority Concentrations Districts (MCDs) at present in 20 states,” a government statement said. “Thus, six more states namely Andhra Pradesh, Chhattisgarh, Gujarat, Punjab, Rajasthan and Tripura will also be covered,” it said. The restructuring will sharpen the focus of the programme on minority concentration areas making the programme address development issues of the minorities in a more effective way, it added. The cabinet also approved another proposal to expand the scope of labour ministry run Rashtriya Swasthya Bima Yojana (RSBY), which provides for smart card-based cashless health insurance cover of Rs.30,000 per year to families below the poverty line. With Tuesday’s decision, the government will provide RSBY benefits to rickshaw pullers, rag pickers, mine workers, sanitation workers, and auto rickshaw and taxi drivers. Overall, it will provide additional benefits to more than 8.5 million more workers, costing the government Rs.210 crore in 2013-14 and Rs.420 crore in 2014-15. Currently, 34.4 million workers enjoy the benefits of RSBY. The proposed food security law was not discussed at the cabinet meeting. Source: livemint

Bank of Baroda announces single rate of interest for home loans

State-run Bank of Baroda BSE -0.30 % today announced a single rate of interest -- 10.25 per cent -- for all its home loans. The rate revision, which will be effective June 1, will be available to borrowers irrespective of tenor or quantum of the loan, a bank statement issued here said. Banks typically charge lower interest rate for an amount of up to Rs 30 lakh, after which it goes up. They also differentiate the interest rate offering according to the tenor of the loan. Both new as well as existing borrowers can avail the loans under the revised scheme, the statement said, adding that there are no conversion charges for existing customers of Bank of Baroda to get the benefit of reduced rate of interest. With the corporate loans slowing down, a majority of the lenders are shifting focus to the retail segment, which is considered resilient. The country's largest lender State Bank of India has the most aggressive interest rate offering at 9.95 per cent for loans under Rs 30 lakh at present. Source: Economic times