Byapaar.com -The Indian Business Blog

Whatever is the case with Indian politics, one thing is sure though that there is an underlying consensus among all political parties that economic reform is the way to come out of that Nehruvian economic development which saw a sustained medium rate of Gross Domestic Product (GDP) growth also known in Indian economic folklore as Hindu Rate of Growth!

This consensus thing has become more pronounced when Left Front ruled state government in West Bengal has been trying hard to find vast spaces of land for big industrial houses interested in investing billions of $s in the state. Ironically, there is someone who is in their way of industrializing Bengal - it is their bête noire - Mamata Banerjee of the Trinamul Congress party who is doing the same same as the left parties did in the 60’s and 70’s - i.e. protect the farmlands which form most part of Bengal.

But I am not here for Bengal, I am here to talk about the new opportunities that has been brought about by economic reforms and rapid GDP growth over last 10 years or so.

Everyone is aware that Indian middle class is one of the largest in the world with huge level of purchasing power and MNCs come to India for them.  There are two groups though. One group is western educated, sauvé and highly urban working in the private sector with high salaries. The other group is semi-urban, traditionally educated, middle aged and look for security in government jobs. But members of both groups has one thing in common - ‘to own a house of their own’. While the first group had advantages so far to fulfill their dreams with their fat pay packages from so called sunshine industries (IT, ITes, Bio-technology), the second group had to think a lot before they took the plunge due to their low pay slips.

Some recent developments - both in the domestic and international scenarios have shifted the balance in this equation. The world economic meltdown caused by the now infamous US ‘Sub-Prime Crisis’ has affected the real estate and financial services sector more than anything else. With billions of square feet of real estate property lying vacant and liquidity crunch engulfing the world market, realty sector is not going to get hot in the near foreseeable future. Although most governments have taken several steps to infuse trillions of $s to come out of crisis, the market as a whole is still in the doldrums and real estate sector has simply crashed.

This is what I am talking about - a golden opportunity for all those who had to think ten times before owning a house in earlier scenarios. There are three plus points -

• Keeping with the rest of the world, Indian realty sector has also crashed.
• Indian banks have not been hurt that much with world liquidity crunch and with active initiatives by several branches of the central government through policy changes, the banking industry has been involved in home loan modification by way of rate cuts.
• The central government and most state governments have revised the pay structure of their employees with much higher pay so as to give the benefit of fast economic growth during last 10 years or so.

It is pure circumstantial that has brought about this opportunity. Now, a government servant is more suited to own a home or flat than someone working in the private sector. Employees in the private sector live in constant fear of loosing their jobs, Read the rest of this entry »

Amidst global economic turmoil and financial crisis caused by US subprime lending crisis that caused havoc in markets around the world, Indian nationalized banks in consultation with the government have announced reduction of interest rates on home loans of up to Rs. 2 million that could lead to partial impetus in the realty sector. Just last week industrial production in India contracted for the first time in 14 years.

According to the new rates set by the banks, housing loans of up to half a million Rupees will now have interests of 8.5 percent and that of loans between half a million to two million will have interest rates of 9.25 percent. Presently, interest for home loans is 9.75 to 10.5 across various sectors in the banking industry.

This brings very good news for millions common people who can not afford to think of a house or flat beyond Rs. 2 million. Another additional feature of the new housing loan package is that interest rates will remain frozen for 5 years which means clients will not have to worry about increased equated monthly installments (EMIs) during this period. Also they will enjoy the benefit of rate cuts in between while banks will take the burden if rates rise. After five years, consumers could choose either fixed or fluctuating rates according to their choice. This makes debt management a lot easier for the common person.

Not only this, but banks have also reduced the margin requirements for loans. While previously, borrowers were required to pay between 20 to 25 percent of the total amount as margin money, it has been trimmed down to 10 percent for loans up to half a million and 15 percent for loans between half a million to 2 million.

According to bankers, this move will see around Rs. 150 to 200 billion being released over next few years and help the common men who constitute eighty percent of nationalized banks’ housing loan book. Read the rest of this entry »

Finally the turbulence of politics is over with the UPA led by the Indian National Congress withstanding a tight no-confidence motion in the Lok Sabha on 22^nd July. The Left Front has been blocking almost all major reforms which are so badly needed to push the economy to the next level. It has been frustrating 4 years for both pro-reform Prime Minister Mr. Manmohan Singh and also the business community. Now that all is over, the UPA government is determined to push through reforms in many fields like insurance, telecom etc. despite the alarmingly high rate of inflation that stands @ 11.98% today!

High rate of inflation has also made the apex bank (Reserve bank of India) to raise interest and thereby make bank deposit attractive. On the other hand, the long bull run of the stock market also ended with the start of the turbulence of government instability and skyrocketing international fuel price.

So as an individual – where do I put my money? Most banks are offering an attractive 10% annual interest rate. But is it long lasting? Despite forecast of an economic slowdown, businesses remain upbeat on long-term economic prospect of the country.

So the ideal way to invest your money is to divide your funds and put them into both the markets. While it is not guaranteed that bank rates will always remain the same, one can not also say for sure when the equity/stock market is going to recover! Read the rest of this entry »