SBI hikes lending rates by 50 bps

India’s largest lender, State Bank of India joined other banks by raising its benchmark lending rate. Market analysts believe the move will surely disappoint the blazing pace of loan growth in the country.

The loan to individuals as well as to the companies has been growing at an annual rate of about 30 percent since last year. RBI to restrain the easy cash outflow has already declared on Dec 8 that it already has increased the proportion of deposits banks were required to keep in cash.

SBI declared on last Wednesday that it was elating its benchmark lending rate a good half a percentage point to 11.5 percent.

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ICICI home loan rates go up third time in a year

Four days after Reserve Bank of India (RBI) hiked the cash reserve ratio, country’s largest private sector bank ICICI announced that it would hike interest rates on floating rate home loans and corporate advances by half a percentage point. The bank will also raise interest rates on domestic term deposits by 25 to 50 basis points across various tenors. The bank's floating reference rate (FRR) has been increased to 10.75 per cent from 10.25 per cent. For the existing customers (floating rate) the increased FRR by 50 basis points will be effective from January, 1, 2007.

 
After ICICI Bank, observers expect banks like Housing Development Finance Corporation (HDFC) to soon hike rates. Public sector banks who earlier have indicated that they are not planning to revise the interest rate structure may now follow suit by hiking home loan rates as well.

 
State Bank of India (SBI) last week raised interest rates on domestic term deposits by 25 to 75 basis points may again up home loan rates by 25 to 50 basis points.   

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IT/ITeS companies grabbing office space in big cities

Despite the buzz around Tier 2 and Tier 3 cities, the space uptake by IT and BPO companies in metros and large cities will continue unabated with global research firm CB Richard Ellis (CBRE) putting the incremental supply estimates for corporate grade and IT/ITeS space in the region of 35 million square feet in 2007.

“The IT/ITeS companies are driving the office market and they account for about 80-85% of the total office space requirement. A large part of the supply in 2007 would be fuelled by large established companies which are on aggressive expansion mode, and a smaller part of it by new entrants,” Anshuman Magazine, managing director (South Asia region) of CB Richard Ellis, said.

The incremental figures will take the total space supply in metros/large cities to just under 200 million square feet in the coming year. “The overall space supply by end of 2007 is expected to be about 190 million square feet, in the National Capital Region (NCR), Mumbai, Bangalore, Chennai, Hyderabad, Pune and Kolkata,” he said.

“We feel that the talk about Tier 2 and Tier 3 cities undergoing massive expansion is somewhat exaggerated. Although they offer several advantages such as cheaper operational costs and lower attrition rates, the smaller cities still face challenges in terms of manpower and the right skill sets. So most of the activity is still focused around the metros,” he said.

Read More in The Times of India-Delhi Edition-13/12/06

Home loan costlier, RBI raises CRR to control inflation

The ghost of rising interest rate is back again, fourth time in a year to haunt the home loan borrowers. Reserve Bank of India unable to control the inflationary pressure and hysterical flow of capital into the stock market has whipped the strongest possible monetary policy tool to extract as much as Rs. 13,500 crore from the Indian banks. Contrary to market estimate the central bank on Friday announced a 50 point hike in the cash reserve ratio (CRR) from 5 to 5.50% in two phase. With this move the Reserve Bank wants the banks to park more money with RBI and so that left with less money to lend.

"The move will drain out Rs 13,000 crore from the banking system and this will result in an upward pressure on interest rates," said Partho Mukherjee, vice-president (treasury), UTI Bank.

India, China top global real estate destination: Knowledge@Wharton

The panelists at the Samuel Zell and Robert Lurie Real Estate Center's fall meeting while responding to Wharton real estate professor Peter Linneman on "How much is hype? How much is reality?" concluded that emerging realty markets like India and China are among the top destinations globally for real estate investment.

During the session titled, "Global Hot Spots -- How to Think about Hot Foreign Markets, Stuart Rothenberg, managing director at Goldman Sachs, leading investment and consulting firm says that there is much excitement about India.

Surendra Hiranandani, managing director and founder of the Hiranandani Group said that India has started witnessing the benefits of free market reforms which commenced in 1991. He also stated that more inflow of capital into the country is making the system more transparent. "When capital is scarce, people find nefarious ways of raising it. The availability of capital automatically makes it more transparent."

Read Full Report at Knowledge@Wharton

Is RBI planning another home loan hike?

Reserve Bank of India (RBI) while announcing its monetary policy on January 30, some foresee, may come up with another hike in home loan rates. There is a growing belief that RBI on account of inflationary concerns may hike home loan rates by 25 basis points, thus forcing banks to hike their retail lending rates as well. Some bankers are of the opinion that since bank rates are on peak and extreme rise of property prices in places like Mumbai and Delhi has already curtailed the demand a lot thus lessening the pressure on banks to release funds. Some bankers, however, opine that since wholesale price inflation touched its peak in 2006, and demand for home loan remains the same the central bank to avoid its basket of worries may inch up the home loan rates by 25 point basis.

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Banks split on hike in home loan rates

PE Player for single project route

Experts state that single-project deals typically come in the range of $20-50 million. “Single projects by real estate developers are attracting a lot of interest from private equity players. With most real estate companies having poor corporate governance standards, single project ventures ensures PE investors are not held responsible for other projects of the company,” said head of a global private equity firm who did not wish to be quoted.

“Though there is a lot of interest in the big-ticket deals in real estate, a lot of private equity players have evinced interest in investing in 100-acre integrated townships and other specific real estate projects. Infact, both global and local PE players are keen on taking this route,” said head (investment banking), Enam Securities, S Subramanium. It’s like a win win situation for both PE investors as well as developers. “We are in talks with some private equity funds. Infact, investments on basis of specific projects also suit our requirements,” Kamal Taneja, MD, TDI said.

And this trend is not just common to small or mid-size real estate companies. A couple of months ago, HDFC Realty Fund had taken a 33% equity in an SPV floated by Ansal API for developing an IT SEZ in Greater Noida.

More in The Economic Times, Delhi Edition- 30.11.06