India Investment Property » Budget

A look towards budget in new light

Wed, 08 Jul 2009 07:49:49 +0000

Photo by pfalaMarket responded unexpectedly on budget. If we judge the budget 2009, there is nothing negative in terms of imposing new taxes on the corporate world. This budget is good if we take recession under consideration. Talking about US, they are still facing trouble due to recession but on the other hand, India survived the deep recession and registered 6.7% GDP growth this financial year.

I think this budget could be presented in much better way. Mr. FM has increased allocations for various social sector projects. It has strong scope for market and the market will soon realise its benefits and will take it as supportive budget.

Everybody is saying that there is no gain in budget, but at the same time it is also acceptable that there is no lose in this budget. It is not bad as per investment point of view.

How will India Survive In Global Financial Crisis

Wed, 15 Oct 2008 07:36:46 +0000

The significance of the financial crisis that has hit the US economy can be measured from the fact that the cost of the rescue of these financial giants to the Federal Reserve and Treasury Department has been estimated at close to a trillion dollars.
According to some analysts, the total cost on this count could go up to $2 trillion since the financial turmoil is not likely to end anytime soon. Most of these banks had created debts to the tune of 30-40 times their equity against the prudential norm of not exceeding ten times.
In India, the Reserve Bank of India has been pumping in liquidity into the system and local banks have been borrowing at least Rs 70,000 crore on an average over the past three weeks under its liquidity adjustment facility. Even so, liquidity has been drying up.
Recently, the Asian Development Bank down-scaled the growth expectations of many Asian economies, including India’s, in its half yearly report: Asian Development Outlook 2008.
The ADB attributes this to the worsening conditions in major industrial economies that will weaken demand for goods and services. “The myth of uncoupling has been exploded”, the report says.
India’s GDP growth estimate for the current financial year has been downgraded from 8% to 7.4% and, for the next financial year, from 8.5% to 7%.
ADB bluntly states that “very large fiscal imbalance created by the current level of subsidization of oil, fertilizer and food, as well as other off-budget items, sets a daunting task for economic management.”
With the financial turmoil in the US and Europe showing signs of worsening since the publication of Asian Development Bank’s half-yearly report, one need not be surprised if GDP growth in India turns out to be even lower than that projected by Asian Development Bank — just around 7% or so for the current fiscal. In line with the falling capital markets across the world, which have already wiped out investor wealth of over ten trillion dollars this year so far, the Indian stock market has witnessed an unprecedented fall over the past few weeks. Not surprisingly, FIIs have been pulling out from the stock market in a big way, corporate borrowings from the global markets are becoming increasingly difficult, raising money for new investments through public issues is on hold, and liquidity in the economy is fast drying up.

Hunter Beer Maker Joins Realty Play With Madhya Pradesh Land Buy

Thu, 22 May 2008 13:04:32 +0000

The Bhopal-based Som Distilleries and Breweries, manufacturer of the Hunter beer, has acquired a 50-acre prime plot in Gwalior for Rs 266 crore from the Madhya Pradesh government. The company will develop a retail mall, a theme mall and two hotels — a star hotel and a budget hotel — as well as residential apartments, in the property.

The project, called Thatipur Gandhi Road Project, is a 60:40 collaboration with Patel Engineering and marks the brewing company’s foray into realty business. Sompel, the company in charge of the project, is promoted by Som Distilleries.

Som Distilleries’ chairman and managing director Mr. JR Arora said, “The project is expected to generate a valuation of Rs 2,500 crore in three years. This project will boost the growth of the company further”.
The project is part of the state government’s housing scheme for its employees, wherein the builder is required to construct a certain number of houses.

The cost of the project will be deducted from the amount to be paid to the government, on account of acquisition of the land on a 90-year lease. Mr Arora said that the project will cost around Rs 100 crore, and will be financed through internal accruals, financing from customers, institutional borrowings etc.

The bid comes as a breakthrough for Som Distilleries, which has been looking for opportunities to diversify from the brewing and distilling business. The Rs 200-crore company, which introduced the concept of strong beer in India, has plans to venture into the South Indian beer market.

Though it controls 12% of the country’s premium beer market, the distribution has been limited to the North Indian market up till a few months ago. Now the company is planning to access brewing facilities through bottling contracts, acquisitions and greenfield projects in southern markets.

Amrapali Group Invests In Hotel Projects

Sat, 29 Mar 2008 08:28:29 +0000

Amrapali Group, a UP-based real estate developer, will be investing about Rs 600 crore in different hotel projects in 2008. These hotel projects are under different levels of construction in different parts of India, primarily the north Indian cities, like Bareilly, Vrindavan, Greater Noida, Udaipur, Indore and Jaipur. The upcoming properties will comprise all categories, from budget hotels to 5-star properties.

Mr. Anil Sharma, Chairman & Managing Director of Amrapali Group said,”While the group has signed management contracts for few of its upcoming properties, negotiations are on for rest of the projects”. The group has already signed a management contract with Choice Hotels for the budget property at Greater Noida.

Two mid-segment hotels, one at Vrindavan and the other at Bareilly, would be managed by UP Hotels Clarks Limited. Sharma said that negotiations with InterContinental Hotels Group were on for the Udaipur property, which would be a five-star property at a prime 33-acres area. Similarly, negotiations with reputed hotel brands are also on for the upcoming budget properties at Indore and Jaipur. The group has recently acquired land in Raipur for construction.

When asked about the time-frame for completing these projects, Mr. Sharma said that the group could not afford to prolong construction for more than 28 months.

Govt Recognizes Public Demand For Lower Home Loan Rates

Thu, 06 Mar 2008 10:34:16 +0000

The government on Thursday acknowledged that there is public demand that interest rates on home loans up to Rs 20 lakh should be slashed, but said it is for the banks and RBI to take a call.

During his post-budget interaction with Assocham, Finance Minister Mr. P. Chidambaram said, “I shall certainly bear in mind that there is public demand that interest rates for borrowers, who borrow (housing loans) up to Rs 20 lakh, must be lowered”.

The Finance Minister further said that he agreed that housing loan borrowers of less than Rs 20 lakh should be incentivised by lowering interest rates. As much as 80% of all housing loans fall in the category of below Rs 20 lakh, these loans have less risk weight than those above Rs 20 lakhs and, therefore, bankers have incentives to lend to these borrowers at lower interest rates.

Further he said, “He (RBI governor) can never please everyone. It is his judgment call what should be the interest rates in order to contain inflation and promote growth”. The RBI governor’s position to strike a balance between low inflation and high growth is unenviable.

Mr. Chidambaram said that he recognized that from the government’s point of view it is important to promote growth without stoking inflation.

Realty seeks tax, input price relief

admin — Mon, 25 Feb 2008 08:42:53 +0000

New Delhi: Real estate companies wish for taxes to be lowered and prices of construction materials controlled in the forthcoming budget.
Vipin Agarwal executive director of Omaxe Ltd states that they want tax breaks on infrastructure, which were there till last year. Infrastructure improvement is important for the improvement of the country. So they should get some encouragement in the form of tax breaks to invest in it.
Realty firms are also bothered about the towering prices of construction materials in India. Abhinandan Chatterjee, president and chief financial officer of BPTP Ltd told that the rocketing prices of steel and cement are affecting construction cost, the government should try to rationalize prices of construction materials so that the costs of developed properties remain under control and the benefit is passed on to the buyer.
Real estate firms want all incomes from rent to be exempted from income and service taxes.
“Service tax should be abolished as it is an unnecessary burden for us,” said Ashish Gupta of Aerens Goldsouk International Ltd. Developers also want a cut in lending rates in construction and housing finance. “I think interest rates on loans should be lowered substantially to make purchasing properties easier,” said Chatterjee. “The demand is low at the moment because of high interest rates,” he added.
However, interest rates are an outside-the-budget decision to be taken by banks.

Forthcoming Budget Could Be Harsh

Wed, 30 Jan 2008 10:35:03 +0000

29 January 2008, New Delhi. Mr. P Chidambaram, Finance Minister of India, said on Tuesday that the coming budget could be harsh on the people. He is going to present the union budget in February. Mr. Chidambaram was asked about the tax cuts in the forthcoming budget, when he was attending an award ceremony. Mr. Chidambaram answered, “I have not started working on it (The budget) yet. All I know that you would not be so kind to me on February 29″. Further he said,” year 2007 has been good for everyone, including tax collectors. I hope 2008 will be better”.

Finance minister has been awarded as the Politician of the year award by a private TV channel. After being awarded, finance minister answered the queries. Mr. Chidambaram also said, “I know that politics is a very different and difficult vocation. Yet if so many are (there) in politics, it is because at the end of the day, we believe that something can be achieved through politics”. Further he said, “Politics is not about individual achievements or collective achievements, politics is about bringing everything together so that we can make a great country”. Mr. Chidambaram expressed his feeling and said, “I am quite proud to be in politics and proud to be called a politician”.

Answering the question about volatility in the stock market, Mr. Chidambaram said, “I am not worried about market going up and down.” Replying the query about service tax on lawyers, Mr. Chidambaram said, “no one believes that lawyers render any services. So there cannot be any service tax on lawyers.”

Buy A House And Get A Car Free

Mon, 28 Jan 2008 11:43:16 +0000

Real Estate businessmen of Bangalore have always been in search for techniques to grab the attention of customers for their properties. Recent publicity stunt is ‘buy a house and get a car a free gift’. For example, if a customer buys a flat of worth 200 lacs, he gets a car as a free gift worth 10 lacs and this trick doesn’t end here, the person who has refered the customer, will get a Hyundai Santro. A source says about similar offer are being given by a mid-budget developer on kanakpura road that offers cars which are bought at a 10% discount by developers because either the cars are of old models or dealers are not able to dispose that excess stock. Mr. Amit Bagaria, Chairman of Asipac, a business advisory company in the real estate and project development sector, says that the cost of the free car is added to the cost of the apartment. Hence the buyer is actually paying for the car.

P R Shankara Raju, regional manager of LIC Housing Finance, says “Builders, who are not able to market their property effectively, use such offers to attract buyers.”

J C Sharma, MD of Sobha Developers says “I don’t believe in such offers. Our product is an apartment and nothing else. Customers are aware that these attractions are not a value addition.”

Now a days, customer is more conscious and they don’t run for offers. Rather, offers leave buyers with doubts about the deal itself.

Economists’ Recommend Not To Cut Direct Tax Rates In Budget

Mon, 28 Jan 2008 11:41:47 +0000

Jan 09, New Delhi: Finance Minister P Chidambaram received two contradictory suggestions from economists and industrialists. “Given the circumstances that there a number of fiscal stress points in the offing, like oil bonds, MSS, pay commission, it is not prudent to start thinking of reducing tax rates,” Standard & Poor’s Chief Economist (Asia-Pacific) Mr. Subir Gokaran told reporters after pre-Budget consultations between P. Chidambaram and economists.
ICRIER (Indian Council for Research on International Economic Relations) Director and Chief Executive Mr. Rajiv Kumar said the advice given to the Finance Minister was that both personal income tax and corporate tax rates should not be altered.

“Don’t touch personal income tax, buoyant tax collections do not mean that you cut tax rates, but use the money to either improve infrastructure expenditure,” Kumar said.

Economists’ suggestions appeared just a day after India Inc called for a cut in direct tax rates as well as excise duties. That way, the Finance Minister got two different sets of recommendations on cuts in tax rates in the first two days of his consultations with the industry and economists.

However, Kumar suggested rationalizing excise duties whose incidence is very high, particularly in oil sector.

“You can also look at the tax composition of oil prices, it is 57%. Why don’t you bring that down. By cutting taxes you can give relief to customers and down stream oil companies,” he said.

However, Mr. Gokaran was for not touching excise taxes on oil sector as well since it would have revenue implications. He advised moving to specific duties instead of advalorem. With rupee appreciation already making imports cheaper, Mr. Kumar suggested that custom-duty rates should also be left untouched. He advised the Finance Minister to impose Tobin tax on foreign inflow to check rupee appreciation. Tobin tax is a levy on currency speculation to discourage volatile short-term trading and its destabilizing effect on currency value.

Mr. Kumar suggested such a tax on inflow into equity market and real estate, but not in other sectors of the economy. Besides, steps should be taken to enhance absorptive capacity of the economy so that inflow of funds could be utilized, he said. Mr. Gokaran was for managed appreciation of rupee. “You can’t ignore pressure to appreciate given growth rate, but pace is the problem,” he said.

The issue of food prices also arose for discussion. Worldwide, economists threw light on food prices as the next big threat; though may not be in the instant future, he said.

It is the fourth Budget of the UPA Government, which probably would be its last full Budget, so the pressures on steps which yield immediate results would be immense, Mr. Gokaran told reporters. However, long-term goals should not be lost sight of, he said.