News shortcuts: From the Courts | Top Headlines | VAT (Value Added Tax) | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | Professional Updates | Corporate Law | Markets | Students | General | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing | GST - Goods and Services Tax | PPE Safety Kit SITRA Approved | PPE Safety Kit
« General »
 Delhi govt warns strict action against companies defaulting on tax payments
 Tax burden on salaried individuals, professionals to increase Delhi
 IT department randomly picks up cases to remove bias from tax scrutiny
 TDS on cash withdrawal alert! New functionality from Income Tax Department for banks and post offices
 Income tax department notifies exemption for sovereign wealth funds
 How much gold can you keep at home as per income tax rules?
 New income tax slab: Rules changed, no exemption on meal vouchers & coupons
 Pharma shines in advance tax pay
 SDMC starts offline facility for depositing property tax
 Covid-19 crisis threatens to wipe out gains from corporation tax cut
 Big tax shortfall raises Centre’s fiscal deficit to 4.6%

SEBI asks AMCs to keep off realty debt
November, 24th 2010

Capital market regulator the Securities and Exchange Board of India (SEBI) has told asset management companies (AMCs) to avoid exposure to real estate debt in certain schemes. According to fund officials, SEBI has directed asset management companies to mention a negative sector list in their draft prospectus, and give an undertaking that they will not invest in sectors that appear in this list.

According to marketing officials at fund houses, the regulator is prodding fund houses to include real estate in the negative sector list. However, none of the fund houses ET spoke to, has received anything in writing on the negative sector list or to limit their exposure to real estate companies. It is only conveyed to fund houses verbally. The directive to include real estate in the negative list is happening more in the case of fund houses that are launching capital-protected schemes, said the investment head of a bank-promoted fund house.

The marketing head of a mid-sized fund house recently said at a press conference that it has been asked by the regulator not to invest in bonds issued by real estate companies. The fund house has also given an undertaking that the capital protection scheme, which it recently launched, will not invest in the black-listed sector, said the official. SEBI officials were not available for comment. An email query to SEBI remained unanswered at the time of going to press.

According to officials at fund houses, SEBI is worried about the debt repayment ability of real estate companies, which often take on too much debt. Also, the regulator is not satisfied with the reporting standards of most real estate companies. Balance-sheet strength, landbank valuation, authenticity of titles and project standards and execution are areas of concern for SEBI. In October 2008, many real estate companies were unable to meet their repayment schedule, forcing mutual funds to borrow externally to meet redemptions.

All regulators, including the RBI, are nervous about real estate, said Anuj Puri, India head, Jones Lang LaSalle, a real estate consulting firm.

At a broader level, we dont expect any trouble for developers. With respect to non-payment of debt, weve not seen real estate companies defaulting in the thick of recession. There was some rollover of debt, but that was there for a short period. Credit risks have reduced greatly, with most lenders opting to fund individual projects than capitalising the entire company, added Mr Puri.

According to analysts, real estate prices, across cities, have witnessed a significant appreciation in the recent past. In fact, prices in some regions have surpassed their highs of 2008. Real estate funding has also been picked up over the past 11 months. The period between January and August has seen private equity investors closing 25 real estate deals, totalling $990 million. Developers have raised Rs 1,109 crore by way of debt placements and Rs 2,225 crore by way of public issues.

Home | About Us | Terms and Conditions | Contact Us | PPE Kit SITRA Approved | PPE Safety Kit
Copyright 2020 CAinINDIA All Right Reserved.
Designed and Developed by Ritz Consulting