Finance & Taxes

Milestone Capital Advisors Ltd, which manages around `3,152 crore of assets in its portfolio, and Future Ventures India Ltd, the investment arm of retailer Kishore Biyani's Future Group, have filed draft prospectuses with the Securities and Exchange Board of India, or Sebi, for a public listing of shares.

Milestone says in its draft red herring prospectus (DRHP) that it will primarily use the money raised from its initial public offering (IPO) as seed capital for a new infrastructure fund (expected to be around `800 crore) and for a small and medium enterprises fund (`250-300 crore).

Future Ventures expects to raise `750 crore from its IPO to "create, build, invest in or acquire, and operate businesses in consumption-led sectors," it says in its DRHP, filed late August.

That's about one-fifth of its earlier fund-raising plan. In 2008, Future Ventures had filed a draft prospectus to raise `3,700 crore, but decided against an IPO when the stock markets crashed.

Spokespersons of both PE firms declined to comment, referring instead to the DRHPs.

Source: Live Mint By Deepti Chaudhary PE firms look to raise funds from market

The inter-ministerial Board of Approval (BoA) on SEZs, headed by Commerce Secretary Rahul Khullar, will also consider framing a policy for setting up units for recycling of plastics in SEZs, an official said.

As of now, there is no specific provision in the SEZ Act for such units.

The new SEZ proposals include Infosys Technologies IT SEZ in Bangalore, Lepakshi Knowledge Hub's proposed aerospace SEZ in Andhra Pradesh and the Gopalan E-Park IT SEZ at Mysore, Karnataka.

The board will also take up the requests of 24 developers, including Wipro, Mahindra and Mahindra, Ansal SEZ Projects and Wockhardt Infrastructure Development, who have asked for more time to execute their projects.

The BoA will also take up the request of real estate major Raheja Universal for de-notification of its IT SEZ in Maharashtra. Base Realty has also asked for permission to surrender its IT/ITeS SEZ in Maharashtra.

Source: Realty Plus Govt to take up 8 new SEZ proposals on Sept 16

However, a section of developers felt the deduction of interest paid on home loans could have been raised from the existing limit Rs 150,000.

"The move to retain the tax benefit will help home buyers. However, it does not help developers much. The government could have considered raising the limit to Rs 2.5 lakh, instead of maintaining it at Rs 1.5 lakh," Rajiv Talwar, executive director of DLF, said.

The Income Tax Act, 1961, provides for deduction from taxable income of up to Rs 150,000 towards interest paid on a home loan availed for purchase or construction of a property.

Source: Realty Plus Realtors, Banks Cheer As Home Loan Rebate Stays

"The root cause being, inflation, which in-spite of RBI's efforts has not come down to satisfactory levels, and is further spreading from food items to non-food items. RBI is cautious and it is expected that, it will act soon to counter that," said, executive director, HDFC Bank Ltd, Paresh Sukthankar.

He said, "Due to tightening of liquidity, we could see a hike of 50-75 bps in the lending rates. The rise is likely to impact loans across the board including home loans, personal loans, and the like. The rise however, will not happen at the first instance. It will take place in tranchesby the end of current fiscal," said Sukthankar.

He said the move will not dishearten the low and mid-income group from going ahead with their buying decisions.

The first draft of Direct Tax Code (DTC) was silent on exemption on interest paid on housing loans. However, after adverse feedback from

"It is a very good thing that the government has retained the exemption. It will have a feel-good various quarter, the second draft proposed to retain this exemption, which is also incorporated in the bill.

Commenting on the development, the country's largest realty firm DLF Group executive director Rajeev Talwar said: "It is good that the exemption has been retained. However, the industry was expecting enhancement of the limit.

"I think, in future the government has to consider increasing the limit to include more people in the bracket."

But if you are one who has a home loan running for a few years now and are under the BPLR system, you may be feel- ing cheated. So, does it make sense for you to switch to the new base rate system, which is fairer? If yes, how can you do it and would it really make a dif- ference to your equated monthly instalments? We ad- dress these issues and more.

What makes base rate fairer than BPLR?
Under the BPLR regime, you paid more when interest rates went up because some banks were prompt in hiking the BPLR.

Click On Image For PDF View...

However, their BPLR never come down even when interest rates head south. So, a drop in interest rates didn't mean you paid less.
This made the BPLR system un- fair and non-transparent.

The new base rate system promises to give a fairer deal, at least to new customers. Since the base rate is the minimum rate at which banks are permit- ted to lend, the banks will have to alter it whenever their cost of funds and other parameters al- ter, owing to change in key rates announced by the Re- serve Bank of India (RBI). The change in loan rates will be equal to the change in base rate and would, therefore, lend transparency to the system.

Source: Live Mint By Bindisha Sarang Home Loans: BPLR Rates Are Rising, Shift To Base Rate

• How can you shift?

• Should you shift?

The SEZ developers say the tax regime approved by the Cabinet on Thursday does not reduce the uncertainty, which will make it difficult for them to attract units.

"We have clients who have developed SEZs and got into serious talks with interested investors, only to have them back out when the first draft of the DTC was circulated," says Hitender Mehta, partner, Vaish Associates Advocates, a Gurgaon-based consultancy firm.

Developers are not sure whether investments that they have already made in zones under construction will attract units though the direct taxes bill approved by the Cabinet retains the tax exemptions available to them under the SEZ Act.

Developers and the units located in the SEZs are particularly opposed to the provision in the code that links tax exemptions to investments made rather than profits earned.

Source: Economic Times By AMITI SEN New DTC: SEZ sops may continue till 2014

The Bill, which raises the income tax exemption limit from R1.6 lakh to R2 lakh a year, and rejigs existing slabs, will replace the archaic Income Tax Act.

"The objective is to limit the plethora of exemptions. (Income) tax slabs will be three. Rate of taxes will be taken in the schedule so that they need not be changed every year," Finance Minister Pranab Mukherjee said on Thursday after the cabinet meeting.

The Bill has also proposed fixing corporate income tax rate at 30 per cent inclusive of surcharges and cess -down from 33 per cent at present.

It has also proposed minimum alternate tax (MAT) of 20 per cent, instead of the present 18 per cent, on book profits of companies.

While Mukherjee did not disclose the proposed new income tax slabs, sources said income between R2-5 lakh would attract a rate of 10 per cent, 20 per cent for income between R5 and R10 lakh bracket and 30 per cent above R10 lakh.

The bank raised deposit rates by 25-50 basis points and its benchmark prime lending rate by 50 basis points last week.

But it is not looking to raise its Base Rate for now, Bhatt said.

Bhatt said although liquidity is not as much as it used to be, funds are available. But after September there could be pressure on liquidity due to advance tax payments.

Central Bank of India may raise lending rates by 25-30 basis points in the October - December quarter, said R Sridhar, chairman and managing director.

Currently, the bank is seeing about 20-21 per cent year-on-year credit growth.

Most of the credit offtake has been to the infrastructure sector, NBFCs which lend to commercial vehicles and some to textile companies, he said. Within the infrastructure sector, the bank is nearing its sub-limit for the power sector.

The company will issue fresh shares and is currently talking to "three big domestic and global institutional investors" for the fund raising exercise, sources said.

Repeated calls and SMSes sent to the company spokesperson remained unanswered.

"The company will issue fresh shares to raise Rs 350-400 crore and if everything goes well, it will happen in the next 15-20 days. With fresh issue of shares, the promoters' holding will come down to about 45 per cent from the existing 56 per cent," a source said.

In May, the company's board had approved an enabling resolution to raise Rs 1,000 crore through the qualified institutional placement (QIP) route.

"With this tranche of QIP raising, the company expects to reduce substantial amount of debt and operate in a healthy mode," another source in the know of the development said.

The company currently has a total debt of about Rs 1,750 crore.

Source: Economic Times Ansal API Plans Rs 400 Crore QIP In Next 15-20 Days

The department of industrial policy and promotion (DIPP), the nodal agency for foreign investment policy, has written to the finance ministry giving the broad contours of the proposed foreign investment framework for LLPs. It has suggested that foreign investment be allowed in LLPs with prior approval.

"This will give foreign investors flexibility to operate in a simpler environment with minimal compliances and yet be tax efficient," said Akash Gupt, executive director of consulting firm PwC.

LLPs share many of its features with normal partnerships, but partners will have reduced personal responsibility for its business debts as the partnership itself is responsible for such liabilities.

A discussion paper is expected to be put up in public domain soon, said a government official privy to the discussions. This would be third in the series of discussion papers released by the DIPP. The earlier ones were on foreign investment in defence production and multi-brand retail.

Source: Economic Times By DEEPSHIKHA SIKARWAR Foreigners may get to set up LLPs in sectors open to FDI

Over the last four years, more and more of them have been drawn to properties. They don't get into cash deals, broker-dealings and paper work -- the messy side of real estate transactions. Instead, they ask real estate fund managers to grow their money. Their message to fund managers is simple: "first, don't buy listed stocks, go for unlisted builders; second, pick those property firms with projects in Mumbai and Delhi, the hottest markets." Around 15 local real estate funds are today managing Rs 10,000-12,000 crore. That's as big as the portfolio management business of stock brokers.

Like PE players, their more glamorous neighbours, the property firms offer a hurdle rate of return to investors. Simply put, this means that the fund has to generate a floor return, that varies from 8-11%, before it can claim a slice of the profit. This return (which isn't guaranteed) goes to investors and anything above it is shared in a way where the fund keeps 20% of the profit and the balance 80% goes to investors. Say, the hurdle rate is 8%, and the fund generates 15%.

The extra 7% over the hurdle rate is split, with investors receiving 5.6% and the fund keeping 1.4%. One of the funds, backed by a blue-chip institution, has been clever enough to raise money before Lehman, sit on the cash for a year and invest it after the meltdown. But not all have been lucky; and a few missed the bull run. The four-year old party is slowly beginning to get a little crowded. Corporates, professionals, builders and brokerage firms are floating funds. And none of them has a problem in raising money.

What's helping is a near stagnant mutual fund industry. Very little new money is flowing into mutual funds, which can no longer use investors' money to pay brokers and banks who have so far helped them mop up funds. But real estate funds, away from the regulator's glare, have no such curbs. They are paying as high as 3-4% commission to whoever is interested to raise money for them.

The National Housing Bank (NHB), regulator for HFCs, said HFCs will not follow in the footsteps of banks immediately.

"There is no real rush on the part of HFCs to raise rates. It will depend on their cost of funds," RV Verma, executive director of NHB, said.

Verma said HFCs are likely to wait and watch the action that banks take on base rates before taking a view on their lending rates.

"Over 50 per cent of HFC funding comes from banks. If banks raise their base rates when they conduct their next round of review, the cost of funds of HFCs will be impacted. That will have a bearing on the decision of most HFCs," he said.

Source: Realty Plus No Interest Rate Hike From Housing Finance Companies (HFCs)

They are turning tricky as bankers line FDs to match fluctuating interest rate cycles.
Which means you cannot take the rate of interest you get on your deposits for granted.

In the new scheme of things, you can choose to have a fixed rate term deposit. But there will be a catch: you will have to pay a penalty if you close your FD before its maturity date. If you choose a `floating rate' term deposit instead, you may still attract charges for premature withdrawal but the damage is expected to be much lower.

Industry leader State Bank of India has already launched its variable fixed deposit scheme that is linked to its base rate.Other banks may follow suit.

"I see the market moving in that direction and we are looking at this as well," said K.V.S.
Manian, group head, retail liabilities, Kotak Mahindra Bank.

"It will take some time for retail depositors to accept it but they will get used to it." Financial experts, however, said banks should ensure they are transparent in passing on the benefits of rising interest rates. They should not act they way they did in the case of home loan rates where they hiked their rates when the interest rates rose, but lagged behind in passing on to consumers the benefit of a rate decline.

Source: Hindustan Times By Sandeep Singh Soon, no fixed interest from fixed deposits

* FD Power On Wane?

The Global Market Perspective report released by Jones Lang LaSalle says that the region was quickest to recover and the outlook seems positive.

In fact robust bounce back was recorded last year itself when much of the world was still sluggish. Abhishek Kiran Gupta, Head - Research & REIS, Jones Lang Lasalle Meghraj says, "Even though Europe is reeling under the fallout of the economic crisis and US is showing signs of convincing recovery now, funds are once again being routed towards the Asia-Pacific region, where India and China top the investment destinations.

The real estate implications are obvious and compelling. Both countries are heavily populated with growing economies that are spawning growth in the manufacturing, telecom , pharmaceutical, agriculture and logistics sectors. Each of these sectors will require to be housed in properties besides housing itself."

Akash Deep Jyoti, Head, Corporate & Infrastructure Ratings, CRISIL Ltd., says, "India's realty sector has maintained strong resilience in the recent financial crisis, despite slowdown in demand. Demand is expected to recover sooner in India, than in USA and European Union, spurred by economic revival."

Source: Economic Times By ARCHANA SINHA Real estate in Asia-Pacific region on path of recovery

As per the existing rate card, loans up to Rs 30 lakh attract a lowest rate of 9.25 per cent with a repayment period of 5 years while loans above Rs 30 lakh is available at 10 per cent for similar maturity.

"Under the offer, housing loans up to Rs 50 lakh will be available at discounted rate of interest of 8.5 per cent under fixed interest rate option across all repayment tenors," the bank said.

At the same time, new car loan borrower under fixed option will get a rebate of 0.5 per cent. The offer will be valid till December 31, 2010.

"House tax will be levied after the four-member committee constituted for the purpose submits its report," said the minister, who heads the committee.

Talking to reporters after presiding over the monthly meeting of the district grievances committee here today, he said though Chief Minister Bhupinder Singh Hooda did not want to impose house tax on the people, the Union Government had asked the state government to make its urban local bodies economically self-reliant, due to which the move was necessitated.

To a question, he said the franchisee system to be implemented in Gurgaon was aimed at giving the responsibility for ensuring quality power supply to consumers to a private player.

"The ownership is not being transferred, so it cannot be termed as privatisation of the power utilities," he said, adding that the control would be with the government and the tariff equal to that in other parts of the state.

Source: The Tribune By Sunit Dhawan House Tax Burden To Be Minimal : Mahender Pratap Singh

The private equity firm, with over $2.8 billion of assets under management, will raise around Rs 1,500-2,000 crore through the exits, which are mainly due to the maturing of the investment horizon, according to vice chairman Shahzaad Dalal. The returns could average 25-30% from the real estate investments that were made about five years ago.

"We hope this is the right time to unlock few of our investments. We have already identified three real estate investments for exit and are evaluating a few more," said Mr Dalal. However, he refused to disclose the name of the companies. This move has come at a time when real estate sector has started looking up and ready to provide better returns on investments.

The private equity arm of Infrastructure Leasing and Financial Services (ILFS) has invested more than $1 billion or Rs 4,600 crore through 41 transactions across the country. It has invested in various projects being developed by leading real estate developers including Ackruti City, QVC Realty, Ansal Township, DB Realty, Suyog Realtors and ETL Infrastructure Services. IIML has invested in these companies through its two real estate funds-IL&FS India Realty Fund I and IL&FS India Realty Fund II with nearly $1.4 billion assets under management.

Further, IIML plans to invest a major portion of its investments in real estate and also exploring fresh opportunities in other sectors like green energy, ports, power infrastructure and agriculture. "We will invest 40% of our total investments in real estate, 20% in infrastructure and remaining in new segments," said Mr Dalal, adding, "We see ample opportunities in India with 8.5 % GDP growth target."

Source: Economic Times By PRADEEP PANDEY IL&FS fund may raise Rs 2k cr via realty exits

India Realty Fund-1, managed by Azure Capital Advisors Pvt Ltd, is raising  a Rs 500-crore rupee-denominated private equity fund, which will track investment opportunities in "byte-sized" real estate developments in India's southern and western markets.

The fund will essentially be focused on urban conglomerations where the knowledge economy is expanding and on re-developments of smaller residential societies in Mumbai.

The fund will focus on equity investments of up to Rs 35-40 crore each in small to mid-sized residential projects. These could be new joint developments and re-developments on land parcels of 5 to 10 acres in metros as well as in tier-II and tier-III cities.

"The first close of India Realty Fund-1 at around Rs 150-200 crore and is expected  towards end of September. The first close will be mainly through retail investors, HNIs and family offices. This will be a seven-year (six plus one) close-ended fund," Shailesh Ghorpade, MD & CEO of Azure Capital Advisors told VCCircle. Ghorpade came in from Suzlon Energy where he was the chief strategy and planning officer.

Source:www.vccircle.com By BOBY KURIAN Azure Capital On Road To Raise Rs 500Cr Fund

By pushing this distinction, retailers have asked for allowing 100% FDI in non-food retail; food retail could be opened up to FDI in a calibrated manner. Most of the organized retail chains have in place different entities for food and non-food retail in the country.

"The discussion paper is not clear on food and non-food retail and we have addressed that in our response," said Kumar Rajagopalan, chief executive officer, Retailers Association of India (RAI).

The proposal comes at a time when the debate on FDI in retail has moved from being an academic to a political discussion.

"The government now understands that organized retail can create jobs and bring investments. However, there is a big resistance on the food side," said Raghav Gupta, president of Gurgaon-based retail consultancy firm Technopak Advisors Pvt. Ltd.

Source: Live Mint By Sapna Agarwal Retailers For Non-Food, Food Retail Distinction, Asked For Allowing 100% FDI In Non-Food Retail