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Recently I travelled from Kolkatta to Hyderabad on Kingfisher A320 Airbus. Thought I should share this experience considering the hoopla that surrounds this airline and its service.
Believe me, service in any airline in India is much better what we get in US. But airlines in India like Jet Airways and Kingfisher claim to be full service. So, I thought I should share my experience so that the chairman can take a note of things that dont work the way he thinks they are working.
Read More at hyderabad.mylifemysite.com
I am trying to be as neutral as possible on this blog and thats why I had rejected a lot of politically charged rhetoric or comments that have been posted detailing the project fraud etc..
For all you that are itching to discuss this and other issues, I am about to launch a new site that will allow everyone to discuss all these and other current topics.
How much of this is real and how much of it is political grand standing I dont know.. So, I will leave it to you..
Here is the snippet that was published in Deccan.com
Hyderabad, April 21: The Telugu Desam on Saturday released documents to prove that the State government had signed the Fab City deal with a non-existent company.TD leaders K. Yerran Naidu, Dr N. Janardhana Reddy, S. Venugopala Chari and K. Rammohan Rao termed the project ‘Fraud City’ and pointed out that the company SemIndia Fab did not exist when the industries department signed a memorandum of understanding with it.
Industries Secretary Lakshmi Parthasarathi signed the MOU on February 16, 2006 with Vinod Kumar Agarwal, the supposed chief promoter of the company. However, SemIndia Fab Private Limited was incorporated only on February 20 in New Delhi, the TD leaders said. Mr Yerran Naidu said that the total paid up capital of the company was only Rs 1 lakh though it had promised $3 billion investment. “The government either did not bother to check the company’s credentials or connived with it,” he said.
The Special Economic Zone Approval Board of the Centre also gave permission to FabCity SEZ on March 17, 2006, when there was no company by that time. It was only on May 2, 2006, that the separate company for the SEZ was incorporated, the TD leaders pointed out. “The State government allotted 1,200 acres of land worth Rs 6,000 crore to a company which neither had the requisite experience nor the financial strength,” said Mr Yerran Naidu. “This is a big scam involving many people.” He further said that the the promoter Vinod Agarwal’s first venture in the United States, Logic Vision, went bankrupt.
“SemIndia has to pay Rs 480 crore for the land, but it not paid a single rupee till now,” said Mr Yerran Naidu. “No techno company has come to start its office in FabCity. Agarwal is signing MoUs with private parties to construct hotels, spas, commercial complexes and entertainment zones.” One of the promoters, Preet Pal Singh Mahal, left the company after realising that Agarwal does not have the wherewithal to run FabCity, alleged the TD leaders. “The government has learnt nothing from the Volkswagen issue,” said Mr Yerran Naidu, taking strong exception to the way the government was signing deals.
April 16th was the birthday of Greater Hyderabad Muncipal Corp GHMC making it the second largest city in India after Delhi. [ Originally I said that we may be #1 since delhi is a UT, I received a ton of email indicating that delhi is not a UT .. So we are #2.. thanks for the correction..] Talk is now on that that the next step is to create a GHVMC.. Great Hyderabad, Vijayawada Muncipal Corp. Why not just create a TMC - Telangana Muncipal Corp, AMC-Andhra Muncipal Corp and RMC - Rayalseema Muncipal Corp which will lead to APMC - is there a need to have Hyderabad or other local governments?.
The much awaited 100 story tower bids have been closed. It will be 6 months before the technical evaluations are done. APIIC continues to find new bakras for their projects this time its reliance and an israel company. APIIC is trying to sell 76 acres of land at 6 crores an acre. Looking at the history of Golden Mile, this may end up in some legal trouble as soon as the bidders are selected and are forced to pay their advance.
Heard that cost of construction costs would run around RS 7000/sq ft., while the developer has to sell at Rs 10,500 / sq ft. to make a decent margin and to make the project viable. Now, theres a reason why we should buy apartments at 4000/sqft ;-). As of last week, some gucchibowli apartments in good gated communities were looking for buyers in the 3000 - 3300 per sq ft. range.
Negotiations between AP Govt and the promoter of Fab city are still on. Land allocation has come down from 1200 acres to 75 acres and has been adjusted to 300 acres now. Power and infrastructure issues have held up the agreement. Point of contention is on the subsidy for power/energy. Fab city needs 200MW per day and they want it to come at 1.80 per kwh for the next 15 years. Guess what, AP govt just signed a deal with Tatapower to buy energy at 6.00 per kwh. So, thats a 4.20 per kwh loss to the govt during peak months in 2006. Adjust for inflation and thats nothing but a giant black hole. My estimate is that it will equate to a subsidy of USD100 Million per year.
IMHO, situating this assembly and test plant in Hyderabad will not create any major incentives to the prospective customers or MNC's. Fab will certainly bring more jobs, but dont expect it to do the miracles that IT+ITES(BPO) did. In tech 20% of cost was static and 80% was human driven allowing MNC's to make huge investments. As mentioned in one of my old posts, 88% of cost is static in chip fab.. giving very little incentive for companies to move here in a large scale.
I really hope that the AP govt backs out of this whole deal and invests the USD100Mn per year in Power / Energy projects
Indian rupee has finally touched the much awaited 42.x mark. It clocked at 42.87 today and appreciated over the 43 rs per dollar mark. Thats almost a 10% gain in 9 months.
View the graph
Get the latest data on Dollar Rupee conversat at hyderabad.mylifemysite.com
This is a short post to keep you updated on the monetary situation in India... Inflation at 6.5%, CPI at 8%
RBI feels that there is too much liquidity even at this stage and is concerned about the Inflation pressures.. so, they have reacted yesterday by raising CRR [ Fed Reserve Requirement ] and Repo Rate [ Fed Funds Rate ] .. ( Equivalent Us terms have been provided as links for reference.
CRR has been raised to 6.5% [ 2 phases to be in place by April end ] while REPO to 7.75%.
So, get ready for another hike in home loan, auto loan and other loan rates. Also bank deposits will fetch a much better return than investing in many other instruments in the short term. Bank profitability and small and medium size companies will be hurt most due to this squeeze..
This may also be a chance to buy that dream house or plot at a lower price.. will update the situation once the banks announce their decisions on interest rates.
Finance & Economy
A lot of you have sent emails asking for a newer update on hyderabad real estate. I have tried to be as truthful as possible below.. so dont call me a nay-sayer again..
Apartments : STAGNANT .. NO MOVEMENT.. DEAD is the update on apartments that are priced at Rs 3500 and higher. Builders think that we will still fall for the good old techniques of "I only have a few left.."... Insiders are indicating that builders are now pulling the planned projects since they are unable to gain any interest at Rs 3500 and higher. Recently I heard of Rs 4000, Rs 3750 in L&T and a new a launch at Rs 4500 got a very cold reception.IT junta realized that builders are skimming them out of their hard earned money. It will be a while before this correction ends since a lot of supply is coming into the market now.
Villas : The hype has now shifted to villas. This is the next area where I think people will get burned. Every one and their brother is starting a villa project, since they do not see any demand in apartments. Things you hear today in the market are .. :"We need villas for most people who work in the hitec area etc.. There are not enough villas around to meet the demand etc..".. How the heck will a person earning 50K as a median salary afford a Villa ?. Forget the installments at 11%, the person will not even have enough to pay for maintenance. There is no question that demand will go up for the next 18 months as the villa projects have just started and all investors will think that this demand will sustain. Think about what will happen when they are all ready to be delivered and occupied ?
Plots : Bubble has busted in the dead-areas of the City. Other areas have corrected pretty badly. People still cannot believe that land prices are lower than they bought for. If your realtor friend tells you that your plot acquired in the last 6 months is going for double the price, its time to call his/her bluff and ask for the money. Overall its a good time to pick up land.. I heard recent transactions in Banjara and Jubilee residential areas happening in the 35K to 45K range.. Forget the commercial areas, they are hot hot hot.
Some recent updates..
1. One large township in the city is undersold, and people who booked and got their apartments are not able to resell it since they are competing with the actual developer who has more than 30% of the inventory left.
2. Whitefields [ my favourite concrete jungle ;-)] has a # of apartments that are not rented since the owners are expecting that they will really make the Rs 30K / month based on the hype that builders created. I know of one person that got his 3 bed apartment done with all the latest in fittings etc., expecting to get 30k, and is unable to rent it even for Rs 18k. Best offer he got was 15k.
3. Interest rates now stand at 14% on fixed and 11% on Floating. One bank manager who deals with loans indicated that all their business has stopped in the past 1 month and they are only dealing with the backlog that they had from earlier months.
As always.. do your own research.. dont get carried away by my commentary or for that matter any ones input.. Its your money, spend it wisely !!!!..
World Cup 2007 fever will subside in a few hours. All the preparations with TV's, Score Boards, Intra and Inter company events etc., that were planned for the duration of the World Cup will no longer carry the hype that they started with..
India is 112/6 and yuvraj's runout followed by Dhoni's Duck washed out any hope I had for winning against Sri Lanka.
First, I feel sorry for the viewers in India including myself since Sony plays an ad every couple of balls making it very tough to keep up with the flow of the game. Editing is so bad that they cut to ads without realizing that some thing key is happening on the field.
Second, I dont understand the marketing geniuses running the ad campaigns for the world cup. Highlights were the ads of Sachin shown immediately after he was out, followed by Dhoni's 7 up ad after he was out. If Indian fans are passionate and crazy enough to thrash dhoni's house after the bangladesh fiasco.. it doesnt take much to stop 7up sales in India.
In the time I took to scribble 2 thoughts.. Agarkar's time was up. . 138 for 7..
http://sports.espn.go.com/sports/news/story?id=2809756
Nokia was identified as the largest MNC based out of India today with 15000+ crores in revenue for 2006 followed by HLL at 12000 crores other well known brands like coke and pepsi together with 10000 crores, Hyundai with 9000 crores. Most of Nokia's revenues come from handset sales and it has increased its market by 100% in 2006.
Finally the budget 2007 is here and doesnt seem to have a major effect on my life. My tax deduction limit was raised from Rs 100,000 to 110,000 equating to a refund check of Rs 1000. Shoes, Watches and Plywood are expected to cost less and finally I can afford a nice pair of shoes after paying my taxes ;-)
I watched this speech for 15 mins and couldnt take it after the FM announced an allocation of Rs 22 Crores combined for 4 states and also took the time to name the states getting the funds. While he was busy talking about things that didnt matter, his colleagues were picking their noses without any realization that they are on National TV. Does 22 crores need a full country's attention ?.. Dear FM, come over to Hyderabad and sell 1.5 acre of govt land and you dont even need a budget to fund that project.
Some areas like Agriculture, Rural Infra, Healthcare received high funding making it a very good budget for India overall. There was even a program to stop dropouts at 8th grade [ I was not aware that this was an issue ], and also some merit based scholarschips along with an increase in education cess of 1% which are sure add fuel to the the inflation fire.
Infosys mentor Narayan Murthy's wishes to pay taxes in India were granted when the govt decided to levy a MAT on IT/ITES sector ( Minimum alternative tax.. similar to AMT in US 1040 ) . But this tax may not hurt infosys much since it pays most of its taxes outside India. Also ESOPS now fall under Fringe benefit tax.
Market fell 540 points today and can create further panic selling tomorrow unless the government and the foreign investors do something to create the support levels. Drops of 300+ points have the potential to destabilize the Margin players who are critical to the market.
In a surprise move yesterday, ICICI bank has raised its lending rates further, becoming the bank with the highest rate of 13% on Fixed and 11% on floating loans. Though HDFC is lagging behind, it is also expected to move higher by 100bps or a 1% soon. PLR ( Prime Lending Rate ) the reference rate has been left untouched , keeping the existing loans at the same rates as of Feb 6th 2007. Many feel that this move by ICICI is in line with its strategy to slowing down growth in home loan portfolio. Many state owned banks have also raised interest rates for new borrowers and the rates are expected to go further up.
On deposits banks are increasing it further with SBI, ICICI offering upto 9.5% interest as of today. Senior citizens get an additional 0.25% on their deposits generating an annualized yield of 11.75% at 9.75% savings rate.
In other finance developments, Forex reserves of India increased to $190b, creating some more issues for the financeministry. Rupee is being reigned in through various measures by the government but the fact remains that rupee has appreciated against the dollar from 46.9/$ [ when I landed at hyderabad in july] to 43.9/$ [ last week ] and this may continue creating margin pressures for exporters as well as the outsourcing industry.
Disclaimer : I dont claim to be an economist or even some one with formal finance education..
The hype and confusion still continue around the Fab City project of Hyderabad. Everyone was banking on the announcement of semiconductor policy in India which was finally revealed on thursday. Per the new policy, manufacturing plants in SEZS can avail 20% subsidy for semiconductor plants and those outside the SEZ's can avail 25% subsidy. This subsidy will be in the form of tax concessions, interest subsidy and interest free loans for subsidizing the capital expenditure incurred in setting up the manufacturing units for the first 10 years of its existence.
25% is exactly what SemIndia [ promoter of fabcity ] has been demanding saying that it needs atleast this much to sustain. New York state has recently granted a 28% subsidy to AMD to setup its fab in the state. So, what the Indian government is offering is no more than what a US state would offer. Korea is known to offer 80% of the costs incurred and malaysia is known to offer a double deduction for R&D etc.
In fab business companies operate at a 12% Margin irrespective of the location. About 88% of the cost of a chip fab are static and do not change regardless of the location the plants are in. So, India may serve as the testing, packing destination for a while instead of being a manufacturing site. A recent semiconductor vision summit also quashed some myths about the scale of initial operation. SemIndia's goals are to acquire fab's across the world , operate them as-is and then transfer them to India. One component that is guaranteed to come to Hyderabad is a chip design entity that will design chips for DSL Modems [ is that cutting edge anymore ?.. aren't there tons of these design shops in India already ? ], but the manufacturing will actually take place near Chennai in a 3rd party plant, followed by a semindia branding and sold to BSNL.
Recent and continuous announcements about an ATMP ( Assemble Test Mark Pack ) facility being the first in Fab City doesnt indicate that too much will happen in the near future in fabcity. No doubt, the growth will be slow, but dont be fooled by the hype around the 3 billion investments since it will be a long time before that really flows in.
While I really look forward to Hyderabad becoming a Fab center/Fab city, I do not see a clear roadmap to achieving the same from semindia. SemIndia from my research is not just focussing on Hyderabad, they have plans for other locations too..
I some how missed to notice the news about 1000 employees fired in Hyderabad this week. Looks like companies are finally taking background checks seriously. Due to the serious security lapses leading to data theft, companies in India are actively supporting NSR, [ National Skills Registry ] Initiative. The following quote from Nasscom shows how serious IT/ITES industry is about data security to protect the honest people working in India.
"We will leave no stone unturned to make India the “Fort Knox” of security, positioning ourselves as the gold standard for security as we are today for quality. We hope that NSR will dramatically raise the level of security and protect all the honest people working in this industry".. Kiran Karnik - Nasscom
Today I received an email from my HR to complete the NSR registration. This has become mandatory for all levels within the organization. I logged into the site and completed the online part, but did not have the time to go to the kiosk setup in our cafeteria. I am supposed to go there with a photograph and also leave my fingerprint so that NSR can continue conducting a background check. The cost of this is borne by my employer and I will be receiving an ID card as well as an ITPIN that will allow any future employer to hire me based on the credentials validated by NSR.
Recent opening of the lumbini mall added 3 more restaurants in the Jubilee/Banjara area right around touch. These include Zaffran Laguna [ Mediterranean ], Malgudi [ South Indian ] and Basil [ Vegan Cuisine ].
The mall itself is still under construction, but this is a centrally located building very close to KBR and right next to touch. I envy the few friends who were able to grab some commercial space in this mall a long time ago.
Malgudi, a restaurant which claims to be specialized in southern delicacies, is located on the 4th floor in the mall. Interestingly all restaurants are on the same floor and malgudi doesnt have a restroom within its premises.. not sure how they agreed to that..
The interiors are very well done with traditional hardwood props and its very inviting. Once we settled down, I realized that it was the most confusing and interesting menu I have ever seen in a south indian restaurant. The menu was organized by state instead of the traditional starters, main course etc. Each page was dedicated to a state and it covered Andhra, Tamilnadu, Karnataka and Kerala
Now to the experience.. I scanned the menu multiple times to make sure that I was not missing the traditional souther appetizers and to my shock the waiter just recommended typical paneer tikka, spring rolls and other chinese starters. Followed by that we tried to order the maincourse from the traditional non-andhra stuff but were left scratching our heads since the waitstaff was of no help in recommending any of the dishes. When we tried to ask for help, they went back to recommending the Dal Makhni and Malai Kofta [ which was a story in itself.. ] instead of even trying to speak about or sell the traditional fare listed in the colorful menu.
After dinner, we decided to order a dessert, and since I had prior experience in Kerala with adapradhamam which was the only unique dessert on the menu for a Hyderabadi. As expected the waiter walked back to us to let us know that Kubhani-Ka-Meetha [ typical hyderabadi dessert ] was the only dessert available.. We decided to eat what ever they had since it was late to go somewhere else for a dessert and called it a day pretty dissapointed with the whole experience.
Indian economy is overheated and its particularly visible in the metro's and Hyderabad. Frenzied M&A, Over valued real estate, Rising prices in commodities etc., shows why the finance ministry is worried. Inflation today at 6.75%, Recent increase in CRR and Repo rates by RBI is a very clear indication that the government is concerned about the common man not being able to afford anything anymore.
Bank lending rates have moved from a range of 8 - 10% to 10 - 14%. As banks are in a squeeze since increased CRR will drain 14000 crores out of the banking system as committments to RBI for their existing loan base. So, banks are willing to pay above 9% for deposits compared to the 5% they were paying when I landed here 6 months ago. May not be too long before it reaches the good-old 18% rate. It is not a distant possibility, considering the issues that RBI and the finance ministry are constantly warning about the over heated and overly liquid economy.
Hyderabad realestate prices according to realtors are still booming, but the reality is that they have softened more than I expected. Try to sell a plot and you will get a dose of reality. I have seen folks get offers of 50% of what the paper value was when they really wanted to get rid of it. In the recent days areas like Jubilee, Banjara, Kavuri Hills seem to have softened more than I wanted to see. 6 months ago no one was willing to even consider talking about less than 60-70K in these areas and now many options are available at 40 and above. Even gacchibowli and kondapur have pulled back considerably, and we recently took advantage of the low prices and acquired a small plot.
Coming to the builders, No doubt, there is a demand for apartments and houses, but with the interest rates inching up every day, there are very few people left with cash to invest. Anyone who has put into land is waiting for it to recover back to the 2006 levels. I dont mean any disrespect, but dont believe the realors and builders that are still looking for the 4000 - 7000 per sqft in Hyderabad. They must be really out of their mind. Recent announcement of L&T phase II at 4000/sqft and some complexes in Banjara Hills asking for 7000/sqft is way overblown. Villas are reasonably priced in the gopanpally area, but there is still room for negotiation since the area is not that close to the business areas like the builders seem to potray. Also, land around / behind chirec [ Some have clearances and some dont .. please be weary of narne and other lands with issues there.. but it may not make a difference in the long run since the govt is looking to get rid of ULC soon .. ] is available for good prices now a days if you look for bargains, you will certainly find them.
On the financing front.. I recently dealt with a large bank to get a loan to cover one of my apartment purchases from a long time ago. This was purely to get the basic deductions that I needed which I discussed in my prior post about tax deductions etc. Banks seem to readily agree to a loan of 60 times the net monthly income. Now lets take a techie who gets 50K Gross per month [ Which I feel is the median salary of some what experienced techies in hyderabad ], after taxes he/she ends up with 30K per month as net ... and that equates to a 18Lakhs of loan eligibility. How many sqft do you think they will be able to afford at the Rs4000/sqft ?.
That was a quick rant about hyderabad .. will try to blog more this week.. Keep reading..
This is just a commentary of what I am seeing.. dont send me emails saying that I am a nay sayer.. I am not, I am still investing but in good areas that are closer to the city..
Hyderabad real estate market seems to be taking a breather to digest the high run ups it has seen in the recent past. Primarily the rush by individuals to acquire 200 - 400 yd plots and properties in unknown forest lands way beyond the Airport and Maheshwaram seems to be causing the slow down. There is no stretch of land in between that can really be acquired to start projects, a drive through this area made me realize that many folks have relied too much on brokers advise than really investigating the area.
Recent telangana sentiment is also adding fuel to this scenario and property values are rising like crazy in the Vijayawada area, primarily in areas like Kanur, KanchikaCherla, Gannavaram ( VJA Airport ) etc. In addition the area between VJA and Guntur is also on a alltime high due to predictions that it will become the new capital. I am not sure if telangana will ever materialize but many voices are now asking for Telangana, Rayalaseema, Uttarandhra ( North Andhra ) and Costal Andhra. "Do you think the state is big enough to be broken up into 4 parts ?. I dont..". Also, a prediction that Vizag will be the capital incase of telangana break up is causing rise of property values in vishakapatnam also.
Cash strapped investors are also adding fuel to the current correction by trying to get rid of their properties at what ever price. If you are holding estate in the Gucchibowli, Nanakramguda, Kondapur, Hitec area, you are fine, the dip here doesnt seem to be as bad as the outskirts. A group of us had to pullback our offer on a large investment even after paying a token advance, since land right next door was being offered to us by cash strapped investors for much lower prices.
All that said, the growth is Hyderabad is not slowing down at all. A good opportunity to land deals in the prime areas of the city where the prices went beyond the regular market levels. The premium levels will certainly come down, but not the base land values. So, for a 40K per yd land in Gucchibowli, there is a 20K premium built in and I expect that these values to stabilize around 25 to 30K.
Couple of my real estate contacts have indicated that smart money is now running away from Hyderabad to Bangalore and Vishakapatnam.
As always.. "Its your money, so invest it wisely.. dont take my word or for that matter anyone's word for granted.. do your homework before making an investment"
First let me take this opportunity to Wish you all a Happy and Prosperous new year 2007. Hyderabad was a happening place for the last few days with a number of parties all around the city.
After receiving a ton of emails about salaries in Hyderabad, I decided to do a survey of my contacts in local companies, recruiters and others who have been involved in the placement industry. What I present here is very unscientific and should not be considered an official survey. Also, please note that Indian Salary are based on the concept of CTC ( Cost to Company ) and that makes it very hard to compare offers of two companies. There are companies that include every component including their contribution to PF, and other companies that try to be fair by including only the real components that are being given to you.
The remaining article has moved to our new blog at hyderabad.mylifemysite.com
