Foreign investors find Indian realty sector attractive again after 5 years

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At least Rs 14,680 crore of funds have been raised in sector so far in current investment cycle.

Foreign investors’ interest in Indian real estate is on the rise after almost five years, India-specific fundraisings indicate.

The cycle started gaining momentum just before the 2014 general elections and at least $2.2 billion (Rs 14,680 crore) of funds have been raised so far in the current investment cycle, indicating an improvement in foreign investors’ confidence in Indian real estate, said consultancy firm JLL India. “During the pre-GFC (global financial crisis) phase, 82% of funds got raised in US dollar.

This reduced to 57% in post-GFC phase when micro-market understanding was required more than banking on the macro-economy,” said Shobit Agarwal, managing director of capital markets at JLL India. “Interestingly, the contribution, 2014-onwards, has increased considerably to 70% – hinting that the positivity is here to stay for some time.”

Recent easing of foreign direct investments rules is expected to bring in more capital into the property sector. PE funds are also looking to leverage on this rising interest among foreign investors.

“We believe this is an opportune time to invest in Indian real estate, with rigorous risk management and strong asset management.

Offshore funds are showing interest in Indian real estate and there is lot of interest from FDI funds back in Indian real estate,” said Rubi Arya, chief executive of Milestone Capital Advisors. “We are planning to leverage further on our structured debt and commercial platform to raise money from offshore funds.”

According to Arya, FDI funds are looking to invest in pre-leased commercial assets, create strategic-level partnerships with reputed developers mainly through equity deals and make structured debt investments in residential projects.

India-specific cumulative fundraising attained its peak in the pre-GFC period. During this period between 2005 and 2008, there were 50 such funds that raised $16 billion in total. However, post-GFC, only 29 funds got raised in five years, with cumulative fundraising of $3.9 billion, said the JLL India report.

Not only has the volume of investment increased, but there has also been an increase in the average investment size from $134 million to $184 million in the current cycle that started in 2014.

Source: http://economictimes.indiatimes.com/articleshow/50476154.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

Govt gets Rs 2,428 cr from black money disclosures

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The national exchequer received Rs 2,428.4 crore in payments from disclosures made during a three-month long compliance window under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act last year, bolstering tax revenue collections.

This is 97 per cent of the amount due from 644 declarations made from holders of black money stashed overseas by December 31, the last day of payment.

The amount included tax and penalty on the declarations made under the three-month compliance window that ended September 30 last year on total disclosures of Rs 4,147 crore.

This added to government’s gross tax revenue collection, which touched 66 per cent of Budget Estimates for the full financial year till December, a sharp uptick from 52.4 per cent till November.

Even as government targets a fiscal deficit of 3.9 per cent during 2015-16, it is expecting a shortfall of Rs 30,000-40,000 crore in direct taxes this financial year. Besides, lower than expected nominal GDP (gross domestic product) growth at close to eight per cent will exert further pressure on the fiscal deficit target.

“The amount collected under black money disclosure is Rs 2,428 crores (97 per cent of amount due) by December 31, which was the last date of payment. The total tax revenue collected up to December this year is Rs 9.5 lakh crore, 66 per cent of Budget Estimates,” said Revenue Secretary Hasmukh Adhia in a tweet.

Source: http://www.business-standard.com/article/economy-policy/govt-gets-rs-2-428-cr-from-black-money-disclosures-116010700025_1.html

Rs 8K cr credit guarantee funds for MUDRA, Stand Up India

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The Union Cabinet on Wednesday approved the setting up of two credit guarantee funds to facilitate loans to micro and small entrepreneurs through MUDRA (Micro Units Development Refinance Agency) and the Stand Up India scheme. The corpus of credit guarantee fund for MUDRA will be Rs 3,000 crore and for Stand Up India Rs 5,000 crore. Finance minister Arun Jaitley said these schemes will improve funding to micro and small entrepreneurs and help boost economic activity.

 

Under MUDRA, the agency refinances loans up to Rs 10 lakh to micro and small units, and has so far disbursed loans worth Rs 72,000 crore to 1.73 crore beneficiaries. MUDRA was launched in April last year.

 

The Stand Up India scheme seeks to provide refinance window through Small Industries Development Bank of India (SIDBI) with an initial amount of Rs 10,000 crore.

 

The Stand Up India scheme is distinct as its objective is to help entrepreneurs from scheduled castes, scheduled tribes and women entrepreneurs.

 

Each branch of all banks, including private banks, will fund at least two entrepreneurs in the SC/ST category and one in women category, Jaitley said. The government aims to refinance loans of 2.5 lakh borrowers in 36 months under Stand Up India. The credit guarantee fee under both the funds will be paid by the banks and not passed on to the borrowers, banking secretary Anjuly Chib Duggal said.

 

She said the National Credit Guarantee Trustee Company Ltd (NCGTC) would be the trustee for both the credit guarantee funds of MUDRA as well as Stand Up India.

 

The Stand Up India scheme will handhold borrowers both at the pre-loan stage and during operations. “This would include increasing their familiarity with factoring services, registration with online platforms and e-market places as well as sessions on best practices and problem solving,” the government said in a statement. Under the scheme, the margin money would be up to 25 per cent, while remaining would be funded by the bank.

 

The credit guarantee fund for MUDRA is expected to guarantee more than Rs 1 lakh crore worth of loans to micro and small units in the first instance, the government said. It will help in reducing risk taken by banks and financial institutions in case of default under the scheme. The government will provide guarantee on portfolio basis to maximum extent of 50 per cent of the amount in default in portfolio.

 

The Cabinet also approved conversion of MUDRA Ltd, currently a non banking finance company, into a bank called MUDRA-SIDBI Bank, a wholly owned subsidiary of SIDBI.

Source: http://indianexpress.com/article/business/business-others/rs-8k-cr-credit-guarantee-funds-for-mudra-stand-up-india/

E-Commerce Industry to Cross $38 Billion Mark in India

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India’s e-commerce market is likely to touch $38-billion-mark in 2016, a 67 per cent jump over the $23 billion revenue it clocked last year, according to the Associated Chambers of Commerce and Industry (Assocham).

“Increasing internet and mobile penetration, growing acceptability of online payments and favourable demographics has provided the e-commerce sector in India the unique opportunity to companies connect with their customers,” according to the Assocham’s latest report.

Buying trends during 2015 have witnessed a significant upward movement due to aggressive online discounts. India’s e-commerce market was worth about $3.8 billion in 2009, it went up to $17 billion in 2014 and to $23 billion in 2015 and is expected to touch $38-billion mark by 2016, said D.S. Rawat, Secretary General, Assocham.

Mobile commerce

Mobile commerce (m-commerce) is growing rapidly as a stable and secure supplement to the e-commerce industry. Shopping online through smart phones is proving to be a game changer and industry leaders believe that m-commerce could contribute up to 70 per cent of their total revenues, according to the report.

Mumbaikars had left behind all other cities in India shopping online in 2015. While Delhi residents rank second, Ahemdabad came third, Bangalore fourth and Kolkata fifth in their preference for online shopping in 2015.

“The customer is connected 24×7 through their smart phones, tablets and other mobile devices which is leading to a gradual evolution of e-commerce into mobile commerce and there is an issue of convenience which also leads to impulsive buying,” Mr Rawat said. The browsing trends, which have broadly shifted from the desktop to mobile devices in India, online shopping is also expected to follow suit, as one out of three customers currently makes transactions through mobiles in Tier-1 and Tier-2 cities. In 2015, 78 per cent of shopping queries were made through mobile devices, compared to 46 per cent in 2013, said Mr. Rawat.

The highest growth rate was seen in the apparel segment, almost 69.5 per cent over last year followed by electronic items by 62 per cent, baby care products at 53 per cent, beauty and personal care products at 52 per cent and home furnishings at 49 per cent. The most important contributing factor to the rapid growth of digital commerce in India is the increase in the use of smartphones. Mobiles and mobile accessories have taken up the maximum share of the digital commerce market in India, according to the paper.
Online shoppers

Almost 45 per cent of online shoppers reportedly preferred cash on delivery mode of payment over credit cards (16 per cent) and debit cards (21 per cent).

Only ten per cent opted for internet banking and a scanty seven per cent preferred cash cards, mobile wallets and other such modes of payment.

As per the findings, many small companies have also established online stores for group buying, which enable customers to obtain goods at a discount so long as a certain number of people make the purchases.

Shopping centres, whole sale markets and supermarkets should create their online stores to reduce costs and develop product-tracking systems, Mr Rawat said.

Among the age segments, the 18-25 years age group was the fastest growing age segment online with user growth being contributed by both male and female segments, it was said in the paper.

The survey highlights that three per cent of regular shoppers are in 18-25 age group, 52 per cent in 26-35, eight per cent in 36-45 and two per cent in the age group of 45-60.

Sixty-five per cent of online shoppers are male with females constituting 35 per cent. The products that were sold most in 2015 were mobile phones, iPad and accessories, MP3 players, digital cameras and jewellery, among others.

As per the study, there would be more than a five to seven-fold increase in revenue generated through e-commerce compared to last year with all branded apparel, accessories, jewellery, gifts, footwear available at a cheaper rates and being delivered at the doorstep. The most popular among the e-commerce websites — Snapdeal, Myntra, Flipkart, Amazon, Jabong and others — have been doling out massive price cuts or discounts on purchase of popular brands of apparels, footwear, electronic goods, coinciding with the year end.

According to the report, the one of the driving factors for the online shopping is the age profile of the consumers who are young, between 15-35 years. This segment is quite net savvy and enjoys doing new type of shopping experience, virtually from their desk top in office, lap tops at home or even Android-based phones.

Source: http://www.thehindu.com/business/ecommerce-industry-to-cross-38-billion-this-year-assocham/article8058892.ece

Government extends tax residency rule – Place of Effective Management

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A deadline for comments on the draft guidelines to determine the tax residency of a foreign company has been extended to January 9.

The government felt the need to determine a company’s place of effective management due to lack of detail in the Income Tax Act leading to the possibility of tax avoidance.

“Representations requesting for extension of the last day for submitting comments and suggestions, have been received and considered,” according to a government statement announcing the extension of the deadline for comments on the issue, earlier slated for January 2.

The Place of Effective Management (POEM) of a company, as the concept was called, was introduced in the Finance Act, 2015 to determine the tax residency of a foreign company.

The draft guidelines for what defines a company’s place of effective management, released on December 23, defines the POEM as “a place where key management and commercial decisions that are necessary for the conduct of the business of an entity as a whole are, in substance made.”

“Section 6(3) of the Income-tax Act, 1961, prior to its amendment by the Finance Act, 2015, provided that a company is said to be resident in India in any previous year, if it is an Indian company or if during that year, the control and management of its affairs is situated wholly in India. This allowed tax avoidance opportunities for companies to artificially escape the residential status under these provisions by shifting insignificant or isolated events related with control and management outside India,” according to draft guidelines issued by the Central Board of Direct Taxes.

“As per the amendment brought in by the Finance Act, 2015 a foreign company will be regarded as a tax resident of India, if its POEM in that year is in India,” according to a report by Deloitte and CII.

According to the Deloitte report, there is ambiguity around some of the provisions in the guidelines, such as the duration for which a company has India as a place of effective management. “A question may still arise that for a foreign company to be resident in India, is it necessary that the POEM should be situated in India throughout the financial year under consideration or mainly in India.

Similarly, the term “key management and commercial decisions” in the definition of POEM seems to be causing some confusion.

“Unlike, for instance, the UK, India does not define the term ‘key management and commercial decisions’ and therefore these are undefined and subjective.

In the UK, judicial precedents and tax rules lay emphasis on whether directors/officers taking major decisions are independent, are empowered to take these or whether such directors/officers are acting under the influence or direction of shareholders,” Mr.Alex Postma, Leader–Global and EMEIA International Tax Services, EY had said in a note.

Enterprises have become increasingly mobile and technology and connectivity are as important as never before in their global competence. This poses risks that a travelling executive may create significant unforeseen tax burdens in India,” Mr. Postma added in his note.

Source: http://www.thehindu.com/business/Economy/government-extends-tax-residency-rule-deadline/article8055070.ece

Czech Republic to help India modernise heavy industry

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India has signed a protocol with Czech Republic to promote bilateral cooperation in the field of heavy industry, especially in industrial cooperation and facilities construction, the Union Cabinet was apprised today.

The protocol includes modernisation of the existing facilities in India by the Czech companies, including modernisation of three plants of Heavy Engineering Corporation and a central public sector enterprise (CPSE) under the Department of Heavy Industries at Ranchi, set up with Czech support in early 1960’s.

“The aim of the protocol is to promote bilateral cooperation…in the field of heavy industry on the principle of mutual convenience and benefit, in accordance with the laws valid on the territories of the states of the Parties and their obligations resulting from other international agreements,” an official statement said.

Source:  http://economictimes.indiatimes.com/articleshow/50467014.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst