ESDM sector to reach US$ 228 billion by 2020 says @IESA_ONLINE and @EYnews report

Electronics System Design & Manufacturing in India to reach US$ 228 billion by 2020 says @IESA_ONLINE and @EYnews report pic.twitter.com/o4CtJ4fwAT

— Press Release Watch (@PrReleaseWatch) February 21, 2017

Other highlights pointed out that, the domestic manufacturing for Electronic Products has been growing at a CAGR of 17% which is expected to increase further over next 5 years. Electronic Manufacturing Services segment has seen a huge growth over the past two years and has grown from $0.5bn. in 2013 to $1.0 bn. in 2015. Indian EMS market is estimated to witness exponential growth of 42-68% over the next five years to reach US$6-13.2 billion.

Residential Real Estate – The Policy Effect

Post the 1991 liberalization policy, India began to welcome various multinational corporates that were seeking permission to commence operations locally. Being the financial and commercial capital of India, Mumbai was the first city to witness a significant influx of large multinational firms.

By 1994-95, real estate prices in the city increased to a point where companies started to look for cheaper alternative locations, paving the way for other cities to grow commercially. Demand for both commercial and residential real estate gathered steam.

A policy-driven bullish cycle culminated in an industrial boom, thereby also driving house prices to a peak in 1995.  At this peak, some realities of the Indian economy (poor bank penetration, high interest rates, non-transparent real estate market, etc.) came to fore, bringing a correction in market prices. As the Asian Financial Crisis (AFC) erupted in the late 1990s, residential prices witnessed a significant drop, returning to the levels witnessed in the early 1990s.

It took approximately 3-4 years for Indian real estate to recover from the AFC shock. A handful of critical national employment-oriented policies and a reduced interest rate environment instituted by the NDA-led government laid the foundation for a revival in residential real estate prices during the early 2000s. Demand for quality residential apartments began to rise, and was increasingly addressed by developers, powered with money coming through the FDI route which had opened up since 2005.

In 2005, the Jawaharlal Nehru National Urban Renewal Mission (JNNURM), which facilitated huge investments into building infrastructure to connect larger cities with 60+ smaller cities and towns, provided a fillip to overall real estate sentiment.

At the peak of prices during 2008, what emerged was a large accumulation of debt with almost every stakeholder – homebuyers (large mortgages accrued in the quest for buying more houses in a rising price scenario), developers (large accumulation of land parcels), and banks/lending institutions (exposure to outstanding loans to the real estate sector, which was now looking overheated). The ensuing economic slowdown and risk of job losses led to halt of the price rally. Thus, the two cycles of real estate that India has witnessed over the last 2 decades or so, has seen policy stimulus in the beginning and an overheated market in the end.

Reforms Targeted At The Real Estate Sector

Against the backdrop of a rising economy and concurrent income growth, the real estate sector has witnessed tremendous growth over the last 10-12 years. Government policies were at the crux, providing the necessary stimulus. However, while on one hand these real estate policies improved the housing situation in general, they also have elements that can be seen as detrimental to the real estate industry’s business viability. With the advent of the union budget season for 2014, it is time to review these policies and highlight the gaps.

·         Repealing the Urban Land Ceiling (ULC) Act of 1976


The Urban Land Ceiling Act, 1976, was enacted with the intention of making land hoarding impossible for individuals or corporate entities which had the capacity to do so. The Act gave the state government the right to acquire and dispose excess land (as specified in the Act) from individuals and entities, thereby serving the common good. However, the Act became one of the main reasons for the short supply of land and therefore led to unaffordable land prices.

Under JNNURM, 29 states have now repealed this Act while two others still need to do so. The benefits of this reform are evident from the Gujarat and Nagpur examples. The Gujarat government transferred their surplus land to urban local bodies at nominal rates for projects focused on housing for EWS/LIG households. Likewise, Nagpur witnessed an increased supply of land for development as well as for investment after repealing the act.

Even while certain states have adopted the repeal Act, there are concerns regarding the lack of implementation by local authorities in certain districts. For instance, the Maharashtra Chamber of Housing Industry contends that the provisions of the ULC Repeal Act are still not in force, and are subject to discretionary interpretation and insistence of NOC from competent authorities. A complete repeal of this Act would unleash positive changes in terms of larger land supply and relatively affordable land prices. The budget can look forward to improve the implementation mechanism.

·         Repealing the Rent Control Act


The Rent Control Legislation has been in existence for almost a century in India. The common intent of every state enacting the legislation was to protect tenants from forceful eviction and unfair rental hikes. However, the law failed to make provision for receipt against rent payments, rent increase against rising cost of building maintenance or inflation, repair work when the residential structure is at peril, etc. which renders the act inefficient. In an attempt to protect tenants, this Act has in fact created unfavorable terms for landlords, thereby making the entire model of rental housing unviable and inefficient.

To end the problems associated with this archaic law, a Model Rent Bill was circulated by the central government in 1992. It was an attempt to balance the interests of both the tenants and landlords. However, over the last two decades, only seven states have implemented the changes suggested in the Act. States such as Punjab and Goa have already experienced benefits from implementing the suggested changes.

A further push from the central government (possibly under the JNNURM scheme) would be needed to expedite the adoption of the model Rent Control Act. Its repeal could unleash a construction boom, as has been witnessed in many major cities all over the world (after they repealed their respective rent control acts). This is not only necessary to meet the growing unmet demand for housing but would also have a very favorable effect on employment generation.

·         The New Land Acquisition, Rehabilitation and Resettlement Act


There have been innumerable cases of land owners being either exploited or dispossessed by force through diligently crafted contracts by corporate entities. The Land Acquisition, Rehabilitation and Resettlement Act tried to ensure maximum protection for land owners, who are often individuals and at times not fully aware of the future consequences of disowning their land. This Act has the potential to unlock all the land which has been locked for several years due to lack of ways and means that ensure fair compensation.

While the Act had the objective of balancing the interests of land owners and land acquirers, the final draft of the policy did not really deliver on this front. The clauses that appear in the Act not only ensure that land costs go up for the acquirer, but it also renders the acquisition process more complex and time-consuming. This is evident in the clauses pertaining to obtaining mandatory consent of 80% of the owners, future incremental gains from land transactions to be shared by the land owners, and different resettlement procedures for different sections of the population (such as scheduled castes/tribes).

·         Service Tax Abatement On Construction Activity


In June 2012, the Ministry of Finance provided an exemption from service tax on construction activities related to single residential units or low-cost housing (carpet area of 60 sq. meters or less). The policy of levying service tax on construction services of under-construction apartments (which do not have completion certificates) added to escalation in cost to buyers. Due to non-availability of large capital sums and easy accessibility of EMI finance, the urban populace invests in real estate by taking loans. This includes the inbuilt costs of overdraft, which is further compounded by the imposition of service tax.

Exemption from service tax is provided for construction of residential complexes which are a part of the JNNURM and Rajiv Awas Yojana (RAY). JNNURM and RAY are flagship schemes of the government of India to provide shelter for the poor and the disadvantaged.

·         Consolidated FDI Policy

 The Indian real estate industry has been on a roller-coaster ride since 2005. Consequent to the government’s policy to allow Foreign Direct Investment (FDI) in this sector via Press Note 2, the sector has witnessed a boom in investment and developmental activities. The FDI channel was opened up under the automatic route in townships, housing, built-up infrastructure and construction development projects.

The main intention behind opening up the real estate sector to 100% FDI was to bridge the huge shortage of housing in the country, and to attract new technologies into the housing sector. The sector not only witnessed entry of many new domestic realty players but also the arrival of many foreign real estate investment companies - including private equity funds, pension funds and development companies - all lured by the high returns on investments.

However, lack of consistency in rules relating to the development of SEZs, increased monitoring of the sector by regulatory agencies, tightening of rules for lending to the real estate sector and increase of key rates by the RBI several times during the last one year have arrested the growth of the real estate sector.

There is a very clearly defined need to streamline government policies and introduce reforms. The key challenges that the Indian real estate industry is facing today are lack of clear land titles, absence of title insurance, absence of industry status, lack of adequate sources of finance, shortage of labor, rising manpower and material costs and a snail-like project approval process, among others.

By Anuj Puri, Chairman & Country Head, Jones Lang LaSalle India

Trust Index Report by Thomson Reuters for the last quarter in 2013

Thomson Reuters, the world’s leading source of intelligent information for businesses and professionals, today announced the latest results of its proprietary TRust Index showing that trust sentiment in the Top 50 Global Financial institutions finished the year stronger, but still negative, with fourth-quarter sentiment below that of the third quarter.  Analysis of the Top 50 Global Financial institutions for the fourth consecutive quarter of TRust Index metrics revealed several trends observed throughout 2013, among them a regional convergence of news and social media sentiment; continued confidence in analyst expectations; and proliferation of regulatory activity.

“Throughout a year which saw dramatic improvement in markets and numerous headline events impact the financial industry, trust sentiment amongst news and social media, whilst still modestly negative, had recovered from 2012’s lows and stabilized,” said David Craig, president, Financial & Risk, Thomson Reuters. “Our data reveals a stronger industry, which enters 2014 within a much-changed landscape and an ever-increasing regulatory focus.”

Tracking trust through news and social media sentiment shows that the Top 50 Global Financials ended the year with a fourth-quarter trust score of -1.75 percent, down from -1.5 percent in the third quarter.  At the regional level, the top institutions in Europe/UK scored the highest trust sentiment in the fourth quarter, ending the year at -1.25 percent, down from -1.0 percent in the third quarter. Institutions in the Americas scored lowest with -1.85 percent in the fourth quarter, versus -1.6 percent in the third quarter.  The Asian institutions, which had led in trust scores for most of 2013, were down at -1.5 percent (-1.0 percent in the third quarter).

Headline events affecting trust sentiment scores over the fourth quarter included:
•    Record mortgage- and LIBOR-related bank fines, penalties and settlements exacted by US and European regulators
•    The US government shutdown; cuts to Asian GDP growth forecasts by the World Bank
•    IMF and ECB activities around capital buffers, debt, leverage and risk
•    The release of the approved Volker Rule on December 10, 2013.

Other features of this quarter’s TRust Index follow below; please click here for further insight and data:

The Confidence of the Marketplace – Investors and Analysts
Fourth-quarter earnings growth estimates for the financials sector continue to show high expectations by analysts. Sridharan Raman, senior research analyst at Thomson Reuters, said, “At 22.4 percent earnings growth estimates for the sector, financials are just below telecommunications companies this quarter at 22.6 percent, but still well ahead of all other S&P 500 sectors.”

According to Thomson Reuters StarMine, analysts forecast forward 5-year growth rate for the Top 50 Global Financials at 9.0 percent, above the 8.0 percent expectations for the S&P 500.  However, we are still seeing investors discount growth, with market-implied growth rates at -2.1 percent.  This is further reflected by a 4.9 percent price appreciation in the Top 50 Global Financials stocks over the quarter, below both the S&P 500 (9.3%) and Thomson Reuters Global Index (6.7%).

Aggregate changes to analyst recommendations over the fourth quarter for the Top 50 Global Financial institutions reveal downgrades continued to outnumber upgrades across all regions, although only by a small margin.  This quarter, the highest numbers of upward revisions were seen for the UK/Europe institutions, due in part to the improved UK housing market increasing loan demand.

Counterparties: Credit Spreads as an Indicator of Trust
In the fourth quarter, credit default spreads (CDS) continued a long-term tightening trend, reflecting an overall increase in confidence among the Top 50 Global Financial institutions in pricing the relative risk of doing business with each other.  Institutions in the Americas ended the year with tightest spreads, and Asia the widest.  With the average spread for the Top 50 Global Financials at about 103 basis points, CDS ended 2013 far below 2011’s high of nearly 350, demonstrating the positive appetite in the bond market and reduced risk of default.

Regulation as a Barometer of Trust
According to Chris Perry, managing director of Risk at Thomson Reuters, “The proliferation of regulatory activity over the past several years must be seen as a growing and permanent condition for the global financial industry and a significant factor in the cost of doing business”.

The average daily number of regulatory alerts tracked by Thomson Reuters Accelus was above 100 for the second consecutive quarter, roughly double the daily average in 2010, and at the end of 2013 stood at 26,898 alerts, an increase of 43 percent over 2012 (18,761).  This increase reflects both increased activity by regulators and additional monitoring by Thomson Reuters.

Tracking Controversy and Governance as Factors in Rebuilding Trust
Thomson Reuters ASSET4 environmental, social and governance data, shows that a high level of controversies have been reported for the Top 50 Global Financials relative to the Financial Sector as a whole, but that adoption of processes and governance to address responsible marketing practices, improve fair competition and avoid bribery and corruption, all continue to be priorities.

About Thomson Reuters
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