INDIAN ECONOMY: OVERVIEW, GROWTH & DEVELOPMENT
Unsold houses at all-time high of 12.76 lakhs
Over 12.76 lakh houses are lying unsold in India’s top 30 cities, compounding the problems of the real estate sector already grappling with a severe liquidity crunch as non-banking finance companies (NBFCs) have curtailed lending to developers following the collapse of IL&FS last year. The inventory overhang is as high as 80 months in Kochi, 59 months in Jaipur, 55 months in Lucknow and 72 months in Chennai, implying it will take between five and seven years for developers in these cities to get rid of the present housing stock. The total unsold inventory in 30 cities has increased 8 per cent over FY18 when the number was 11.90 lakh, according to data from real estate consultancy Liases Foras. This does not augur well for the sector, whose primary source of funds have been NBFCs and customer advances. With tepid sales, which grew only 5 per cent last fiscal, builders are unable to get funds for completing under-construction projects, adding to the unsold stock. And NBFCs have almost stopped lending to developers as the liquidity has dried up in the system. Of the 12.76 lakh units, the top eight cities, including Mumbai Metropolitan Region, National Capital Region, Bengaluru, Hyderabad, Chennai and Pune alone account for 9.66 lakh houses. On a pan-India basis, it will take 42 months to clear this inventory. “An inventory of 8-11 months is typically considered efficient and sustainable. This implies that sales must improve almost four times for the current inventory to clear,” Pankaj Kapoor, Managing Director at real estate consultancy Liases Foras, told. Siva Krishnan, Head-Residential Services, Developer Solutions and Strategic Consulting, JLL India, said jobs have not shifted from tier 1 to tier 2 and tier 3 cities as had been expected. “A lot of developers went there in anticipation of industries shifting there. That transition has not happened. There is not enough traction in employment as these cities have failed to generate the demand that was envisaged,” he said.
Moreover, prices in these cities are not very cheap either. They are comparable with those in NCR and peripheries of big cities. Like average price in Jaipur was Rs 3230 per sq ft in the fourth fiscal quarter and Rs 3969 per sq ft in Nashik, which is just 17 per cent less than Rs 4645 per sq ft prevailing in NCR.
The rate of Rs 5736 per sq ft in Goa and Rs 5340 per sq ft in Kochi is more than both NCR and Pune (Rs 5230 per sq ft).
Co-living: house plans mega communities
Real estate consultancy Knight Frank, in a report, said that the current demand for Purpose Built Student Accommodation (PBSA) totals more than eight million bed spaces in India. This could grow to 13 million beds by 2025. Around $100 million was invested into the Indian PBSA market in 2018. Not just student accommodation, even the market for working professionals is rising. This world, in non-technical terms, is better known as co-living. The market is about two years old in India and is developing interesting nuances.
India’s coal import rises 9 pc to 234 mt in fy19
India’s coal import increased by 8.8 per cent to 233.56 million tonnes in 2018-19, according to a report. Coal imports were at 214.61 MT in 2017-18, according to provisional data by mjunction services, based on monitoring of vessels’ positions and data received from shipping companies. mjunction, a joint venture between Tata Steel and SAIL, is a B2B e-commerce company that also publishes research reports on coal and steel verticals. “India’s coal and coke imports during 2018-19 through 31 major and non-major ports are estimated to have increased by 8.83 per cent to 233.56 million tonnes (MT) (provisional) as compared to 214.61 MT (revised) imported in 2017-18,” it said. Non-coking coal imports were at 164.21 MT in FY2018-19, about 13.25 per cent increase over 144.99 MT recorded in FY2017-18. Coking coal import was almost flat at 47.73 MT compared to 47.22 MT in 2017-18. “The double-digit growth in thermal coal imports during 2018-19 was on expected lines and caused by the coal shortage at power plants until recently. In contrast, the bearish trend in steel consumption and prices, especially during the fourth quarter, restricted coking coal import,” mjunction MD and CEO Vinaya Varma said. “Thermal coal import is likely to remain subdued in the near term, but may rebound if PLF (plant load factor) in thermal power plants goes up post-monsoon,” Varma added. Coal imports during March 2019 were at 19.93 MT (provisional), against 18.02 MT in the corresponding month of 2017-18. Coal Minister Piyush Goyal had earlier urged state-run Coal India to pledge self-sufficiency in production to eliminate import of the dry fuel. The government has set a target of 1 billion tonne of coal production by 2019-20 for the mining major, but is considering relaxing the timeline.
Up govt starts single window clearance for telecom
Uttar Pradesh government Friday started single window clearance for rolling out telecom infrastructure in the state to expedite mobile networks and broadband connectivity. The application for permission can be submitted on UP government’s right of way website launched Friday. It will accept online submission for procuring fresh permission and renewal of permissions, Tower and Infrastructure Providers Association (TAIPA) said in a statement.
The portal will help streamlining and speeding-up the permission process as well as help in expediting the telecom infrastructure rollout across the state, UP Deputy Chief Minister and Minister IT and Electronics Dinesh Sharma said. “I appeal all the authorities to adopt and implement the Uttar Pradesh Right of Way rules, 2018 in their respective jurisdiction as it will help in shaping Digital Uttar Pradesh,” he said. As on December 2018, Uttar Pradesh has more than 56 thousand mobile towers mounted with 2 lakh 34 thousand mobile base stations.
“The UP Government has taken a forward step in this direction by issuing a State Right of Way for the State that is aligned with Government of India’s Right of Way rules 2016, and having this workshop organised for the adoption and implementation of the said rules. These cumulative actions will help in developing Smart & Digital Uttar Pradesh,” Tilak Raj Dua, Director General, Tower and Infrastructure Providers Association (TAIPA) said.
Punjab national bank admits loan defaults
The Punjab National Bank has admitted to 1,142 defaulters across the country who have defaulted to the tune of Rs 25,090.3 crore. The bank has initiated recovery proceedings by filing suits against 1,108 defaulters out of them. The amount they are looking to recover from these cases is Rs 23,879.8 crore.
The rest 34 owe the bank Rs 1,210.5 crore. However, no suits have been filed against them so far. Some of these are several years old and recoveries are still pending.
The Reserve Bank of India has been informed of the status of all the defaulter accounts, as mentioned in a report in IANS.
The defaulter list includes accounts owing Rs 25 lakh or above to PNB through all its branches across the states. The highest number of defaulter accounts has been tracked from Maharashtra, Punjab, Delhi, Chandigarh, Gujarat, Uttar Pradesh and West Bengal.
Additionally, some companies that availed some of these loans are shown as registered abroad, while some registered in India have taken loans from PNB’s overseas branches.
The list goes beyond Nirav Modi and Mehul Choksi who scammed the bank out of Rs 14,000 crore. Kingfisher boss Vijay Mallya also features in the list. He owes Rs 597.4 crore to the bank on the defunct airline’s account. Other defaulters include Kudos Chemie Ltd., Chandigarh for Rs 1,301.8 crore, Winsome Diamonds & Jewellery Ltd for Rs 899.7 crore, Jas Infrastructure & Power Ltd., Kolkata for Rs 410.9 crore, Zoom Developers Pvt. Ltd. Mumbai/Indore Rs 410.1 crore.
The All India Bank Employees Association General Secretary CH Venkatachalam said, “It is not confined to one bank and all banks have such bad loan accounts. A bulk of defaulters is corporates or big companies and a forensic audit of all should be carried out. Why can’t the bank file criminal cases against the big-time wilful defaulters instead of merely civil suits which can drag on for years?”
SBI never stopped lending to NBFCs, will continue to do so, says MD
At a time when concerns around the liquidity crunch in the country are high and recent defaults by some shadow banks have raised eyebrows, State Bank of India on Friday said it had not stopped lending non-banking finance companies (NBFCs). The bank said the crises in the NBFC sector were not “grave” as only one or two companies had been severely impacted, and that they needed to address the core problems. “SBI is lending to NBFCs and we will continue to do so… Our decision is based on the risk perception that we have on a particular entity. We have not stopped lending to NBFCs at all,” SBI Managing Director Arijit Basu told on the sidelined of IMC’s Banking and Finance Conference.
Basu said both the Reserve Bank of India and the central government had taken appropriate measures to address issues around the NBFC sector. He added, the SBI was also trying to address concerns raised by the central bank in its June-7 circular about banks and NBFCs. The SBI’s total loan exposure to NBFCs stood at Rs 1.87-lakh crore as of March 31 — Rs 62,511 crore to housing finance companies; Rs 63,033 crore to government-backed NBFCs; and Rs 67,226 crore to big private sector institutions. Despite this, SBI seems confident of safeguarding its interest. “The overall quality of the NBFC asset portfolio in our books continues to be good. We have already included the stressed NBFC accounts in our estimate for slippages and loan loss provisions for the current financial year,” SBI had said in a statement last week.
RBI will keep a close eye on NBFCs, performance of bank MDs, CEOs, says Shaktikanta Das
Last week, the RBI said the apex bank would continue to keep a close eye on developments in the NBFC sector and would take every possible step to ensure its financial stability. RBI Governor Shaktikanta Das said several steps had been taken to enhance the supervision over NBFCs, including on-site examination, off-site surveillance, market intelligence and annual reports of statutory auditors, and that the RBI would work towards bringing corporate governance reforms in both banking and non-banking sectors.
“It has been observed that most bank frauds can be traced to the absence of effective controls. An essential element of an effective system of internal control is a strong control mechanism. It is the responsibility of the board of directors and senior management to emphasise the importance of internal control through their actions and words. Banks should regularly reorient and train their personnel so that they fully understand the importance of internal controls in their respective stations. The boards of banks should specifically pay attention to creating and sustaining a culture of effective control in the banks,” Das had said, while delivering the 15th annual convocation address at National Institute of Bank Management, Pune.
CM sticks to stance over Thiruvananthapuram airport
Kerala Chief Minister Pinarayi Vijayan Thursday said the state government was not ready to hand over the Thiruvananthapuram airport to Adani group and told the state assembly he would convey that to Prime Minister Narendra Modi.
The Adani group had, in February, won the bid to operate five out of six airports, including the Thiruvananthapuram airport, proposed for privatisation by the central government.
The state government had earlier appealed to the Centre to reconsider its decision to lease out Thiruvananthapuram aerodrome for operation, management and development under the public-private partnership (PPP).
“Without the co-operation of the state government, no private company can develop the airport properly,” Vijayan told the Assembly.
“Our stand is clear…that the airport cannot be handed over to private parties. Either hand it over to the state government or carry on with the current administration.
Will meet the Prime Minister with regard to this matter during the Niti Aayog meet in Delhi,” Vijayan said.
He was replying to a call attention motion by CPI MLA C Divakaran.
In a letter to the prime minister in March, Vijayan had demanded that the airport’s operation be handed over to the Thiruvananthapuram International Airport Ltd (TIAL) floated by the government-run Kerala State Industrial Development Corporation (KSIDC).
However, the Adani group had emerged as the highest bidder for managing, operating and developing six AAI airports, which are to be privatised.
The airport was established in 1932 on 258.06 acres of land owned by the princely state of Travancore, of which the state is the successor.
The 258.06 acres of land had been entered into the revenue records as government land.
The AAI itself has admitted that only 0.05756 hectares out of the total extent of 636.57 acres of land are under its ownership.
The state government claims it has the expertise in airport management and also creditworthiness, more than that of the private entity, which does not possess previous experience in airport management.
Vijayan had said the decision on the privatisation move was ‘totally disappointing’ and had come at a time when the state government was going ahead with steps to acquire 18 acres for the development of the airport.