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Just rate cut not enough to boost realty market: Developers

The hard facts of declining consumption and a deepening economic slowdown in India are inescapable, and real estate has been severely impacted by them.

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Mumbai, Aug 7 (IANS) Real estate developers have joined the industry chorus to welcome the 35 basis points (bps) cut in repo rate but market players and experts also stressed the fact that the mess in the construction sector and the ongoing demand slowdown is of such magnitude that only a rate cut is unlikely to boost subdued sentiments.

Anuj Puri, Chairman of Anarock Property Consultants, said that the hard facts of declining consumption and a deepening economic slowdown in India are inescapable, and real estate has been severely impacted by them.

“For real estate, a rate cut of 35 bps is, however, insufficient to significantly improve buyer sentiment in the mid-income segment, which still has a staggering unsold inventory of 2.17 lakh units in the top seven cities,” he said.

Puri said that on the other hand, the demand for affordable housing, which accounted for 2.4 lakh unsold units in these cities, may see improvement as this highly budget-sensitive segment already has the benefit of other incentives.

Shishir Baijal, Chairman and Managing Director, Knight Frank India said: “In light of the present economic distress in the country, we welcome the move to bring down repo rate by 35 bps… however, we would have really expected to see a more substantial cut is the need of the hour for its effective transmission to end users.

While it is the fourth consecutive rate cut this year and is in line with RBI’s recent shift to an accommodative monetary policy stance, it may not be sufficient to give the required impetus to the stalling consumption numbers, he added.

More needs to be done to provide a liquidity stimulus to the broader real estate spectrum, Baijal said.

Mani Rangarajan, Group Chief Operating Officer of Housing.com, said: “How far these rate cuts will succeed in spurring consumption is something only time will tell. However there is no denying that in the mid-income and affordable housing segments which are very price sensitive, these rate cuts can boost sentiment and sales, provided they are passed on to the end-users by the banks.”

As ideally the reduction in repo rate, the rate at which the RBI lends to banks, should lead to further reduction in retail loans to the common man, developers are hopeful that the rate cut would eventually be transmitted to the consumers and demand for home loans and properties would increase.

“RBIs move will reduce the outgo in terms of EMI for the borrowers, benefitting the home buyers, which will surely boost confidence in the segment bringing in the much-awaited momentum in sales,” said Manoj Paliwal, CFO, Omkar Realtors & Developers.

Surendra Hiranandani, Chairman, House of Hiranandani, was of the view that going forward, it would be imperative for banks to reduce the lending rates and ensure that home loan borrowers reap the benefits of this move.

Amit B. Wadhwani, Co-Founder of realty consultancy firm, SECCPL said: “We believe that more banks will practice the revised rates while lending. This will help sell the inventories at a faster pace, and it will also encourage developers for new launches.”

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Slowdown: Hyundai Motor India lists ‘no production days’

The company had “no production days” on August 10 and 12 at its Body Shop-2, Paint Shop-2, Assembly Shop-2 and Support Teams (three shifts) and Transmission-2 (six shifts).

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Hyundai

Chennai, Aug 17 (IANS) India’s second largest car maker, Hyundai Motor India Ltd (HMIL) has declared “no production days” this month for some of its production departments owing to tough market conditions for the automobile sector.

The company, in a notification to its workers this month, said that due to prevailing market conditions, there will be no production days in its Engine Shop-1 between August 9-21 (10 shifts), and on August 10, 24, and 31 at Engine Shop-2 (nine shifts).

The company had “no production days” on August 10 and 12 at its Body Shop-2, Paint Shop-2, Assembly Shop-2 and Support Teams (three shifts) and Transmission-2 (six shifts).

A company official, who did not want to be identified, told IANS that there are three engine plants and plans are there to start another shift in the third.

The demand for models like Venue, and Creta is good and production is going on. The company is also expecting good demand for its new model Grand i10 NIOS.

Incidentally, HMIL is not the only company which has declared “no production days”.

According to reports, several other vehicle and component makers have cut down production by closing down plants to align production to the demand.

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Gold may surge to Rs 40,000 per 10 gram by Diwali

Currently the October contract of gold was priced at Rs 37,995 per 10 gram on the Multi-Commodity Exchange (MCX).

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Mumbai, Aug 17 (IANS) Amid global growth concerns and heightened trade tensions between the US and China, gold prices might cross the Rs 40,000 mark by Diwali, analysts have said.

Typically, the demand for gold reflects the expectations about the future, the prices of the precious metal tends to rise amid uncertain economic situations or political upheaval.

Currently the October contract of gold was priced at Rs 37,995 per 10 gram on the Multi-Commodity Exchange (MCX).

“Demand for the precious metal may slow down slightly owing to some easing in trade tension between US and China, but over the trend is negative. We see gold prices around Rs 39,000 to 40,000 per 10 gram by Diwali, ” said Anuj Gupta of Angel Brooking.

Gupta explained that the gold prices were surging primarily owing to the decline in global growth rate.

Experts globally are also suggesting investments in gold and other precious metals amid these uncertain times as an insurance against economic uncertainty.

“We now recommend all investors have a full allocation to precious metal investments in their portfolio,” said a Gohring and Rozencwajg report.

“We believe the bear market in gold has run its course and a new bull market has begun.”

Lower interest rate by central banks and the ongoing trade dispute between the two biggest economies, the US and China, were supporting the gain in gold prices.

Besides, latest worry came over the recession warning via bond market. The inversion in the US bond yield hit levels last seen in 2007, just ahead of the global financial crises.

This came even as the US decided to defer the rise in trade tariffs it announced earlier as major export market showed renewed signs of weakness.

Europe’s biggest economy, Germany, reported negative growth, hence nearing the risk of a recession. The UK had already reported a contraction in growth amid Brexit woes and China added fuel to fire after it released weaker than expected factory data.

Investment firm Morgan Stanley had said that if the trade war further soared via the US further raising tariffs on all goods imported from China to 25 per cent, “we would see the global economy entering recession in three quarters”.

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Gold ETFs: Investors bet big on the safe haven asset

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Mumbai, Aug 17 As the global economic scenario remains subdued and trade tensions remain volatile, investors have bet big on the safe haven of gold-backed exchange traded funds (ETF).

According to data from the World Gold Council (WGC), globally investors poured about $2.6 billion into gold-backed ETFs in July, the highest monthly investment since March 2013.

The Gold Exchange Traded Funds (ETFs) are simple investment products that combine the flexibility of stock investment and the simplicity of gold investments.

As per a report by natural resources investing company, Goehring & Rozencwajg, the Gold ETF bull run to continue for the foreseeable time.

“This (gold) bull market will be driven by Western investors, we should start to see robust physical accumulations of both gold and silver through the various ETFs which we believe will be the Western investment community’s vehicle of choice,” the Goehring & Rozencwajg report said.

“In the last several months, physical accumulation has indeed developed in both gold and silver physical ETFs.”

The report noted that ETF gold holdings are now approaching their old highs reached back in 2012.

The same phenomenon of rise in valuation of gold ETFs can be witnessed in India as value of the ETFs on the NSE have risen since April 1 in contrast to the subdued Nifty50 index.

The report further said that, “with central banks becoming significant buyers of gold instead of sellers and with producers no longer forward-selling their production, the only potential source of physical supply over the last eight years has come from the physical gold ETFs”.

Since their introduction in 2004, ETFs have become significant players in physical gold markets. Over an uninterrupted eight-year stretch, physical gold ETFs accumulated 2,600 tonnes of gold by the end of 2012, the report said.

The report showed that after the 2008 financial crisis, most of the inflows into the physical gold ETFs came from investment firms and hedge funds.

It observed that while buying gold in the 1970s was complicated as one had to either buy gold futures, physical coins or bars, or gold equities, the gold ETFs have made buying gold extremely accessible.

“Public participation in the coming bull market will be comparatively easy.”

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