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In this issue:

Golfing Opportunities 1

Dredging – A leap in Maritime Business 2

Mall Mania – Shifting Gears 3

Economic Snippets 4

RBI’s Interest in Interest Rates 4

Team Chanakya 4

2nd February 2008 Volume 1, Issue XI


         
                           

Chanakya
                           
                           
              Sprit
  of Visioneering
           
                           
                           
  MARG
    Ltd                      
                           
  G O L  F I N G  O P P O   R T U N
  I T I E S
                 
                           
  A rapidly
  growing   Indian  economy   along with
  increasing
    Golf's
  image
  of a luxury
  sport  also adds
  to the  attraction of
  income   levels,  rapid urbanization
    and changing
  lifestyles,
  has  golf
  homes.   Golf is  now a part   of upper-class
   lifestyle all over
  led to  a boom  in the premium
  segment
  of  the real  estate   the
  world  and in certain   places,
  like Japan,
  golf  is the ultimate
  market.  But with   king-sized
  swimming
  pools,
  underground
    luxury
  because
  space
  is at a  premium.   In India  percentage of
  parking  facilities,
  video door-phones
    and  designer  interiors  people
  playing
  golf  may be small
  but  the number   of senior
  becoming
  passé   and losing
  much  of their  novelty value,  super
  corporate
    executives  who play   the game  is on  the rise and
  rich customers
    are now  turning  to golf, which
  have  become  thus
  the demand  for
  such homes  will  only increase.
 
  synonymous
  with
  the lifestyles
  of  the rich  and famous.
               
                World
  over
  Golfers   spent around
  a  US$3.8 billion
  in 2007
  It is a trend that  has led  to the mushrooming
    of golf-centric
    towards
  Golf
  clubs   and US$5.6  billion
  in golfing
  equipment.
  super  luxury residential
    projects  across the
  country.   First to  India
  is a baby   market
  and is  likely to  have a very   fast growth
tee off were Gurgaon and NCR regions that besides being rate for the next 5 years. In India the investment by the golfers
                           
much sought after residential and retail destinations also host is been increasing rapidly at 27% from US$1.5 million to
                           
some of the finest golf courses in the country. US$3.8 million in signature courses.
                           
           
So what is it about a home on a golf course that is driving     In this back drop, big-ticket developers like Unitech,
            DLF,
             
customers to go for such projects? The answers are many fold.   Ansal
  API,   Prestige   Estates,  Mantri Developers
    and the Jaypee
             
Earlier golf was a sport restricted to a very select group of   Group
  have
  already   taken the
  plunge   with an  array of golf-
  people,  but not  anymore   with redistribution
    of wealth   
in stock centric
  projects
  that
  promise   a growing
  clientele   the chance to
  markets  and rising
    levels of
salary   top of the
  order  executives.   live
  life king-size
  amidst
  the  greens. A  classic example
  in this
             
The bait is the mobility of more and more people of this class   area
  is DLF  Golf and
  Country   Club that
  is flanked
  by the
   
who travel  
abroad  
frequently are  getting  exposed  to global  luxury
  high-rise
  called
  'The  Aralias’ which  also  offer splendid
  trends  and so  the concept   of golf  homes  is gaining  popularity   views
  of the
  world-class
  golf  course.  Buoyed  by the success of
           
among them. Apart from this today’s customers have the     this
  project,  DLF launched
  'The
  Magnolias',
  yet
  another
   
wherewithal to  purchase  such homes.
   
Though the  trend is   luxurious
   residential  project  inside the   DLF Golf   Course.
           
more pronounced in metros like Delhi and Bangalore, but it                
The newly empowered Indian customers, with their first rub
will soon spread to other large urban centers in a matter of of the pouring wealth from the every rising Indian economy is
time. aspiring for a world class living. Are We Ready to
Empower Them?
                 
                   
 
DREDGING – A LEAP IN MARITIME
 
  BUSINESS
are also eyeing the Inndian dredging market.
 
  Thee current dred dging activity in the countryy is over Rs.6650 Around 80% of the world’s
w dredgiing market is sserviced by a
  ores with maintenance dredgging commandiing a lion’s shaare
cro handfuul of Europeann majors — mostly from Holland and
  of Rs.600 crore and capital dredging
d at Rss.50 crores. The
T m — such as Royal Boskallis, Dredging International,
Belgium
  dreedging activity in India is expected to groww by 2 to 3 tim
mes Van Oord and the Jan de Nul Grouup.
  thee current activity in the nextt few years annd would see thet
  impplementation of around US$444.44 million m dredging Futuree of the Industrry
  proojects in India.
  The 11th Five-Year Plan says that the dredging requirements
r
  Thee next couplee of years would w mplementation of
see im of 12 major ports, including the proposed Setthusamudram
  dreedging projects worth $444 a various ports
4.44 million at Ship Canal
C Project, will
w be about 430
4 million cubbic meters. In
  across India. Inddian dredging industry’s futture potential is additio
on, the businesss opportunitiees in the 187 minor ports
  proojected to be 1 billion cubic meters in thee next five yeaars. are alsso considered to be very hiigh. Going by the dredging
Larrge dredging prrojects includee those being fiinalized at Nhaava work likely to be takken up by majo
or and minor poorts in India
 
Sheeva (estimated d at $177.77 7 million), Tuuticorin, Parad dip there may
m be demand for at least 35 3
($555.55 million) and Ennore ($ $31.77 million), as well as the
t specialized dredgers. The dredgingg
proojects under waay at Haldia, Mangalore
M and Kochi. projectt at Rewas Porrt will make it
one off the largest in India, even
At present the dredging
d indusstry in India is dominated by bigger than the Sethuusamudram Ship
Dreedging Corporration of India (DCI) in the public
p sector and
a Canal Project (SSCP)) in terms of
thee four major foreign companies of Bo oskalis, Dredging volumee. The project envisages
Inteernational, Jan be Nul and Van Oord. The T four foreign dredginng over 120 million
m cubic
commpanies amonggst themselves is reported to o own about 105 meterss at an estimated cost of Rs
traiiler suction hopper dredggers and 83 cutter suctiion 1,800 crore
c for the first
f phase
dreedgers, comparred to 10 TSHDs and 2 CSDs by DCI. alone. This is much bigger
b than  

Indian Governm ment’s clearan nce to the Rs 2,427-cro ore Sethusamudram Canal which involvves dredging of 80-90 millionn
  cubic meters, at a revised cost of around Rss 2,600 crore,,
Sethusamudram sea s canal projeect and other green-field po ort
  which has now on the
t slow trackk due to politiical oppositionn
proojects is expected to open up u the capital dredging
d markket,
  and a few
f legal cases.
which in turn willl attract manyy a foreign dreedging companies
  inteerests, as it invvolves higher margins.
m
  In terrms of the NMDP repo ort, the totall expendituree
  Alm
most all Indian ports are tryiing to deepen their berths and
a earmarrked for dred dging of all major
m ports by
b 2011-12 iss
  appproach channeels in order tot accommodaate larger ships. estimatted to be Rs R 6304 crorre, out of thhe total portt
  This has increassed the demaand for dredggers, pushing up develo
opment expend diture of Rs 55804
5 crore. This
T translatess
  chaarter rates to new
n highs, whille the supply remains sluggishh. into a dredging voluume of about 500 million m3 m over six to o
  seven year period. After
A taking intto account thee maintenancee
  Competition
dredginng, capital dreedging in portss being developped by privatee
  sector and also in non-major portts owned by Governments
G /
Thee Dredging Co orporation of India (DCI), a government of
  Maritim
me boards, thhe total dredgging market is estimated to o
India undertakingg, is the seventth largest dred dging companyy in
  exceedd 150-160 milliion m3 per annnum.
thee world. It boassts a fleet of teen trailer suctiion dredgers and
a
 
twoo cutter suctiion dredgers. However, itss capabilities are a
  These opportunities place India ass a league natiion that offerss
inaddequate for seervicing the vaast dredging activity
a on Indiia's
  one ofo the lucrative dredging markets
m globally. The Indiann
enoormous shoreline of nearly 5,500 kms.
  Government policy of o open tendering for dredgging operationss
  Bessides DCI, thee other Indian companies/grroups engaged in for thee private dred dgers has addeed carrots to the aggressivee
  com
mmercial dred dging activitiess include Dharti, Mercantor, D will enjoy 10% pricing prreference overr
global players. Still DCI
  Cheellarams and Jaisu. Other gllobal dredging majors, such as the priivate players but
b the opporttunity is so hugge that DCI iss
Greeat Lakes Dredge & Dock Co C of the US anda Penta-Oceean alreadyy booked to itss capacity for the
t next two years.
y The field
d
Construction Co of Japan, besid des smaller com
mpanies in Asiaa, is widee open for all of
o us to play. Are
A We Read dy to capture e
a slice
e of it?
 

The high
h growth citties are a smalll group which have over thee
past year
y entered a high growthh phase. Theyy include citiess
with substantial
s connsumer spendiing power likee Ludhiana, thee
tourissm-driven cityy of Jaipur, raapidly-growingg IT hubs likee
Chand digarh and Ko ochi, as well asa some mediuum-sized citiess
like Lucknow,
L Suratt and Vadodarra. These highh growth citiess
are peerceived by rettailers as the ‘nnext retail desttinations’.

The ‘eemerging’ cities have been brranded thus onn the basis of
  plans drawn up by major
m hypermaarkets and depaartment store
  MALL MANIA – SHIFTING GEARS retaileers for the futuure and this grroup of six emeerging’ cities
 
are likkely to be the next growth markets
m over a three-year
  Ahh, Malls! Theyy have becomee the new Teemples of mod dern horizo on. Factors succh as growing incomes, risingg aspirations,
  India. With fancy malls sproutting all over thhe place, they have
h scarciity of branded stores and gro owing corporatte activity are
  beecome magnets for youth witth money and families seekinng to leadinng to a rise in demand
d for orgganized retailinng in these
  sppend some time away from home. cities.. The urban centers in this caategory includee Nagpur,
  Indore, Nasik, Bhubbaneswar, Vizagg, Coimbatore, Mangalore,
  Thhe real estate sector has reesponded well to the growtth of
Mysore and Thiruvaananthapuram.
  thhe organized reetail and the demand for Malls and this hass led
  too a phenomenaal rise in supp ply of space fo
or organized retail
r
On thhe other side the study brougght out that thhe shoppers in
  opperations year after year.
India are
a spending a lot of time annd not much moneym in the
  malls, and predictedd the profits to
o begin falling by
b 2009-10.
Mall space, from
m a meager onee million squarre feet in 2002,, has
  This is due to the faact that the aveerage sales perr sq. ft in India
to
ouched 40 million square feeet in 2007 annd is expected d to
  are veery low at US$$155 against USS$560 for US.
to
ouch an estim mated 60 million square feeet by end-2008.
 
Thhough organizeed retail activitty in India is co
oncentrated inn the
 
tw
wo major metrros of Delhi and a Mumbai, others o are nott far Havinng said that, thee statistics lookk positive: Althhough 300
 
beehind. million people still survive
s on less than $1 a day,, India's middlee
 
class is
i estimated to o number 250 million.
m
  A study of JLLM M has identified five types of cities
c and classsified
  thhem under the titles maturing, transitio onal, high grow wth, Aboutt 65 percent of o the populatioon is younger than
t 35, the
  emmerging and naascent. These indicate cities at different sttages right age
a for the maall experience, and designated d as a powerfuul
  off the retail market
m evoluttion, with eaach type offeering consuumer force, havving grown up without the shhortages and
  diffferent types of
o opportunitiees for retailerss and the propperty self-deenial that older generations lived
l through. Just
J 22 million
  seector. Indianns are credit-caard users, but the
t number is expected to
 
triple by 2008.
  Thhe maturing’ cities are Delhi/NCR and Mumbai and theyy are
  heead and should ders’ above thee other Indiann cities in term
ms of
In shoort, India's retaail revolution, which
w began with
w the arrival
  nuumber of shoppping malls and d organized rettailers. Both thhese
of thee first shoppingg mall less thann six years ago,, is having
  citties are likely to lead with 40%
4 of the orrganized retail and
teethiing troubles. Not
N because off lack of moneyy to be spent
  mall stock of 22 million and 15 5 million squarre feet respectiively
but beecause of the lack of developpmental policiees of
  byy 2008-09.
goverrnment to free the retail induustry and developers to add
 
stock the demanded d levels.
Co ompetition witthin the NCR and Mumbai arre expected to o
inttensify as suppply grows and there
t is risk off saturation in
soome market segments by 200 08. The transitiional’ cities aree
noow firmly making their mark on the retail sector. Whilst
orrganized retailing is a more recent phenomenon in them,
thhey are catchingg up as both reetailers and deevelopers tap innto
 
  thheir large middle classes. In thhis category arre the cities of
Baangalore, Kolkaata, Chennai, Hyderabad,
H Punne and Are We t Give that Shopping Experience to
W Ready to o
 
Ahhmadabad, all of o which have significant malll development in the In
ndian Custom
mers?
thhe pipeline. Theese six cities arre likely to holld around 30
market share off organized retaail and Mall sto ock.
 

ECONOMIC SNIPPETS
I
Indicators Jan 200
08 Decc 2007

B
Bank Credit 22.2%
2 23.5%

B
Bank Depositts 25.3%
2 26.7%

Money Supplyy
M 25 23.8%
 
(
(M3)
  Inflation 3.8% 3.07 FDI at bay.
b
 
  Home Loan
H 11
1.25% 11.25% In the earlier times RBBI could have threatened
t with
  R
Rate devaluattion of Indian Rupee.
R If it atteempts to do it now people
 
IIP 5.3% 9.83% will lauggh that away. So to control thhe money suppply from
 
FForex Reservves 284 272.95 outside India before itt end up as inflation, RBI need d to take
 
(
(US$ Billions)) action and
a the first to get affected were
w the Real Estate
E
 
Sector.
 
 
RBI because of its fearr of inflation haas decided to sacrifice
s
 
growth. Is this a prudeent thing to do o, when the Go overnment
  RBI’S INTREST IN INTREST is reckleessly spending money more thatt it can earnn the
 
econom my has to feed iti with a higherr fiscal deficit?
  R AT
A E
 
The Reserve Bankk of India in its latest monetarry policy has Even in n this budgett, Real Estate e sector is no ot likely to
 
oncee again confirm
med its intentio
on of choosing inflation over get any y respite or favor
f from th he Governme ent. The
 
econnomic growth. situationn may change ifi the fiscal deficit of the Govvernment
 
decreases from the cuurrent 3.8% of GDP to anywhhere
 
Thiss is because it is playing a dueel role of beingg a debt betweenn 3.5%-2.8%.
 
manager of the Go overnment of India and a cenntral bank for
 
the Republic of Ind dia.
  T E A M C H A N A K YA
A
 
Let’ss see how this is detrimental to the Industrry, in particularr
  Mr T P Anand 
Reall Estate Industrry. RBI when the debt is to be
b arranged forr
 
the Central
C or Statte governmentts issues bondss in the markett Head –– Strategic Planning 
 
to mop-up
m the mooney. The easy way to sell thee bonds is to
   
force the Scheduleed banks to buyy them.
 
  K Pandian 
D Joel K
The banks are alsoo happy that thhey have a readdy borrower fo
or
  DGM‐Strategic Plann
ning 
the swash
s of moneey that they haave and is also a risk free
 
instrrument to earnn their income. But they alwaays complain of
o  
 
the low interest thhat they could earn from thiss.
  n 
Shravan
  AM‐Strrategic Planning 
To keep
k the bankeers happy the RBI
R maintains a higher intereest
 
rate – artificially! This
T makes India one of the high
h interest
 
rate countries in the world. Thiss makes Indian financial
 
markets interesting for the foreiggn capital. Thiss also makes thhe
 
Indiaan borrowers to t look for thee foreign moneey through ECB B,
 
ADR R, GDR etc.
 
 
Thatt’s the reason why
w the RBI iss been implemeenting the
orrowers outside the countrry
borrrowing controls for Indian bo
is beeen following restrained
r mon
netary policy to
o keep the

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