Real News‎ > ‎2015‎ > ‎January 2015‎ > ‎

8th January 2015

Singapore Economy

Economic outlook poses challenges globally and domestically: DBS CEO

Speaking at a DBS Private Bank event, DBS' chief executive officer, Mr Piyush Gupta, said the credit cycle in Asia is turning and Singapore will be affected by higher rates and falling oil prices in 2015.

Source: Channel News Asia / Business

SINGAPORE: As we enter 2015, the economic outlook poses challenges on the global and domestic front.

Speaking at a DBS Private Bank event, DBS' chief executive officer, Mr Piyush Gupta, said the credit cycle in Asia is turning and Singapore will be affected by higher rates and falling oil prices. Domestically, restructuring would pose further challenges.

Said Mr Gupta: “I really think that 2015 is a very important year for our country. It is important because this whole scope of transitioning the economy and restructuring the economy is very sensitively-poised.”

He added: “Fundamentally, we are trying to do two things at the same time - restructure the manufacturing sector to be productivity-driven and more technology efficient, and at the same time, slow down the asset prize inflation, particularly in the property market.

"Both of these have deflationary drives and to be able to balance this and nuance these two deflationary engines at the same time is not an easy job.” 

- CNA/dl

Coming: budget of celebration and challenges

Expectations high for an expansionary budget as Singapore celebrates 50 years of independence

Source: Business Times / Government & Economy

THE Singapore government's budget for FY2015 - to be delivered in Parliament on Feb 23, Monday - will be no ordinary one. Even as a celebratory tone is struck, the social and economic challenges confronting Singapore will need facing up to, too.

Expectations run high for an expansionary budget, this being the year that Singapore celebrates 50 years of independence. That anticipation stems also from Budget 2015 being viewed as a pre-election budget. It could be the last before the next general election, due in 2016, is called.

Bank of America Merrill Lynch economist Chua Hak Bin expects Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam to table "a generous Jubilee Budget" with handouts extended to the middle class, and incentives to drive productivity stepped up.

The SG50 celebrations make this a good year "to share the fruits of sustained economic growth and prudent fiscal policy with Singaporeans", said DBS economist Irvin Seah.

"Similar to past pre-election budgets, larger transfers in the form of expanded Workfare, personal tax rebates or direct transfers such as the S$1.5 billion of growth dividends in Budget 2011 are likely," said Citi economist Kit Wei Zheng.

Economists thus widely expect a budget deficit that sets Singapore on an expansionary fiscal policy stance in 2015.

Citi's Mr Kit noted in a recent research note that the S$9.7 billion of surpluses accumulated in FY2012 and FY2013 will be more than sufficient to fund the projected S$1.2 billion FY14 deficit, without breaching the balanced budget rule. That states that the government must not run a fiscal deficit over its term of office, usually a five-year period.

Singapore's budget deficits typically end up smaller than projected, but even in the unlikely scenario that the FY14 projected deficit is met, that still leaves S$8.5 billion in cumulative surpluses that can fund FY15's budget, Mr Kit said.

In this "special year", UOB economist Francis Tan thinks that the government is unlikely to rock the boat too much in terms of measures to boost revenue collection - such as a goods and services tax hike or changes to income tax brackets. "Only after the elections do we expect the difficult question of how to pay for these programmes to be addressed," agreed Mr Kit.

However, Budget 2015 will need to confront some of the big challenges facing Singapore.

With the "distinct shift" in fiscal policy in recent years to strengthen social safety nets, DBS's Mr Seah expects a significant focus on social measures this year - particularly ones that address the challenges posed by Singapore's rapidly ageing population.

"There are many things about the external economic environment that are unforeseeable, and difficult to cater for, but the ageing population is a certainty. It is a good time to plan ahead," he said.

Indeed, details of the Silver Support Scheme to supplement the retirement savings of the needy elderly and help them cope with living expenses - first announced by Prime Minister Lee Hsien Loong at his National Day Rally last year - are due to be unveiled at Budget 2015. A panel tasked to review Singapore's Central Provident Fund system to make it more flexible and provide more options for retirement adequacy, will also submit its first findings to the government next month.

Budget 2015 also comes as questions are being asked of the economic restructuring push that Singapore embarked on in 2010 - so businesses and the economy will not be neglected, observers say.

Slower growth has already become the new normal. The Prime Minister has said that 2-3 per cent a year growth over the next decade would be "not bad" for Singapore - lower than the 3-5 per cent target set in 2010.

Also, five years on, productivity growth is still a long way from meeting the original goal of 2-3 per cent a year over the decade. For the first three-quarters of last year, productivity shrank 0.5 per cent.

This was the result of uneven productivity growth across sectors, an issue which came up at a pre-Budget 2015 dialogue with 40 business leaders, economists and academics on the Government Parliamentary Committee for Finance, Trade and Industry's resource panel on Wednesday. Participants suggested that policies to improve productivity should be more targeted and sector-specific, said a Ministry of Trade and Industry note on the meeting.

"I think that it is time to take a different approach," said DBS's Mr Seah, who thinks that Budget 2015 will mark a shift in the restructuring-related initiatives. "The second half will have to be very targeted, to look at specific industries, even specific companies. There should be more focus on enhancing the top line of the SMEs - such as innovation, R&D, helping companies to be first movers in their fields," he said.

At the companies and workers level, more details are also expected on Singapore's SkillsFuture push, announced last year as a national effort to help individuals make informed education, training and career decisions, develop a high-quality system of education and training and responds to industry needs, and promote employer recognition and career development based on skills and mastery of skills.

As business groupings and tax firms alike have started rolling out their annual wish lists, the Ministry of Finance yesterday said that members of the public too are invited to send in views and suggestions. Its feedback exercise on the Reach Budget website and Reach Singapore's Facebook page will close on Jan 29.

*Recommendations from SME panel

-By Teh shi Ning

Singapore's Budget to be delivered on Feb 23

Speech expected to focus on training, strengthening of social safety nets

Source: Straits Times / Top of The News

THE Budget will be presented on Feb 23 - right after the long Chinese New Year weekend.

The focus is expected to be on training and development as part of ongoing efforts to cultivate deep skills in the workforce.

The business community hopes Finance Minister Tharman Shanmugaratnam will deliver some respite from rising costs, as well as stronger incentives for companies to transform processes and improve productivity.

The Budget is also likely to further strengthen social safety nets for the vulnerable, including plans to help the elderly poor.

Prime Minister Lee Hsien Loong said in his National Day Rally speech last year that a new scheme, called Silver Support, will provide a payout in the form of an annual bonus to low-income Singaporeans aged 65 and above.

Mr Lee said the money will benefit the 10 per cent to 20 per cent of people who have not saved up enough in their Central Provident Fund (CPF) accounts, do not own flats and are without family support.

The annual bonus is meant to supplement the payouts from CPF accounts.

A "live" webcast of the Budget statement from Parliament will be available on the Singapore Budget website (

For more information, the public can also use the Budget 2015 mobile app, available for download at the Apple App Store and the Google Play Store.

Separately, Minister of State for Trade and Industry Teo Ser Luck met about 40 members from the Government Parliamentary Committee for Finance and Trade and Industry Resource Panel yesterday for a pre-Budget dialogue.

Participants discussed how the Government could help companies improve productivity and support small and medium-sized enterprises (SMEs).

They noted that productivity performance had been uneven across sectors, and suggested that existing schemes aimed at helping firms restructure themselves should be more targeted.

Participants also suggested the Government help SMEs internationalise by encouraging them to partner larger companies.

-By Chia Yan Min

Singapore Real Estate

Fragrance puts Geylang building on market

Light industrial building has indicative price of S$115m and can be strata sub-divided for sale only 10 yrs after TOP

Source: Business Times / Real Estate

Fragrance Group Limited is selling a new, 60-year-leasehold light industrial building in Geylang by expression of interest (EOI). The indicative price for the development, located at 110, Lorong 23 Geylang, is S$115 million, said its appointed agent Colliers International. It is to receive its temporary occupation permit within the current quarter.

-By Lynette Khoo

Office rents to rise this year, says Colliers

Report cites healthy demand and positive economic environment

Source: Straits Times / Money

OFFICE rental growth in Singapore will continue to be driven by healthy demand amid a cautious but positive economic environment, said a report yesterday.

Rents of premium-grade office space in the Raffles Place/New Downtown sector are likely to climb 10 to 15 per cent for the whole of this year, said the report by Colliers International.

And rents for Grade A and B office space across the Central Business District (CBD) could rise by up to 10 per cent.

Rental growth for premium-grade office space in the Raffles Place/New Downtown sector eased to 2.2 per cent in the fourth quarter of 2014, after a 6.1 per cent quarter-on-quarter spurt in the third. Rents averaged $11.93 per sq ft (psf) last month, marking full-year growth of 15.8 per cent last year.

The average monthly gross rents for Grade A and B office space across the CBD held firm or edged up by 1.9 per cent quarter-on-quarter in the fourth quarter of last year. Rents for Grade A and B office space gained 6.8 per cent and 4.9 per cent year-on-year respectively to $9.23 psf and $8.09 psf as of last month.

While overall occupancy rates of premium-grade and Grade A office space islandwide slid two percentage points to 94.8 per cent in the three months to December, the market is expected to see a "gradual rebound" this year.

The fall in occupancy rates was largely due to the addition of about one million sq ft of office space as two major projects - CapitaGreen and Westgate Tower - were completed in the fourth quarter of last year.

"Favourable demand drivers - such as a positive economic environment and the strong appeal of Singapore as the preferred business location - as well as the expected decrease in supply of new office space to about 1.1 million sq ft this year will likely provide a window for some of the space completed in 2014 to be gradually absorbed over the next 11 months," noted Ms Chia Siew Chuin, director of research and advisory at Colliers International.

But leasing market sentiment could be dampened due to a rise in secondary office space stock on the market, said executive director of office services Marcus Loo.

This could happen as some firms rationalise their space utilisation or relocate to new office developments. "More importantly, the current collapse in world oil prices has set off a contagious fear among investors, affecting global markets, and we expect this apprehension to perpetuate throughout the rest of the year," he said.

Prices for premium-grade and Grade A office space in the Raffles Place/New Downtown area could grow as much as 5 per cent this year, said the report. The average capital values of premium-grade office space in the area rose 4.2 per cent last year, from 1 per cent in 2013; while that of Grade A office space rose 4 per cent, outpacing 2013's 0.2 per cent growth.

-By Jacqueline Woo

Morgan Stanley fund mulls bulk sale of luxe units

It appoints two agents to explore demand for a bulk transaction for its 23 units in Draycott Eight; Blackstone has inked deal for 21 Anderson Royal Oak Residence

Source: Business Times / Real Estate

The momentum for bulk transactions of high-end residential units looks set to continue this year. A German core fund managed by Morgan Stanley is said to be exploring a bulk sale for its 23 units in the Draycott Eight condo. It has appointed two agents to help it find a buyer in a transaction which will be effected through the sale of shares in a company that owns the 22 four-bedders and a penthouse with a total strata area of 68,419 square feet.

-By Kalpana Rashiwala

Sheng Siong buys HDB complex in Tampines

Source: Straits Times / Money

SUPERMARKET chain Sheng Siong has bought a three-storey Housing Board commercial property in Tampines Central for $65 million, and will open a supermarket on the second floor.

Business is expected to begin by the end of this month, according to a Sheng Siong announcement on the Singapore Exchange last week. The second-floor space at Block 506 Tampines Central 1 used to house a Giant supermarket.

The new store will be Sheng Siong's first in Tampines, adding to its stable of 34 in Singapore. It will have a gross floor area of about 9,800 sq ft.

But as other leases in the building expire next year and in 2017, the supermarket will be enlarged gradually, Sheng Siong said last June when it received the option to purchase the property.

The 3,876 sq m (41,720 sq ft) property has 75 years left on its lease. The $65 million purchase price works out to $1,558 per sq ft, which experts said was reasonable, given the location and relative rarity of the property. "There are not many properties of this type on the market, so I believe this is a fair price," said ERA Realty key executive officer Eugene Lim. "And it's Tampines Central, so you can't go wrong. The traffic is pretty good."

Block 506 is near Tampines MRT station.

With the HDB having largely stopped its sale of such properties, it is hard to get ownership of HDB commercial space now, noted Savills Singapore head of research Alan Cheong. "You can hardly get anything for $1,600 per sq ft now," he said. "I think Sheng Siong made a good call."

In any case, the purchase seems more of a business decision by Sheng Siong to facilitate its supermarket expansion, noted Chris International director Chris Koh. "It's really more about Sheng Siong having this good location rather than being a landlord."

Last week, in the light of the property acquisition, OCBC Research reiterated its buy call on Sheng Siong with a fair value estimate of 77 cents. Sheng Siong Group closed unchanged at 69.5 cents yesterday.

Block 506 was sold by S-11 Wan Jin Investment, a subsidiary of coffee shop chain S-11 F&B Holdings. It was known as S-11 Court, and an S-11 food court used to operate on the ground floor but it closed down a while ago. Existing tenants include food outlets, dental and medical clinics, and enrichment centres.

-By Janice Heng

More homeowners look to refinance loans as SIBOR inches up

More homeowners who took housing loans from banks are now looking for refinancing options after the recent spike in SIBOR (Singapore Interbank Offered Rate). Some are, however, tied down by the loan's lock-in period.

Source: Channel News Asia / Singapore

SINGAPORE: More homeowners who took housing loans from banks are now looking for refinancing options. Loan specialists said they have been getting more inquiries since the recent spike in SIBOR (Singapore Interbank Offered Rate).

Homeowners - whose mortgages are tied to SIBOR - are now facing higher monthly payments. One of those affected is 30-year-old engineer Lai Ming Kwan, who bought an executive condominium with his wife two years ago and he opted for a bank loan that is tied to SIBOR.

With the benchmark rising sharply in recent days, Mr Lai is concerned about how it will affect him. He said: "They predicted that it will stay at 0.3 per cent to 0.4 per cent for a few years. I did not expect it would go up to so high ... SIBOR is increasing so fast that my pay cannot catch up with the financing rates."

Both Mr Lai and his wife are working and have a 16-month-old child. "Expenses, lifestyles will have to change a bit because I have to save up more to contribute to the housing loan ... so there'll definitely be an impact, maybe less shopping. With the child coming up, there is also school fees, childcare fees, so the depletion will come from my savings. Having a second child will also mean more expenses," he added.

Some homeowners, like Mr Lai, cannot look into other financing options yet because their loan deal has a lock-in period, which requires them to stick to the same bank for a couple of years. However, loan specialists said that those whose lock-in periods are up are already starting to look at refinancing options. This can include looking for a housing loan with fixed interest rates instead of being tied to one with variable rates.

One mortgage consultancy said that it has received many inquiries on refinancing in recent days, about 30 per cent more when compared to last year. Mr Sean Lim, the mortgage consultant head at iMoney, said: "They want to know what is happening in the market ... So they are taking time to digest and understand what is happening in the market.

"The pace of increment did catch me by surprise. But it is also half-expected. The trend has been going up slowly over the last six months. Looking at the market trend, it will continue to go up."

With interest rates rising, banks can be expected to review their mortgage rates and plans. Analysts said that potential home buyers or those who are hoping to refinance their housing loans should choose a package that best suits their financial needs. 

- CNA/ac

SIBOR remains well below historical levels: Analysts

The three-month Singapore Interbank Offered Rate continued to inch ahead on Wednesday, taking its increase since last Friday to 40 per cent - the sharpest jump in the last five years. 

Source: Channel News Asia / Business

SINGAPORE: The three-month Singapore Interbank Offered Rate (SIBOR) reached 0.63 per cent on Wednesday (Jan 7), compared to 0.45 per cent on Jan 2.

SIBOR is a key benchmark used to determine various lending rates. While the recent increase may signal the end of low interest rates, analysts said that for now, SIBOR remains well below historical levels. 

At 0.63 per cent, the three-month SIBOR is now at its highest in recent years. Analysts said this is due to expectations of an increase in US interest rates later this year and also new regulations in Singapore requiring banks to set aside more liquidity.

However even at current levels, analysts pointed out that from a historical standpoint, interest rates are still some way off from "normal".

Mr Alvin Liew, a senior economist at UOB, said: "If you bring yourself back to 2007, the rates were easily many times higher than where we are at 0.6 per cent. So I think largely in part due to the last six years, prolonged stability has inbuilt a lot of complacency in the market psyche, now with rates coming up.

"It is coming up from a very low base, so the increase looks magnified, but on a historical basis, we are still not anywhere near normal interest rates levels."

Homeowners and buyers are likely to be among the first to feel the effects of a rising interest rate environment as many home loans are pegged to SIBOR. Business costs may also increase but according to analysts, firms may find that it is still manageable.

Mr Alfred Chia, CEO of SingCapital, said: "Corporate activity-wise, as far as SMEs (small and medium enterprises) are concerned, as long as their loan amount is not big, it is still something that is able to be digested.

"But of course, if you talk about a loan size of hundreds and millions of dollars, then even a 0.1 per cent increase would have significant changes. But once again, all these rate hikes are not unexpected. I think a lot of the businesses have already been geared up, it is just the way that it is coming."

Looking ahead, expectations are that the three-month SIBOR will hover around 1 per cent at the end of this year. However, this may change depending on the pace of US interest rate hikes. 

- CNA/ac

Companies' Brief


Source: Business Times / Companies & Markets

Guocoleisure (GLL) recently completed the re-financing of its debenture stock, which expired in December 2014. The £138 million security, issued at coupon rate of 10.75 per cent back in 1989, was redeemed by GLL and refinanced at below 4 per cent, by our estimates. GLL expects interest savings of US$7 million for the six months ending June 2015, and annual savings should be in the range of US$14 million.

Singapore Reits 

Source: Business Times / Companies & Markets

We reaffirm our "positive" rating on the S-Reit sector, though are much more cautious and selective compared with our stance at the start of 2014. For 2014, the S-Reit sector outperformed the overall market (with an absolute gain of 9.2 per cent for the FTSE ST Reit index versus 6.2 per cent for the FTSE Straits Times index).

Global Economy & Global Real Estate

HK home prices in Nov hit record high for 7th straight month

Source: Business Times / Real Estate

Dismantling a Chinese developer could get ugly

Source: Business Times / Real Estate

Reit takeovers to climb in US with push from activist investors

Source: Business Times / Real Estate

French court blocks LVMH's plans for iconic Paris building

Renovation design clashes with historic surroundings, says court; LVMH plans to appeal further

Source: Business Times / Real Estate

Canadian ghost town sold to Chinese developer

Source: Business Times / Real Estate

Chinese entrepreneur buys Bordeaux wine estate

Source: Business Times / Real Estate

New World Trade Center gets a different mix of tenants

Instead of financial firms, most tenants now hail from the technology, media and advertising sectors

Source: Business Times / Real Estate

Glencore’s Head of Copper Pays $70 Million for London Apartment

Source: Bloomberg / News

The head of copper mining and trading at Glencore Plc has paid 46 million pounds ($70 million) for an apartment in London’s upscale Belgravia district.

Telis Mistakidis, whose 3 percent stake in the Swiss commodities trader is valued at about 1.2 billion pounds, bought the property in October last year, according to a filing to the Land Registry. Mistakidis is Glencore’s fifth-largest shareholder according to data compiled by Bloomberg, and received a $70 million dividend payment last year.

The 735 square meter (7,900 square foot) apartment was designed by Foster & Partners and comes with a double height reception room, 24-hour concierge and two terraces. It has a master bedroom, four guest bedrooms and two staff bedrooms.

The property was offered for sale by affiliates of Christian Candy’s CPC Group, one of the developers of the One Hyde Park luxury apartment complex in Knightsbridge.

Mistakidis, 53, joined Glencore in 1993 in the zinc and lead division. Before that the alumnus of the London School of Economics worked for rival commodity trader Cargill Inc. He used a mortgage from UBS AG to buy the property, according to the filing, and declined to comment when contacted by Bloomberg.

Home values in London’s best districts fell 4.2 percent in the last quarter of 2014 as the government increased stamp duty transaction tax to as much as 12 percent for the portion paid above 1.5 million pounds, broker Savills Plc said today in a report.

Chief Executive Officer Ivan Glasenberg is Glencore’s second-biggest investor with an 8.4 percent holding. The company is the world’s third-biggest miner by market value. BHP Billiton Ltd. and Rio Tinto Group are the two largest miners.

The purchase was first reported by the Evening Standard.

Peter Grauer, the chairman of Bloomberg LP, the parent of Bloomberg News, is a non-executive director of Glencore.

-By Jesse Riseborough and Neil Callanan

U.K. Home Prices Seen Lower in 2015 on Vote Uncertainty

Source: Bloomberg / Luxury

U.K. house prices will decline in 2015, led by a slump in London, as uncertainty over May’s general election and proposed property taxes tarnish the country’s image as a safe haven for foreign buyers.

Prices will fall by 0.6 percent nationwide and 3.3 percent in London, the Centre for Economics and Business Research said in an e-mailed report. That compares with an 8.8 percent rise in U.K. values and a 16.8 percent increase in the capital last year.

“The uncertainty surrounding May’s election, proposed changes to property taxation, and reduced foreign demand are already bringing down house prices,” CEBR economist Nina Skero said in the report. “Subdued price rises or modest declines also reflect a correction in the housing market after a period of very strong price growth.”

The U.K.’s housing market has slowed since July when Bank of England Governor Mark Carney introduced measures to limit riskier mortgages and prevent an unsustainable buildup of consumer debt. Demand for U.K. mortgages fell the most since 2008 in the fourth quarter, according to the BOE. U.K. house-prices rose at the slowest pace in more than a year in December, according to Nationwide Building Society.

London’s luxury-home prices were first to cool, after leading the U.K.’s housing boom since 2009. Prices in the city’s wealthiest districts, where values average 4 million pounds ($6 million), declined 1.3 percent during 2014, Savills Plc (SVS) said in a separate report today.

“Sellers of prime housing need to maintain a realistic view on values achievable in the election year, if they are committed to achieving a sale,” Lucian Cook, head of residential research at Savills, said in the report.

-By Patrick Gower

Persimmon Home Sales Gained 17% Last Year as Profit Rose

Source: Bloomberg / Luxury

Persimmon Plc (PSN), the U.K.’s largest homebuilder by market value, expects to report a “significant” increase in 2014 pretax profit after home sales rose by 17 percent.

Persimmon sold 13,509 homes last year, compared with 11,528 in 2013, the York, England-based company said in a statement today. The average sale price climbed 5 percent to 190,500 pounds ($288,000). Revenue rose 23 percent to 2.6 billion pounds.

“We’ve seen good demand right across the U.K.,” Chief Executive Officer Jeff Fairburn said by phone. “We’ve got to be wary of the election coming up but there is plenty to be positive about.”

Prime Minister David Cameron’s Conservative Party and the Labour Party are running neck-and-neck in polls ahead of a nationwide parliamentary election in May. Both parties are touting housing policies that differ on issues ranging from taxation to how to boost homebuilding.

U.K. house prices will fall by 0.6 percent in 2015, the Centre for Economics and Business Research said in a statement today. Persimmon expects to report an improvement in its operating profit margin for the second half of 2014, driving pretax profit growth and cash generation, according to the statement.

Bank of England Governor Mark Carney stepped in to cool the housing market in June to prevent an unsustainable buildup of consumer debt as soaring prices stretched affordability. Demand for U.K. mortgages fell the most since 2008 in the fourth quarter, according to the BOE, as Carney’s measures made it harder for homebuyers to get loans.

Persimmon was up 0.9 percent at 1,541 pence as of 11:25 a.m. in London. The stock has gained 19 percent in the last 12 months, the second-best performance among stocks in the Bloomberg European Home Builders Index, which has dropped about 1 percent.

-By Patrick Gower

Billionaire Investor Picks Home Lenders to Ride Modi Rally

Source: Bloomberg / Luxury

Billionaire investorRakesh Jhunjhunwala, bullish on India as oil prices plunge and Narendra Modi’s government enacts reforms, is seeing some of the best investment opportunities in mortgage lenders and automakers.

The biggest collapse in crude prices since the 2008 global recession is “God’s gift” to India and its benefits will flow in the next three months, Jhunjhunwala, who owns more than $1 billion of stakes in companies including drugmaker Lupin Ltd., said in an interview with Bloomberg TV India today. He cited LIC Housing Finance Ltd. and Escorts Ltd. among his top picks.

The S&P BSE Sensex increased 30 percent in 2014, the most among the world’s 20 biggest markets after China, as Modi ended controls on diesel prices and allowed more overseas investment in sectors such as defense. Last month, he passed executive orders to make it easier for companies to buy land and to allow more foreign investment in insurance after parliament’s session ended without votes on several key bills.

“This government is determined to do what it thinks is right,” Jhunjhunwala said, adding he has “extreme faith and conviction” in the administration.

Brent crude, the international benchmark, fell as low as $50.52 a barrel yesterday, the lowest since April 2009. Lower oil prices slowed gains in India’s consumer price index to 4.38 percent in November, the least since January 2012, because the country imports 80 percent of its energy needs.

Plummeting commodity prices will keep inflation within 5 percent, below the central bank’s 6 percent target for January 2016, Jhunjhunwala said. The Reserve Bank of India may cut the main rate by 100 basis points over the next two or three policy meetings, he said. The central bank has left rates steady at 8 percent since January 2014.

Opposition Parties

Governor Raghuram Rajan wants to be “doubly sure that there isn’t a situation where he cuts rates and inflation goes up,” Jhunjhunwala said.

The Sensex has dropped 6 percent since the beginning of December as oil’s rout fueled concern the global economy will slow, and as opposition parties derailed plans by the Bharatiya Janata Party to pass measures that would permit more foreign investment in insurance and make coal mining more transparent.

Modi issued executive orders to push through the changes, which still need parliamentary approval to come into force permanently. The BJP, which controls 52 percent of seats in the lower house, holds only 18 percent of the upper house. Modi needs to find alternative ways to ensure the passage of bills until 2018, when his grouping’s representation is expected to reach a majority.

“We are ourselves underestimating the change that this government is bringing and the effect of that change,” Jhunjhunwala said. “Everything in India takes time, nothing can change overnight.”

Home Loans

Jhunjhunwala said he’s bullish on some home loan companies and automakers. Home loans as a percentage of India’s GDP are about nine percent versus 17 percent in China and 69 percent in the U.S., data from Housing Development Finance Corp. show.

Dewan Housing Finance Corp. (DEWH), in which Jhunjhunwala held a 3.89 percent as of Sept. 30, surged 85 percent last year, data compiled by Bloomberg show. Dewan and LIC Housing jumped at least 2 percent at the close today, versus a 0.3 percent drop in the Sensex. Lupin, whose shares have more than tripled in the three years through December 2014, fell 1.3 percent.

Jhunjhunwala said the Indian equity market offered enough opportunities across the board over the long run. One stock he is bullish on is tractor maker Escorts, in which he held a 5.47 percent stake as of Sept. 30. The stock fell 6.5 percent last year after surging 84 percent in 2013.

“If India is going to have the kind of bull market that I envisage, all sectors will do well in time,” he said.

-By Rajhkumar K Shaaw

Obama to Cut FHA Mortgage Insurance Premiums to Boost Homeownership

Source: Bloomberg / News

In an effort to expand homeownership among lower-income buyers, President Barack Obama plans to cut mortgage-insurance premiums charged by a government agency.

The annual fees the Federal Housing Administration charges to guarantee mortgages will be cut by 0.5 percentage point, to 0.85 percent of the loan balance, Julian Castro, secretary of the Department of Housing and Urban Development, said today during a conference call with reporters. Under the new premium structure, FHA estimates that 2 million borrowers will be able to save an average of $900 annually over the next three years if they purchase or refinance homes.

Shares of private insurers that compete with the FHA fell on the news, which Obama plans to discuss during a visit to Phoenix tomorrow.

“We believe this is striking a very good balance between being fiscally responsible and also enhancing homeownership opportunities,” Castro said.

‘Locked Out of Market’

The FHA has been increasing premiums since 2011 to offset losses caused by defaults on mortgages it backed after the housing bubble burst. Housing industry participants say the increases in annual fees, which are now at 1.35 percent of the loan balance, are squeezing buyers with modest incomes out of the market.

“Lots of people have been locked out of the market, particularly lower-wealth borrowers and borrowers of color, by the high prices at FHA,” said Julia Gordon, director of housing finance and policy at the Center for American Progress, a group affiliated with Democrats. The premium cut “does put homeownership within the reach of more people.”

The FHA estimates that 250,000 first-time homebuyers will enter the market after the premium reductions.

In addition to its annual premiums, the FHA also charges borrowers an upfront fee, which is currently set at 1.75 percent of the loan balance and is not slated to change.

‘Broken FHA’

Democrats and housing groups say reducing FHA fees will help the agency’s bottom line because it will boost the volume of lending, which declined when homebuyers had to pay more to obtain loans. A December study by the Mortgage Bankers Association said the premium increases had reduced the value of the insurance fund by $4.4 billion as higher costs drove away creditworthy borrowers.

Republicans have said premium cuts should be off the table because the agency’s insurance fund remains below legally required levels. House Financial Services Committee Chairman Jeb Hensarling said last month that “a broke FHA is a broken FHA.”

“This sounds like a move in the wrong direction,” said Mark Calabria, director of financial regulation studies at the Cato Institute, which supports free markets. “FHA has a portfolio of poor quality loans. This will end up costing the taxpayer considerably.”

The agency is required to keep enough cash on hand to cover all projected losses in its $1.1 trillion portfolio. The insurance fund required a $1.7 billion draw from the Treasury Department last year. In fiscal 2014, the fund posted its first positive balance in two years.

Shares Slide

The fund must also maintain a cushion of 2 percent of its value, a level it isn’t projected to reach until fiscal 2016.

Castro, who is scheduled to accompany Obama to Phoenix, said the fee cut would have a “marginal” impact on the insurance fund.

Radian (RDN) Group Inc., which sells insurance to homebuyers, slid 5.5 percent to $15.62 at 1:53 p.m. in New York trading. MGIC Investment Corp. (MTG) slumped 4.7 percent percent and Essent Group Ltd. (ESNT) fell 9.4 percent.

Radian climbed 18 percent last year after more than doubling in both 2012 and 2013 and had said it benefited as private companies gained market share from the government.

Mortgage insurance helps cover losses when homeowners default and foreclosures fail to recoup costs. The coverage is typically required when borrowers’ down payments are less than 20 percent of a home’s price.

The FHA had a 30 percent share of the mortgage insurance market in the third quarter of last year, down from about 69 percent in 2009, according to data from Inside Mortgage Finance. Private firms wrote 42 percent of the coverage in last year’s third quarter, and a government program for veterans accounted for most of the remainder.

Some Ginnie Mae-guaranteed securities backed by FHA loans also declined on concern that more borrowers will find it worthwhile to refinance, repaying debt that’s trading at higher prices at face value. Bonds with 3 percent coupons fell by 0.15 cent on the dollar more than similar-duration Treasuries as of 11 a.m. in New York, according to data compiled by Bloomberg, after typically outperforming government debt when bond prices have dropped in recent months.

-By Clea Benson and Jonathan Allen

JPMorgan Said to Be Bidding for Facebook’s Dublin Office

Source: Bloomberg / News

A JPMorgan Chase & Co. affiliate and Union Investment are among bidders shortlisted to buy Facebook Inc.’s European headquarters buildings in Dublin, a person with knowledge of the matter said.

Chartered Land Ltd., which developed the two properties, also included Hibernia REIT Plc (HBRN) and Irish Life Group Ltd., a unit of Great-West Lifeco Inc., among the final bidders for the office buildings, said the person, who asked not to be identified because the matter is private. The properties were offered for sale in November with an asking price of 216 million euros ($256 million).

Spokesmen for Union Investment, JPMorgan, Irish Life and Hibernia REIT all declined to comment. Chartered Land Executive Chairman Joe O’Reilly also declined to comment.

Irish developers and investors including the National Asset Management Agency are selling assets to take advantage of rising investor interest in Irish real estate. The buildings leased to Facebook in the city’s docklands district were designed by Daniel Libeskind and are being sold as part of a portfolio called the Tara Collection.

NAMA Chief Executive Officer Brendan McDonagh said in November 2013 his agency advanced funding to complete the second building before attracting Facebook, which established its European headquarters in Dublin in 2009.

NAMA generated 7.8 billion euros in loan and asset sales last year, bringing total proceeds since its inception in 2009 to 18.7 billion euros.

-By Neil Callanan and Joe Brennan

Trump Panama Hotel Developer Misses $23 Million Bond Payment

Source: Bloomberg / News

The developer of a Donald Trump-branded hotel and apartment complex in Panama missed a bond payment 18 months after issuing the notes when it emerged from bankruptcy.

Newland International Properties Corp. wasn’t able to make a $23.4 million principal payment due this week on its $200 million of notes due in 2017, according to a statement on the Panama stock exchange’s website. The real-estate developer said it did pay $9.4 million in interest. It reached an agreement with almost two-thirds of bondholders on Nov. 26 under which the non-payment of principal won’t lead to a violation of an indenture agreement, according to the statement.

Newland emerged from Chapter 11 protection in July 2013 after saying in its bankruptcy filing that the financial crisis had curbed sales at the Trump Ocean Club, a 70-story building on Panama Bay with more than 350 hotel rooms and 500 condos. Under its reorganization plan, holders of defaulted notes due November 2014 were given the new bonds that mature in July 2017.

While court documents show the company isn’t an affiliate of Trump Organization Inc., its website includes an endorsement from Donald Trump and a video tour narrated by his daughter Ivanka.

“We are very proud of being the number one preforming hotel in the city,” Eric Trump, Executive Vice President of Development and Acquisitions at Trump Organization, which manages the project, said in a phone interview from Panama City. “Trump Organization is not affiliated to the developer and has nothing to do with ownership of the project.”

Newland executives didn’t immediately return a call seeking comment.

Fitch Ratings said in an August 2014 statement that the company had to cut prices on its condo units.

“Since restructuring, the company has discounted prices in order to sell individual condo units, and executed two bulk sales at even larger discounts,” Fitch said.

The company’s bonds last traded Dec. 30 for 32 cents on the dollar, according to data compiled by Bloomberg.

-By Andrea Jaramillo and Michael McDonald

Additional Articles of Interests - Local & Overseas Real Estate