Hyderabad Fab City is back in news again..

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 at 42.87 per USD

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

Technorati : dollar, rupee

RBI Raises CRR and Repo : Money to get more expensive in India

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

Hyderabad Real Estate Update

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 Fever in Hyderabad ???

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