In a move to help the cash-strapped builders and developers by attracting investments into affordable housing and smart cities, the Cabinet on Wednesday approved relaxation in construction foreign direct investment (FDI) norms .
Minimum capital requirement for project pinned with norms for minimum built-up area and capitalisation have been liberalised, suggest sources.
Suresh Kris, CFO, Brigade Enterprise sees relaxed norms for 100 percent FDI in construction as a shot in the arm for the sector with an anticipated increase in demand for land.
On the flipside, YD Murthy, Executive VP-Finance at NCC says the FDI notification does not pertains to real estate developers and not engineering, procurement and construction (EPC) companies but they will bid for EPC projects if NHAI bidding comes up, he says in an interview to CNBC-TV18.
Recently, NCC's rights issue were oversubscribed, of which most proceeds will be used to reduce short-term loans and NCDs, says Murthy adding that company's debt-equity ratio will change favourably post rights issue, increasing its net worth to over Rs 3,000 crore.
Below is the verbatim transcript of YD Murthy and Suresh Kris' interview:
Q: The overnight announcement that you can get FDI for affordable housing especially even for smaller or cheaper units, does that materially change the game for you?
Kris: FDI investment into affordable housing has been in talk for a while. Apart from other points like reduction in the minimum area from 50,000 sq m to 20,000 sq m and cap rate from USD 10 million to USD 5 million. But still, the area is only 60 sq m of area and out of it again 21 to 27 sq m should be the carpet area and 35 percent of the units has to be committed to this and 30 percent of the total cost should be committed to the affordable housing. 60 percent of the floor space index (FSI) area to be committed to affordable housing.
These criteria are there but one big positive is that there is no minimum capitalisation or there is no minimum area definition into this. Maybe, for Brigade or for any other developers who are having small land parcels which would not have been qualified for FDI earlier may qualify for this now.
Q: But are they waiting for to come, FDI that is?
Kris: FDI may come into this, which is what I am saying because again some of the FDI companies those who don't want to invest so much India on to a specific project of those sizes, it is easy for them to come in.
Q: Do you have any affordable housing projects. Are you planning to get into this segment in a big way and have you seen any interest from foreign players?
Kris: We already have one sovereign fund for our projects and we already have entered into MoU with GIC Singapore earlier. So that is already there but presently we do not have any affordable housing as such but again going forward depending on the market absorption demand and our involvement into developing those segments definitely will clarify more.
Brigade Ent stock price
On October 30, 2014, at 11:13 hrs Brigade Enterprises was quoting at Rs 144.65, up Rs 7.80, or 5.70 percent. The 52-week high of the share was Rs 160.50 and the 52-week low was Rs 49.70.
The company's trailing 12-month (TTM) EPS was at Rs 8.06 per share as per the quarter ended June 2014. The stock's price-to-earnings (P/E) ratio was 17.95. The latest book value of the company is Rs 113.29 per share. At current value, the price-to-book value of the company is 1.28.
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