UK REAL ESTATE INSOLVENCIES DOUBLED SINCE Q3 2007

Real estate and construction firms have been the worst hit in Britain by the global downturn, with the number going bust more than doubling since the credit crunch started two years ago, according to a report on Friday.

Some 1,573 companies in the property sector went bust in the second quarter, compared with 696 in the third quarter of 2007 when the run on British bank Northern Rock occurred, accounting firm Wilkins Kennedy said on Friday, citing data from the UK Insolvency Service.

The sector, which includes developers, agencies and investors, as well as construction-related businesses, represented 24 per cent of all British insolvencies in the second quarter to be the single largest group, it said.

The property downturn has also hit the hotel sector, where insolvencies nearly trebled to 53 in the second quarter of 2009, from 18 in the third quarter of 2007, despite more British staying near home for their holidays, Wilkins Kennedy said.

"Despite the rise of the 'staycation' UK hotel groups are going under at a faster rate than ever ... banks are understandably reluctant to lend to companies whose underlying assets are based on property," director Anthony Cork said.

The Insolvency Service announced on Aug 7 that second-quarter company liquidations jumped 39 per cent year-on-year to 5,055, while personal insolvencies jumped to a record 33,073.

YSR'S DEATH MAY HIT INFRA COMPANIES

The death of Andhra Pradesh chief minister Y S Rajasekhara Reddy in a helicopter crash this week is likely to affect infrastructure companies more than any other enterprise in the state, reports Business Standard.

Reddy’s tenure was known for infrastructure development, including the construction of massive irrigation projects, modern ports like Krishnapatnam and Gangavaram and the proliferation of special economic zones (SEZs) and establishment of manufacturing units (see table). The Rs 12,132 crore Hyderabad Metro Rail project was also his brainchild, the report added.

All the major infrastructure companies in the state including Maytas Infrastructure, the Ramalinga Raju-promoted firm recently taken over by IL&FS, IVRCL, Nagarjuna Construction Company, Indu Projects, Navayuga Engineering and Gayatri Projects have benefited from Reddy’s programmes and they would be at a loss if his successors did not continue these with the same as vigour as he did.

Assocham president Sajjan Jindal pointed out that a lot of domestic and overseas investments had flowed into Andhra due to Reddy’s “investment friendly policies.”

IRB INFRA QUALIFIES TO BID FOR RS 22,000 CRORE ROAD PROJECT

IRB Infrastructure Developers said it has qualified to bid for projects worth Rs 22,000 crore from the National Highway Authority of India (NHAI) and Gujarat State Road Development Corp (GSRDC) among others.

"As regards to the future growth opportunities available, the company has qualified to develop projects worth Rs 22,000 crore," IRB Infra chairman and managing director V Mhaiskar told shareholders at the company's Annual General Meeting here.

These include projects from NHAI, GSRDC, Government of Rajasthan and Maharashtra state PWD, Mhaiskar said.

Mhaiskar said IRB Infra recently emerged as the lowest bidder for four Build-Operate-Transfer (BOT) projects, amounting to Rs 4,300 crore.

It has also been selected by Maharashtra Government to develop the Rs 150-crore greenfield airport at Sindhdurg.

"The current order book of the company will almost double to around Rs 10,350 crore from Rs 5,900 crore as on March 31, 2009, with these new projects in hand,” said Mhaiskar.

In the last 30 years, IRB Infra and subsidiaries have built or operated and managed 1,440 kilometre of road length and has emerged as the largest toll operator in the country with daily toll revenue of around Rs 2 crore.

CEMENT INDUSTRY HIT BY REALTY SLOWDOWN

The slump in the realty sector, which accounts for about 65 per cent of the total cement consumption in India, has affected the cement sector. Since most realtors are facing a severe cash crisis, it is quite unlikely that too much real estate development will take place in the near future. IT/ITES segments account for about 75% of the office space across India and lower growth in employee recruitment for the sector shall translate into muted demand for cement. Cement exports have also declined from 10 million tonne (mt) in FY05 to 2.1 mt between April-December 2008 on account of additional capacity addition and the real estate slowdown in the Middle East region, which is the main export market for Indian cement producers.

SLUGGISH REALTY MARKET TO JUMPSTART AGAIN

Measures announced by the Central government to stimulate the economy by ensuring cheaper loans for homes and industry has raised hopes for people in the real estate and banking sectors. Banks like IDBI Home Finance, ICICI and SBI are anticipating that demand for home loans would increase by 20% in a couple of weeks as queries for home loans have already started pouring. People are now inquiring about home loans after finding that the Union government has decided to make loans cheaper, said a senior bank official. Bank officials also feel that steps being taken by the government to revive the economy would also end all the rumours that have affected the loan business more than the global slowdown