NHAI to float bids for monetising 10 national highway projects by April

NEW DELHI: Buoyed by response from institutional investors from the Middle-East, Canada and the US, NHAI plans to come out with bids for monetisation of 10 out of 75 public-funded national highway projects in the first phase.

The move follows the government's decision in August last year authorising the National Highways Authority of India (NHAI) to monetise public-funded highway projects in the country.

"Bids are likely to be out by April inviting tenders for monetisation of at least 10 projects on toll operate transfer (TOT)," a senior NHAI official told PTI.

The official said 10 such projects out of a basket of 75 have been identified for monetisation and several investors, including Canadian Pension Fund, Abu Dhabi Investment Fund and those from the US, Europe and Singapore, have shown keen interest in buying them.

"Investors are keen on our projects and we are going to bid out the same," the official said.

Road Transport and Highways Minister Nitin Gadkari has earlier told PTI that monetisation of public-funded highway projects could result in funds in the range of Rs 80,000 to Rs 1 lakh crore initially.

Ever since the government's nod for monetisation, NHAI has been conducting traffic studies related to such projects, the revenue streams available and their overall viability.

The Cabinet Committee on Economic Affairs on August 3 last year had authorised NHAI to monetise the public-funded highway projects for mobilising funds.

Close to 75 operational NH projects completed under public funding have been preliminarily identified for potential monetisation using the toll operate transfer (TOT) Model.

The corpus generated from proceeds of such project monetisation could be utilised by the government to meet its fund requirements regarding future development and operation and maintenance of highways in the country and could address development of highways in unviable geographies.

Market feedback indicates that certain institutional investors from outside the country have long-term investment appetite and are keen to participate in operational highway projects with stable toll revenue outlook.

These investors generally hesitate from taking construction risk, but are willing to look at de-risked Brownfield road assets, the government has earlier said.

Source - ET Realty

Soon, you will get lower loan rate with home cover

MUMBAI: Home buyers may soon get cheaper credit or more loans. All they need to opt for is property insurance.

National Housing Bank, the regulator for housing-finance companies, is working on a broad framework with the Insurance Institute of India, which could reduce home loan rates by about half a percent if borrowers opt for an insurance cover, aimed at mitigating default risk as well, said two sources familiar with the matter.

“We are conducting a survey in association with the Insurance Institute of India to assess the feasibility of calamity (property) insurance,“ Sriram Kalyanaraman, national director & chief executive officer, NHB, told ET confirming the matter.

“We are examining if taking an insurance cover while buying a home loan can lead to lower lending rates,“ he said.

“An insurance cover should bring down the risk premium, which lenders can pass on to consumers. Going forward, we would come out with a broader framework once the exercise is over.“

Now, it is a common practice among housing finance companies to offer property insurance to borrowers taking home loans.

For example, largest mortgage lender Housing Development Finance Corporation (HDFC) offers HDFC Ergo products for nonlife including property insurance. Dewan Housing Finance Cor poration (DHFL) sells Cholamandalam MS General Insurance products through its various branches.

Customers prefer low-cost premium to higher coverage.Normally, property insurance shields potential financial losses arising out of any earthquake, flooding, act of terrorism, accidental firedamages, cyclones, lightning strike, vandalism.

On many occasions, banks and financial institutions compel their customers to buy property insurance, it is alleged.

The recent natural calamities in Bihar, Jammu & Kashmir, Uttar Pradesh, Uttrarakhand, Gujarat have emphasised the importance of property insurance as the risk mitigation instrument to reduce the loss to the stakeholders.

“Half of the exercise is over.Although it is not yet concluded but the cost benefit could be about half a percent,“ said an executive associated with the matter.

Now, a retail borrower pays an equated monthly instalment or EMI of Rs 874 at 8.6% for one lakh rupees loan amount taken for 20-years. Going by 50 bps cut in rates, the home loan customer will pay Rs 842 for the same loan, show an estimate by ICRA, a credit rating company .

Karthik Srinivasan, senior VP , ICRA, said: “Such measures, if finalised, should help borrowers.While it would potentially benefit them in improving the risk profile, their loan eligibility too may expands either through lower rates or more credit. The cost of the insurance cover is likely be borne by borrowers but still it will benefit home buyers as it could be nominal compared to higher rates.“

Transparent and seamless transaction system in property insurance will provide more confidence to consumers, lending institutions like banks, housing finance companies; and insurers, and promote voluntarism on property insurance, NHB said.

Source - ET Realty

Your 1st house on 20-year loan will cost Rs 2.4 lakh less now

If you earn up to Rs 18 lakh per annum, buying your first house will cost about Rs 2.4 lakh less as the government will subsidise a part of your home loan interest. At present, this subsidy is available to only those earning up to Rs 6 lakh per annum.

The government has announced two new subsidy slabs to spur the real estate market and achieve housing for all by 2022. The slabs will apply to loans with a tenure of up to 20 years, as against the limit of 15 years now.

On December 31, 2016, PM Narendra Modi had announced two subsidy schemes under Prime Minister Awas Yojana (PMAY), but their details have been worked out only now.

Homebuyers will get subsidy at different rates depending on the income bracket they are in. People earning less than Rs 6 lakh per annum will get a subsidy of 6.5 percentage points on a principal component of Rs 6 lakh, regardless of their total loan amount. If they borrowed money at 9% interest, they will pay only 2.5% interest on Rs 6 lakh, and 9% on the remainder.

In the next bracket, people earning up to Rs 12 lakh per annum will get interest subsidy of 4 percentage points on a principal component of Rs 9 lakh, and the highest income category of Rs 18 lakh per annum will get a subsidy of 3 percentage points on a principal component of Rs 12 lakh.

Source : ET Realty 

RBI FAILS TO MEET MARKET EXPECTATIONS

     

With the Union Budget 2017-18 recently announced, markets were anticipating the RBI to come out with a decision to further ease the pressure off the market. With the banks currently holding high liquidity, a rate cut today could have assisted the borrowers in a big way. RBI’s neutral stance today, becomes its second in a row after the previous bi-monthly policy review in December last year. Markets were hopeful that the apex bank will reduce the key rate this time to allow the economy to breathe easy, but has failed to meet the expectations yet again. This being the first bi-monthly policy review for the current calendar year and post the budget; and the sixth and final for this financial year, a rate cut at this point of time would have pushed the banks to further drop their lending rates in near future. This further drop in the lending rates could have motivated the borrowers to gain access to funds at even more lowered rates, thereby signalling a growth in the demand and reduction in EMIs.

With today’s decision in the monetary policy review, the Repo rate remains unchanged at 6.25 percent, Reverse Repo rate under the LAF at 5.75 percent, Statutory Liquidity Ratio (SLR) changed to 20.5 percent from previous 20.75 percent, Cash Reserve Ratio (CRR) at 4 percent and Marginal Standing Facility (MSF) at 6.75 percent respectively. After a series of rate cuts for the general and affordable housing markets recently, this move could have only benefitted further. Realty experts aren’t welcoming this move as the economy was gaining momentum especially after demonetisation, and they believe that the growth graph will carry on to look a bit stagnant until rates are reduced further.

Industry Reacts:

Deepak Kapoor, President CREDAI-Western U.P. & Director, Gulshan Homz

Looking at the current market scenario, we were anticipating a repo rate cut by at least 25 basis points as the banks were already holding high liquidity and the benefit could have been passed onto the buyers. Lowered interest rates just ahead of the financial year closing could have allowed the buyers to plan their future investments, and realty sector would have benefitted the most especially after the recent lending rate deductions by the banks. RBI has played a wait and watch approach and might be waiting for the remonetisation drive to conclude properly and should cut the rates in April.

Kushagr Ansal, Director, Ansal Housing

We had pretty much entered a rate reduction cycle which was bringing back the demand for property investments in the market. After such a populous budget, a rate cut should have been there but the RBI has gone against the market forecasts. A rate reduction today could have allowed the realty buyers to plan property purchase as EMIs could have further eased. Banks are still to pass on the benefits of the previous repo rate cuts and a deduction today could have escalated the matter further.

Vikas Bhasin, MD, Saya Group

The government borrowings had reduced to INR 3.48 lakh crore from 4.25 lakh crore as presented in the Budget, which meant that a rate reduction was quite evident. Earlier this year, the government had provided subsidy on interest rates for affordable housing segment and banks had also reduced the general home loan interest rates by upto 50-60 basis points. A rate cut today could have allowed the potential buyers to invest in property as the EMIs would have reduced further in coming months. We hope that the next bi-monthly policy review observes a rate cut as it has been a neutral review for the second straight time.

Dhiraj Jain, Director, Mahagun Group

In case of a low interest rate environment surrounding the economy and cash available in abundance, the risk of inflation moving up exists. Hence, the RBI doesn’t reduce the rates until it has been fully convinced about the inflation control; as even the inflation has been on a rise for the fifth straight month in December. On the other hand though, since demonetisation, banks are keeping a strong credit and a rate cut today would have allowed them to pass on the benefits to the borrowers where reduced EMIs could have made the demand to take an upward movement on the demand graph for the property market.

Rajesh Goyal, Vice President CREDAI-Western U.P. & MD, RG Group

This is a surprise move by the RBI as we were expecting a 25-50 basis point reduction of the repo rate. The market has been gaining stability and post the union budget, further ease was looking on the cards. Even though the RBI has not provided any rate cut this time, fresh home loan borrowers should not worry much as they may still witness lowered EMIs because amidst intensifying competition among the lenders, the banks might be forced to start cutting down the interest rates themselves.

5 factors why RBI may go for a 25 bps cut but be ready to be surprised

NEW DELHI: The stars are aligned for an interest rate cut by the Reserve Bank of India (RBI) on Wednesday, but the central bank is known for delivering surprises.

A kneejerk reaction on Dalal Street cannot be ruled out in case the central bank decides to maintain status quo on rate this time again.

More than 1,000 Twitteratis in an ETMarkets poll have voted in favour of a 25 bps rate cut by the Reserve Bank of India (RBI) on Wednesday. As many as 43 per cent of participants, who voted in the survey, said RBI could cut rates by 25 bps, while 40 per cent expect no rate cut and 17 per cent foresaw a rate cut of up to 50 bps.

The domestic macro-economic backdrop clearly calls for continuous monetary easing, especially because the fiscal impulse to growth remains modestly negative.

“The global scenario remains a tad uncertain, but we believe it does offer a window of opportunity to RBI to act. Overall, we expect a 25 bps rate cut by the central bank on February 8,” Edelweiss Securities said in a report.



Going by the buzz on Dalal Street as well as what economists are saying, we have collated a list of five factors that may make RBI go for a rate cut.

A supportive Budget: The Union Budget announced on February 1 had no surprises. The government remains committed to continued fiscal consolidation from 3.5 per cent of GDP in FY17 to 3.2 per cent in FY18.

“The assumptions underlying the fiscal deficit target were broadly realistic, barring a few ‘quibbles’, such as a rich disinvestment target, and there was an improvement in the quality of expenditure,” Pranjul Bhandari, Chief India Economist at HSBC Securities and Capital Markets (India) Private, said in a note.

“The fiscal impulse from the Budget alone is likely to be negative, leaving some space for RBI to remain accommodative,” she said.

“On interest rates, while it is a close call, we expect RBI to cut by 25 bp. We expect RBI to discuss its forecasts, but continue to hold on to its accommodative stance,” Bhandari said.

Benign inflation: The macro backdrop for the forthcoming monetary policy review is conducive for continued monetary easing. Inflation remains low and contained at 3.4 per cent, which is below RBI’s target.

Retail inflation is likely to be well below RBI’s target of 5 per cent this financial year, as demonetisation would discourage any headwind on the price front, the Economic Survey for 2016-17 said.

During April-December, retail inflation averaged 4.9 per cent and has displayed a downward trend since July. Retail inflation eased further to a near three-year low of 3.41 per cent in December, reflecting weak demand, as consumers grappled with cash crunch following demonetisation.

Though it may rise in the coming months, it will still undershoot RBI’s indicative trajectory

Stable global environment: In its December policy review, one of the reasons cited by RBI to hold policy rate was Fed’s tightening stance and the associated strength seen in the US dollar. Since then, the USD has stabilised and, in fact, weakened to some extent.

If RBI believes there is space for a rate cut, then it should move quickly. Inflation is low thanks to food prices, the Budget was disciplined and the dollar is steady.

“At the global level, though uncertainty persists, the situation still offers space as the US Fed is not in a hurry to raise interest rates immediately and the US dollar is showing a weakening bias,” Edelweiss Securities said in a report.

“Moreover, the rupee is overvalued. In our view, this backdrop warrants a 25 bps rate cut,” it said. The Fed is not in a hurry to raise rates. Perhaps, the next move by the US Fed could happen around mid-2017.

Comfortable fiscal math: The economy is certainly stabilising after the demonetisation shock, but still aggregate demand remains weak with private capex particularly anaemic.

The central government’s aggregate expenditure growth is going to moderate sharply to 6-7 per cent YoY in FY18 compared with 12-14 per cent in the past 2-3 years. “The fiscal math presented in the Budget is quite credible, which should also be comforting for RBI,” Edelweiss Securities said in a report.

Note ban has hurt growth: The Economic Survey released last week pointed out that demonetisation would have both short-term costs and long-term benefits, but growth will get hit in the short term.

To keep the momentum going, RBI might give a booster by cutting interest rates by 25 bps to facilitate further transition.

“Given the government’s intention to adhere to fiscal prudence despite the compulsions of supporting a slowing growth momentum, we expect RBI to deliver a 25 bps rate cut in the forthcoming monetary policy,” Kotak Institutional Equities said in a note.

“We continue to see scope for 50 bps rate cut through FY18,” it said.

The domestic economy should grow between 6.75 per cent and 7.5 per cent in the financial year beginning on April 1, 2017, said the Economic Survey for 2016-17 last week.

The survey’s GDP growth figure for this financial year is lower than 7.1 per cent the Central Statistics Office had forecast earlier this month.


Source - Et Realty

Gurugram may open more areas for real estate as state reassess controlled areas

GURUGRAM: Unplanned construction may come up in many rural areas on the outskirts of the city if the Haryana government goes ahead with its plan to denotify some of the areas marked as controlled areas in the state, where no construction activity can be carried out without the approval of the department of town and country planning (DTCP).

With 113 notified areas in Gurgaon, the entire district is currently under the Controlled Areas Act, 1963. This means every construction needs the DTCP’s permission. Once an area is denotified, a land owner can take up construction there without seeking DTCP’s approval. Though the proposed move could meet the high demand for real estate in Gurgaon, urban planners say it will subvert the long-term development plans mentioned in regional, sub-regional and master plans.

The Haryana government has recently decided to reassess the status of controlled areas in the state, citing impact on agriculture and allied activities due to a significant increase in such areas in the past decade. A letter has been sent to all field officers of DTCP across the state, including Gurgaon, to conduct a field survey of controlled areas and submit a report.

Haryana has a total area of 44,212 sq km, out of which 14,000 sq km has been declared as controlled areas, which is almost 32% of the state’s total area. “Till 2015, only around 14% of state geographical area was under controlled area, now it has increased to 32%,” says the letter issued by the chief coordinator planner (CCP), NCR, Haryana.

“... it is required to reassess the controlled areas declared by the department. In case it is felt that the areas within controlled area are experiencing very few incidents of unregulated and haphazard development and where requests for seeking change of land use has been decided, such areas can very well be considered for denotification. It has been decided that field officers in each district would prepare an assessment report of controlled area,” it adds.

Urban planners say that denotification of controlled areas can disturb the future development work. “There is a regional plan (for entire NCR), sub-regional plan (for few districts) and then the master plan for a particular city. All these plans have proposals for several infrastructure and other development works, which will take place in next 20 to 30 years. Denotification of controlled areas will only hamper developments.”

Source: The Economic Times

Banks set to cut loan rates further due to slow growth in credit

MUMBAI: Bank credit increased by nearly Rs 1.7 lakh crore during the current financial year up to January 20, 2017, as compared to a more than Rs 11-lakh-crore increase in deposits. This huge gap in growth of banks’ resources, even as demand remains tepid, points to further reduction in interest rates.

The gap of nearly Rs 10 lakh crore between the growth of deposits and loans will no doubt shrink in the remaining nine weeks of the year as withdrawals gather pace. But banks say that they will still run an asset-liability mismatch until early next year, which will prompt interest rate reductions despite higher oil prices putting pressure on inflation. Most economists expect the RBI to cut rates by 25 basis points (100bps = 1 percentage point) when the monetary policy committee meets next week on Tuesday.

Data released by the RBI on Friday shows that outstanding loans with banks as on January 20 at Rs 74,177 crore are lower than their loan book position as of end-September. On September 30, outstanding bank loans touched an all-time high of nearly Rs 75 lakh crore. However, in subsequent weeks, borrowers have been repaying loans. Deposits, which touched a peak of around Rs 1.06 lakh crore, continued to shrink and total deposits with banks dropped to Rs 105 lakh crore as on January 20 as the pace of remonetisation picked up.

The two weeks ended January 20 was the first fortnight after the demonetisation exercise came to a close. As customers withdrew money they had turned in, deposits dropped by Rs 88,861 crore. The same fortnight in 2016 had seen bank deposits shrink by only Rs 7,599 crore. Earlier this week, the central bank had released information on sector-wise deployment of bank credit up to December 23, 2016. In FY2017, the period up to December 23 saw credit to industry shrink by Rs 1.5 lakh crore. However, outstanding credit remained flat thanks to a Rs 1.16-lakh-crore growth in personal loans and Rs 38,000 crore growth in credit to services. Almost half of the personal loan growth came from home loans with mortgage books of banks growing by Rs 73,000 crore during the year.

“We expect the RBI to deliver a 25-bp repo rate cut on February 8, given continued fiscal consolidation and likely undershooting of its near-term inflation target. However, with global factors turning adverse — higher oil prices, narrowing interest rate differentials — this is a close call,” said Sonal Varma, economist with Nomura.

According to Pranjul Bhandari, chief economist, HSBC India, rising commodity prices is reducing the scope for rate cuts. “With oil on the climb, pressures from higher government wages, and Fed rates expected to rise, the space for rate cuts is quickly dwindling. We expect one final 25-bp rate cut in the cycle”.

Source: The Economic Times.