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Indian Real Estate and Habitat Home Furnishings

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Nirmala Sitharaman must have been having a bleak Christmas: selling home furnishings at Habitat on Regent Street and this was 1990, London was gripped by a property driven recession and although Nirmala had won a bottle of champagne for best sales that month, almost nobody was buying anything. How she must have longed to come back home to India, wading through the mud and slush of a London winter. And of course, eventually, she did…after a spell with Price Waterhouse the redoubtable Ms Sitharaman finally made it back, and now she’s the first woman to lead India’s Finance Ministry since Indira Gandhi who, let’s face it, gave herself the job so Nirmala Sitharaman’s really the first.

She must have brought some hard lessons back from that bleak month in London: first-hand experience of just how much a faltering property market can negatively impact on the economy and sales as a whole. Back then the UK’s base interest rate was an eye watering 13.9% and suddenly the new jargon phrase wasn’t “yuppie” anymore, it was “negative equity”. High interest rates can and do kill property markets quicker than a rat in a bucket of warfarin.

So Nirmala Sitharaman isn’t about to greenlight a rise in rates…

This month the Monetary Policy Committee of the Reserve Bank of India cut interest rates for the fourth time running, with the repo rate (the rate at which it lends to domestic banks) now falling 35 basis points to 5.4%, an aggregate cut of 1.1% this year which prompted the State Bank of India to cut its own rate by 15 bps overnight (no sluggishness at passing on benefits there). And whilst the Finance Minister has, of course, no direct input into the decisions of the MPC, don’t forget this is the woman who was described in Parliamentary Debate as a “one woman demolition squad”, who conducted a bitter tussle with Rahul Gandhi over allegations the Government was a party of business (it is) and who, perhaps most of all, survived the sharp elbows of Christmas shoppers at Habitat. Who can resist her powers of persuasion?

She more than anyone knows how important Real Estate is for the future of India’s economy and this latest reduction brings rates down to a nine year low which will be a shot in the arm for a sector already riding high on a surge of favourable demographics and fiscal trends (think Affordable Housing in particular).

The Chairman of Apex Association of Real Estate Developers, Prashant Solomon (a man of few words) said it would all be of “great benefit” while Anshuman Magazine, Chairman and CEO of CBRE India and Southeast Asia (a man of slightly more words) positively purred: “We believe this announcement will result in a further reduction in home loan rates and will provide an impetus to the Government’s initiative in affordable housing.”

Quite right…both of you.

And as reported on this site last month, the Reserve Bank of India has also maintained its so-called “accommodative stance” which pretty much takes any prospect of an interest rate hike off the table for the foreseeable future. That has to be good news too for India’s real estate sector, for the subcontinent’s increasingly urbanised population and for the wider economy as well.

Whatever the future holds, it’s a safe bet Nirmala Sitharaman won’t be working at Habitat again…unless she’s running it.

                                                  Capitalise on the growth of Indian real estate 

Modulex Construction is the World’s largest and India’s first Steel Modular Building Company, working to meet the opportunities of India’s real estate markets in a practical and focussed manner. It was established by Red Ribbon to harness the full potential of these fast-evolving markets and deliver exciting opportunities for investors: because, when it comes to investing on the subcontinent, nobody knows its markets better than Red Ribbon.

A Threshold Moment …DLT, Blockchain and India’s Digital Revolution

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The entire text of India’s Regulation of Digital Currency Bill was leaked last month before it even reached the Prime Minister’s Desk, and if form is anything to go by someone should probably be asking Gavin Williamson for his download history. But there again maybe not… this is beyond the ambition of a former fireplace salesman, now inexplicably back in Cabinet before the ink is even dry on his police report: this is much more important because once enacted, the new Digital Currency Bill will fire the starting gun for India’s Digital Revolution. And we didn’t need a leak to tell us what is about to happen…two recent events in particular have signalled the way forward and (without wanting to sound all Sweeney) it might be worth taking another look.

First, there was the Finance Minister being asked Parliament on 16th July whether cryptocurrencies had actually been banned in India. Note the phrasing of that question: it’s a clear reference to the legal uncertainty caused by a Reserve Bank embargo imposed on crypto businesses last year, a ban that immediately ignited the maelstrom of litigation now being fought out in the Supreme Court (and which isn’t looking good for the Bank).

And what was the Finance Minister’s Answer to the question? Well, with the smell of burning rubber that usually accompanies a hastily executed “U” turn, she simply said “No Sir”. The Government hadn’t “banned” cryptocurrencies and wasn’t planning to step into the storm currently engulfing the Reserve Bank: quite the reverse, it seemed to be opening the door to cryptocurrencies. What could be happening?

Three days later, on 22nd July, the second event happened: the long-awaited Garg Report on Blockchain Technologies or, as the geeks are insisting on calling it, the Report on “Distributed Ledger Technology” or “DLT” for short.  For those of us of a certain age, “DLT” has other connotations but never mind that, back to the future: the Garg Report is looking like a real game changer for Blockchain technologies on the subcontinent.

For the first time since last year’s Interim Union Budget with its attendant anti-crypto comments from the then Finance Minister, the Indian Government has now accepted through its Inter Ministerial Committee that “digital currencies can have positive effects if deployed in financial services” despite there being “risks associated with them”. That little tail end qualification is, of course, nonsense as anyone with a shoebox full of Turkish Lire under the bed will tell you or, indeed, anyone with a stash of Sterling (wherever they keep it) given the UK now seems to be heading inexorably for a No Deal Brexit: the truth is that all currencies have associated risks; just some more than others, it depends which of them you have and when you have them.

Not that the venerable Chair of the Committee, Subhash Garg, was going to allow any tail end risk statement to dampen his enthusiasm when he tweeted after the publication of the Report (yes tweeted: this fellow is digital to his fingertips):

The Committee is very receptive and supportive of distributed ledger technologies and recommends its widespread use in delivering financial services. It opens up the door for a possible official digital rupee”.

There you have it, you heard it here first (almost). Those more esoteric cryptocurrencies can stay in the shoebox with the Turkish Lire: the bright new grail of cryptofinance will be the Digital Rupee. This may well be the first time ever that a Non Fiat Currency will be issued with Government backing.

But who really cares about the U turns and the Geek speak? The fact is, this is how the Indian Government has decided to square the circle of its previous disavowals of Bitcoin last year, and at the end of the day it is the disavowals that matter not the language in which they are delivered. This is no time to demand sackcloth and ashes as penance for past sins. It’s the repentance that matters.

We should celebrate what is likely to be a threshold moment in the subcontinent’s technological revolution that will change the way we will all do business in the future or, as the Garg Committee put it: “DLT will play a major role in ushering in the Digital Age” (and no, they don’t mean an ageing disc jockey: see above). In its unbridled enthusiasm, the Committee even went so far as to advise Financial Sector participants to consider investing in Blockchain Technologies as a platform for trade finance, credit provision and KYC (where they can take advantage of much reduced compliance costs). Plus ca change

However you phrase it, this is a Digital Revolution and India is leading the way.

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North Block Capital Fund is an open-ended fund that listed earlier this year as a platform for investment in developing Blockchain technology ventures and ICOs: primarily in India where Red Ribbon Asset Management has more than a decade’s experience of advising on the dynamic changes in this, the fastest growing and most exciting large economy in the world.

India’s consumer spending revolution

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In the dying days of his Empire, hemmed in by the generals who would shortly shuffle him off to obscurity (in the back of a Volkswagen), Haile Selassie tried one last throw of the dice: he would build a series of great dams across Ethiopia, each bigger than Egypt’s Aswan Dam and each speaking timelessly to his greatness, like the Great Pyramid and the Sphinx (had he never read Shelley?). But with a bravura born of the end of empire, as well as a shocking disregard for the famine raging in the north, his Finance Minister disagreed: “Egypt is wealthier than we are…it has more people than we do and they have more money”. The Finance Minister might have had appalling political instincts, but he was right about that single demographic truth: great economies and great projects are built on mighty populations, wealthy enough and willing to put their money where their dreams are.

Sadly for Haile Selassie (or probably not), the thinly populated and famine ravaged regions of Ethiopia had little if anything to dream about beyond food, and no interest at all in building dams.

Aside from the fact India’s Prime Minister Modi is a million miles away (in every way) from the former Emperor of Ethiopia, that story has a certain resonance with the subcontinent today, where the economy is growing at unprecedented rates borne up by a perfect demographic storm: India’s population is now the fastest-growing on the planet, wealthier than ever, increasingly urbanised and more than ever prepared to put their money behind the dream of a consumer-driven economic boom.

And we’re about to witness the full tectonic impact of these changes, changes which some commentators have called the Fourth Industrial Revolution: a radical realignment of India’s economy as it begins to accommodate to the reality of more than 300 Million new consumers, all of them getting ready to do some serious shopping.

In their report, The Future of Consumption in Fast-Growth Consumer Markets, Bain & Co forecast that by 2030 India will have experienced a fourfold increase in consumer spending, whilst at the same time remaining one of the youngest nations on earth with more than 700 Million youthful internet users, one hand on their smartphone and the other reaching for their credit card (a posture parents will be all too familiar with). But this is no teenage phase. Millennial and Generation Z preferences “will significantly shape the market” for the foreseeable future: 77% of Indians were born in the late 1980s, and that’s precisely the demographic already spending more and spending it faster than anyone else (think Flipkart).

And whereas in the past the subcontinent’s economy has been traditionally built from the “bottom-up”, that’s all set to change too: by 2030 close to 80% of Indian households will be middle class, as against 50% at the moment, so by definition they’ll have more money to spend. Forecasts expect the middle-class Indian segment to spend up to four times more on services and entertainment than they do at the moment: think Flipkart again, and imagine you had just been awarded a 400% pay rise, it’s that radical…

But perhaps most significantly of all, the Bain Report predicts companies on the subcontinent will now start to move beyond existing Western models to meet these trends: “localising and personalising business models” to address the unique preferences of the subcontinent’s consumers. India by 2030, it predicts, will be a “hotbed of growth and innovation”.

Who could argue with that? It’s certainly better than a load of old Dams…

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Nobody understands the fundamentals of the Indian economy better than Red Ribbon Asset Management, which has placed the subcontinent at the heart of its investment strategies since the company was founded more than a decade ago. Drawing on unrivalled knowledge of local markets with an expert team of more than a hundred advisers working in India’s economic hotspots, Red Ribbon offers unique opportunities to share in the potential of this, the fastest-growing large economy on the planet.                                                                                                               

Executive Overview

We tend to focus so much these days on supply-side economies (Brexit springs to mind, naturally, with its focus on real-time delivery logistics), so it’s sometimes easy to lose sight of the importance of the demand side of the equation. Even so, the economic impact of India’s rapidly changing population has been difficult to ignore.

Within a decade or so the subcontinent’s mostly rural population has become increasingly urbanized, wealthier and much more technology literate and by itself that is a perfect mix for creating the demand-side conditions necessary to sustain explosive growth within any developed economy. But in India’s case, that same population is also rapidly expanding (soon to be the biggest on earth) and also getting ever more youthful, meaning there will be an increasing propensity to spend across more and more people.

It is, as the article says, a “perfect storm” for growth and I for one will be keeping a close eye out for what comes next…

Right Time, Right Place… Innovation’s White Heat burns more brightly in India

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The Duke of Devonshire was at his wit’s end by 1874: what should he do with that box of old papers? They weren’t as interesting as his grandfather’s work on inflammable air (don’t ask) or how to weigh the earth, both of which had brought the old boy, Henry Cavendish, a certain measure of fame, but recycling bins were still a century off and the subject of the papers, electricity, was starting to interest the public. So with unusual prescience (for him) the Duke gave the box to James Clark Maxwell (foremost scientist of his day) and Maxwell was impressed enough to name a laboratory after Henry Cavendish: within forty-five short years, scientists working in a small back lane in Cambridge at the Cavendish Laboratory had untangled the mysteries of electromagnetism, isolated the neutron and the electron and in 1919 went the whole hog and split the atom.

The rest, as they say, is history…

It’s the equivalent of striking the first flint spark and going on to build a fully functioning internal combustion engine within half a lifetime, but that’s what scientific innovation is all about: chance decisions (like the Duke’s), resolute determination and, most of all, being in the right place at the right time.

And right now, according to the Global Innovation Index, the right place is Bangalore, Mumbai and India where innovation is running white hot. The subcontinent rocketed up the Global Index last year and currently ranks 15th in R&D Expenditure worldwide.

Francis Gurry, Director General of WIPO (which compiles the Index), had no doubt about the importance of the subcontinent’s Silicon Ghaatee: “India is now consistently ranked amongst the top countries in innovation worldwide” he gushed.

And when it comes to those other two Cavendish ingredients, chance decisions and resolute determination, well the Modi Administration might be short on the former (not being in the habit of leaving anything to chance) but they’re definitely long on resolute determination: having already worked remorselessly for years to make the subcontinent a Global Innovation Hub.

But don’t take WIPO’s word for it, or mine, take a look at the evidence: the Atal Innovation Project is already inspiring a culture of innovation and entrepreneurship across India with Atal labs dotted everywhere; the Mangalyaan mission to Mars saw India become the first Asian Nation to send a spacecraft into orbit around the red planet and, of course, Chandrayaan 2 is currently on its way to land an exploratory craft on the Moon: prompting Prime Minister Modi almost to burst with the pride and enthusiasm of a new father: “Indian scientists are second to none…they are the best. They are world-class”.

But who would be rash enough to disagree? After all, whatever our preferred holiday destination might be for Donald Trump and Boris Johnson, just how many US or UK spacecraft are currently on their way to the Moon? Does the UK even have a spacecraft?

Nobody understands the fundamentals of the Indian economy better than Red Ribbon Asset Management, which has placed the subcontinent at the heart of its investment strategies since the company was founded more than a decade ago. Drawing on unrivalled knowledge of local markets with an expert team of more than a hundred advisers working in India’s economic hotspots, Red Ribbon offers unique opportunities to share in the potential of this, the fastest-growing large economy on the planet.

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 Overview

As a proud Indian living in London I am delighted by the technological achievements India has made over the last few years, and landing a craft on the moon within the next month will make me prouder still. When I was young and growing up in India none of that seemed possible, and now we have a craft in orbit around Mars!

But the steady process of day to day innovation and development is important too, and it’s difficult to underestimate the sustained work Prime Minister Modi and his predecessor have both put into making India a Global Technology Hub: day by day and step by step, they have inexorably helped move the country towards a new, technology-based economy that is infinitely better suited for the new millennium.

It’s nice to see that those efforts too have now been recognised.

The Indian Economy outlook

By India, News No Comments

You’ve just scooped one of the bigger, life-changing Lottery prizes: millions beyond measure, and then catch breaking news that Donald Trump’s been struck mute and blocked from Twitter: but then Kwik Fit calls, your car has failed its MOT and needs new brake pads. How do you feel? Stricken with gloom because of the car or happy that everything else is better beyond compare? Of course, you’re happy …we take small setbacks in our stride when the world smiles. So how odd it was to read gloom-laden reactions to this month’s IMF Report that India’s 2020 growth forecast has been cut by 0.3% to a mere 7%. How odd, when GDP in the UK is projected to be 1.3% for the same year and Mr. Trump’s America will stumble along at 2%.

The economy will only expand by 7% in 2020…in the words of Kylie Minogue, we should be so lucky.

And then consider the reason given by the IMF for the “downgrade”: weakening domestic demand. This is India: the country with the fastest-growing population on the planet, increasingly affluent and increasingly switched onto the Internet’s newest consumer technologies (think Flipkart which now has a market capitalisation of $22 Billion). And assuming even an average boost from the projected 7% expansion of the subcontinent’s economy next year, these are trends are hardly likely to weaken.

Perhaps that’s why the IMF report also includes the surprisingly coy suggestion in its report that it expects “some of this to improve in the near term with a more accommodative monetary and fiscal policy on the part of the Indian Government”. It’s as though the IMF had put pen to paper before this month’s Union Budget but still correctly predicted what it would say because the Budget does indeed include significant monetary and fiscal initiatives on the part of the Modi Government: greater access to external savings that will ease pressure on domestic reserves and boost capital growth, increased use of public-private partnerships, an ambitious disinvestment programme and a fiscal deficit target set at 3.3% of GDP.

And added to all that, the Reserve Bank of India last month cut policy rates for the third time running: reducing the key rate by 25 basis points and altering its public stance on monetary policy from neutral to accommodating. Given inflation on the subcontinent came in at a lower than projected 3.18% in June, analysts are also expecting a further cut in rates at the next review scheduled for 7 August which means consumer spending trends are much more likely to strengthen than weaken over the medium term, whatever the IMF might think. Perhaps the Report’s author had just taken a call from Kwik Fit?

But for those still intent on scrambling in the dust for economic gloom, look north from the subcontinent to China: still enmeshed in its futile trade war with the United States following a further breakdown of bilateral talks in May. The United States has now increased tariffs on its imports from China to between 10% and 25% on $200 Billion worth of goods with threats of a further crippling $300 Billion to come. And, utterly predictably China, has responded with $60 Billion worth of its tariffs. Now that has to be unmitigated bad news…even if Donald Trump had lost his Twitter access.

Red Ribbon has been specialising in India’s Markets since the company was founded more than a decade ago, bringing unparalleled expertise to its investment policies on the subcontinent with specialist sectoral advisers working from it’s Head Office in London in conjunction with more than a hundred local experts on the ground in the subcontinent itself. And by drawing on that body of expertise it offers investors an opportunity to secure above market rate returns in this, the fastest-growing large economy in the World.

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Executive Overview

Like the author, I was surprised by the slightly gloomy reaction to this month’s IMF report which predicts economic growth for the subcontinent at more than four times the rate of the UK and more than double expected growth in the US next year. It’s certainly difficult to find any dark clouds in such an optimistic outlook and particularly difficult to pin them on India’s resurgent consumer markets which are now leading the world in so many sectors.

The recent Union Budget will, I’m sure, reinvigorate those markets still further so perhaps whoever wrote the Report should have waited a week or so before putting pen to paper…

Whatever the reasons, I’m sure the UK Treasury and the Fed in Washington would love to have GDP growing at ONLY 7% annually.

The Wolves of Wall Street aren’t coming to London…they’re heading for Mumbai

By India, News No Comments

Most people would accept their fate more stoically: but when Charles Yerkes was wiped out by the Great Chicago Fire of 1871 and then promptly convicted of public larceny, he blackmailed two prominent politicians and President Ulysses Grant pardoned him to keep his mouth shut. Yerkes walked free and went on to build the world’s largest telescope (1892), financed Chicago’s streetcar system (1895) and finally made it to London by 1900. Using methods suspiciously similar to those that got him in trouble in 1871, he built an underground railway line between Baker Street and Waterloo and called it …well, you know what he called it. The Railway Magazine from 1906 grumbled the Bakerloo Line was a “gutter name not to be expected from an English Railway Company”.

Not that Charles Yerkes could have cared less what the public thought: this is the man who told the judge at his trial that he lived by the maxim of “buying up old junk, fixing it up and dumping it on some other fellow” and modern-day commuters packed into his Bakerloo line might find that still has some resonance.

But bear with me, here’s the point: those Edwardian Londoners who objected to Yerkes’ gutter language in 1906 wouldn’t actually have known who to blame because his Bakerloo investment was made through nominee companies to stop it becoming public. By 1927 no fewer than 27% of listed UK companies were owned by American overseas interests, almost none of which were publicly disclosed because of the supposed taint attaching to this brash new brand of capitalism running rampant on Wall Street. British consumers and investors wanted their companies to be homegrown, home owned and home run: most of them would never know how wrong they were.

How things have changed.

Now we have entire Whitehall Departments devoted to drumming up foreign direct investment (FDI) and the wolves of Wall Street are more welcome than ever before, but efforts to attract them over have been stalling over recent years and often failing altogether. FDI into the UK has plummeted since 2016: falling 14% in the year to March 2019 alone, with a 29% decrease in related employment in key sectors including financial services and automotive manufacturing (infrastructure is even worse, dropping by a whopping 40%). And while UK inward investment has slumped equivalent returns for other EU states are showing a relative increase, which might give you a clue to the underlying reasons. It is, as you will have guessed, the “B” word.

Archer Howard, Chief Economic Adviser to the EY Item Club articulated the cause in sober and non-gutter language “foreign companies have become more cautious about investing in the UK due to Brexit uncertainties

Quite so…

Things are very different in India, where crucial FDI policies are starting to reap conspicuously handsome returns.

On the subcontinent FDI is already a major source of non-debt finance with key investment privileges and tax exemptions, not to mention lower wage structures, proving particularly attractive to overseas investors. Figures released by the Department for Promotion of Industry and Internal Trade reported last year’s FDI inflow into India at $ 44.37 Billion: $3.4 Billion of that from the United States, with Singapore coming top of the pack at $ 16.23 Billion. India also came out top on Commonwealth sourced FDI funding so it’s obviously spreading its net wide when it comes to attracting overseas investors, and that’s likely to remain the case for the foreseeable future given the Modi Government plans to secure $100 Billion FDI inflow over the course of the next two years with a range of initiatives including relaxed rules for e-commerce and telecoms enterprises and removal of prior government approval on real estate projects.

Of course, whether that would make it any easier for a modern-day Charles Yerkes to pitch up in Mumbai is, a different matter altogether…

Red Ribbon has been specialising in India’s Markets since the company was founded more than a decade ago, bringing unparalleled expertise to its investment policies on the subcontinent with specialist sectoral advisers working from it’s Head Office in London in conjunction with more than a hundred local experts on the ground in the subcontinent itself. And by drawing on that body of expertise it offers investors an opportunity to secure above market rate returns in this, the fastest-growing large economy in the World.

                                                                 

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Executive Overview

It’s impossible to overstate the importance FDI has for any modern economy, not least because it provides the sort of secure and resilient, non-debt based finance needed to sustain growth without repeated recourse to taxes and public borrowing. And of course India is the fastest-growing large economy on the planet so I’m not surprised to see it placing such an emphasis on FDI initiatives.

Tax concessions and administrative incentives have made the subcontinent a much more business-friendly environment for overseas investors over recent years and further concessions included in the recent Union Budget will now underpin and strengthen that trend.

That’s one of the reasons why I’m convinced there’s never been a better time to invest in India and take full advantage of the opportunities its markets have to offer.

Tales of Failure and Success, half a world apart

By India, News No Comments

Even a dead cat bounces, but the UK Construction Sector has very few feline attributes: according to Duncan Brook, Director of the Chartered Institute of Procurement and Supply, it is currently  “dropping like a stone” and last month saw its worst performance for more than a decade. Most contractors are predictably blaming it on Brexit but whatever the reason, new builds in the UK have now fallen to their lowest level for three years, orders are chronically delayed and as Mr Brook puts it with a sense of consummate understatement, large orders are suffering from “a lack of clarity that has amplified poor performance…Something is needed to pull the construction sector out of the quicksand”.

At least we know where to look for the cat…its probably in the quicksand.

But things couldn’t be more different in India: over the last three years the Cement Index has delivered positive returns of 22% and the Construction Index has grown by 48.9%: with both likely to be boosted by the eye watering infrastructure investment plans announced in last month’s Union Budget where the Government committed itself to building eight million new homes over the next five years (more than half of which are already under construction) and has two Million more planned for the subcontinent’s rural areas over the same period.

Seeming to signal the importance he attaches (rightly) to stewardhip of India’s explosive growth over recent years, Prime Minister Modi has taken charge of the Cabinet Committee on Economic Affairs which last week green lighted an initial investment of £1.8 Billion in the Dibang Dam Project: the largest ever hydro electric initiative on the subcontinent, expected to generate 2880 MW by way of much needed energy resources. Compare that with Hinkley Point in the United Kingdom where financing has still to be completed nearly ten years after the project was announced with short term construction costs being paid by EDF (at double the cost the UK Government would have paid had it borrowed the money at market rates).

And this surge tide of activity driving India’s economy is inevitably making its presence felt too in the subcontinent’s capital markets: Annai Infra Developers has just received clearance from SEBI for an IPO with a market cap of £26 Million and it’s companies like Annai that are quite literally building on the demographic trends at play on the subcontinent at the moment, where what will soon be the most populous country in the world is becoming increasingly urbanised, increasingly wealthy and increasingly hungry for property.

Modulex Construction is the World’s largest and India’s first Steel Modular Building Company, working to meet the challenge of the subcontinent’s urban housing shortages in a practical and focussed manner. It was established to harness the potential of India’s dynamic and fast evolving markets and to deliver opportunities for investors: because, when it comes to investing on the subcontinent, nobody knows the subcontinent’s markets like Red Ribbon.

                                                                 Find out more about Modulex

Executive Overview

It’s impossible to underestimate the sheer scale of the challenge currently facing India’s real estate markets, so I’m not surprised the reinvigorated Modi Administration has put infrastructure and construction at the heart of the recent Union Budget.

Slowly but surely the subcontinent is building its way to the head of the economic top table, and it’s measures like these that will get it there all the faster.

A Union Budget for Growth… Investing in India has never made more sense.

By India, News No Comments

The London based Institute of Chartered Accountants, obviously knowing a thing or two about balancing books and cooking up growth, ruffled a few feathers in Whitehall recently by criticising the Government for failing to invest in the regions, failing to invest in transport, failing to deliver fibre optic connectivity and allowing major public infrastructure projects to fall into stasis. Talk about kicking someone when they’re down, but it’s hard to disagree: especially with Hinkley Point still clutching at its footings ten years after commissioning, road, rail and utility networks creaking at the seams and public investment at an all time low.

But half a world away in India, things couldn’t be more different. This year’s Union Budget included a $125 Trillion, five-year splurge on infrastructure investment and just to put it in perspective, that’s enough to give every man, woman and child in the United Kingdom £1,515 to buy half a Virgin annual season ticket from Liverpool to Manchester. And, as ever, the Modi Administration hasn’t been short on ambition when it comes to spending these breathtaking sums.

For a start there are plans to make India a hub for Aircraft Finance and Leasing with new International Financial Service areas and Special Economic Zones; more urban Metro Rail initiatives, more gas grid works (expect more pavements dug up in Mumbai): more water networks and i-ways and much needed airports for the regions.

And even though India already has one of the world’s most extensive road networks, covering 5.5 Million kilometres with more than 10,000 kilometres added in 2017-18 alone, the Union Budget also includes plans to build a further 125,000 kilometres over the next five years (as well as opening up waterways to alleviate road congestion). India’s Highways and Transport Minister, Nitin Gadkari, said the subcontinent’s roads were the “country’s assets” and this Budget emphatically put its money where his mouth is.

And to put that in perspective, the United Kingdom currently has a total of 394,000 kilometres of roads and will have built just 643 kilometres of new highways between 2015 and 2020: assuming, as Costain recently found to its cost, that most of these aren’t cancelled.

Under the Union Budget provisions, Foreign Portfolio Investors will also be able to subscribe for listed debt securities issued by ReITs and as part of a program to encourage trade and give a boost to the Make in India Campaign, customs duties are being flattened on a range of goods including tiles, vinyl flooring and CCTV cameras.

The South Indian Chamber of Commence President called it “a transformational and forward looking Budget”…And he’s right, what’s not to like about it?

Nobody understands the fundamentals of the Indian economy better than Red Ribbon Asset Management, which has placed the subcontinent at the heart of its investment strategies since the company was founded more than a decade ago. Drawing on an unrivalled knowledge of local markets with an expert team of more than a hundred advisers working in India’s economic hotspots we look to explore opportunities to share in the potential of this, the fastest growing large economy on the planet.

                                                                 View our investment products

Executive Overview

Infrastructure investment is the key turbo charger of all modern economies, and by that standard India has certainly taken its place at the global top table.

The sums announced in last month’s Union Budget are simply staggering and I have no doubt they will now give added impetus to the explosive growth we have seen in the subcontinent’s real estate markets over recent years.

Affordable housing and slum redevelopment

By Archive, India, News No Comments

Slum dwellings across India’s urbanised areas have been around for as long as many can remember, growing up alongside wealthy parts of the city as the low paid workforce required to keep those cities working, struggled to find somewhere affordable to live. Indeed, in a country with a population of 1.37 billion, according to the latest UN figures, at least around a quarter of the urban population are living in slums, many of whom don’t have reliable access to sanitation, electricity or homes that are safe to live in.

Recent fires in neighbouring Bangladesh, in the capital city and a coastal slum area, highlight the problems of slum dwellings and the dangers they pose to those living in them and the surrounding areas, too.

In recent years, a number of ways to improve or even remove the slums of the Indian sub-continent, have been discussed. One previously popular way to modify India’s – and other countries’ – slums, was to remove them completely, bulldoze them out of existence. However, while this method does eradicate many of the issues that arise with slum developments, it also displaces everyone who lives in them.

After assessing different approaches to solving the problem of slum areas, which has gained in importance amid the increasingly rapid urbanisation of India, two answers have proven popular enough to take forward. They are:

  • Improve existing slum areas, without displacing those existing households and eradicating their investment.
  • Find ways to build affordable housing across India’s cities for lower income households to live in.

With those solutions now being formalised by the Government, the next step is to find a way to finance these methods, in order to achieve the target of creating affordable housing for the entire population by 2022.  

PPP and affordable housing

Among the ways in which India is seeking to provide enough affordable and safe housing for its growing urban populations, is through Public Private Partnerships (PPP). As the value of land is high in cities and nearby urban areas and can account for up to 60% of the total cost of housing developments, the Government has sought a way to lower the cost of urban real estate. They do this by allocating a proportion of publicly owned land to be developed by private companies and investors.

This vehicle has been created to encourage private real-estate investors, who previously have predominantly favoured higher income developments, to take an interest in India’s affordable housing sector. The potential rewards are three-fold:

  • Affordable and safe housing in the right areas, for India’s fast-developing urbanisation.
  • The beginning of the end of the growth of slum areas in urban regions.
  • Reliable and attractive returns for investors.

There are a number of ways in which this works financially for investors, all of which result in a notable increase in affordable housing across the areas of India in which it’s required.

Coupled with the improvements to investing and doing business in the country, the option of affordable housing and real-estate as an investment vehicle is one that is beginning to appeal to a growing proportion of investors. Both from overseas and within the country, too.

How to access India’s affordable real estate investment opportunities

Of course, knowing about and understanding the real-estate opportunities in a country whose population is undergoing a fast and significant change, is one thing. Accessing those opportunities in a secure and moderated fashion is quite another.

However, doing business in India has become easier, more transparent and accessible to all kinds of investors. Among the ways in which investors can benefit from the opportunities in India’s real estate sector, is through Funds specifically created for the purpose.

According to data from JLL, the value of investment grade, real estate projects under construction, has risen from $173.9 billion in the fourth quarter of 2012, to $242.6 billion in the second quarter of 2018. That number doesn’t take into account future options, plans or approved, shovel ready projects.

Red Ribbon will soon launch its own Indian Real-Estate Fund, to bring investment access into the sector to those investors interested in diversifying their portfolios with something that will benefit from Government support and help provide a solution to a real need from the existing and changing population.

As with all of Red Ribbon’s asset management options, sustainability, eco friendly and broadly beneficial outcomes form the basis of most of the assets that make up the Fund. Providing affordable and sustainable properties for the millions of people moving from rural to urban living is a challenge that can be met, provided every investor in Indian real estate takes it into consideration.

 

Red Ribbon CEO, Suchit Punnose said:

India’s Government has shown real willing to support the rapid urbanisation of the country and encourage a country in which investors can feel confident in doing business, both from a transparency and prospective returns, perspective. Red Ribbon is proud to be the forefront of supporting an economy that is of major importance on a global scale, while working to create a country with real prospects that future generations can enjoy and reap the benefits from.

Our Indian Real Estate Fund will help provide affordable and sustainable homes for the millions of people moving from one way of life to another. It also gives investors the chance to create a well-balanced investment portfolio, with exposure to a growing and developing economy.

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Modular Construction

Saving Time, Money and the Environment through Modular Construction

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Saving Time, Money and the Environment through Modular Construction

Modular construction methods are often hailed as a more cost-effective option, but that’s far from the only benefit pre-fabricated buildings can have. We take you through how modular construction firms can save on time, the environment and money, while also delivering a return on investment many would be happy to receive.

It’s no secret that global real-estate related costs are rising. The value of property is broadly on the up. Meanwhile, the cost of materials is also climbing, while skilled construction professionals are becoming more scarce, pushing their value up, too. But there is a solution to this problem: modular construction.

Just like many other countries, across India, many people still have a dream of owning their own home. However, with more people moving into urban areas of the country from the rural regions, that’s not always an easy achievement, even for those with stable, well-paid jobs. Indeed, research suggests some 110 million additional housing units will be required by 2022. That’s a tall order and once that is simply unachievable through traditional construction methods alone.

However, major advances in modular construction techniques mean homes can be built quickly, in an environmentally friendly way, while also proving a more cost-effective option.

Saving you time and money

Much scepticism remains over how reliable and practical modular construction techniques are. Although, there are signs the opinion of the sector is improving as more businesses opt for it over traditional building methods.

One major factor that’s encouraging more businesses and home-buyers to choose a modular property is time. Once you gain permission, finalise plans and pay deposits, the fabrication of a modular building is much quicker than one constructed on site, in a more traditional manner.

That’s because templates and machinery in an established and regulated factory can create the specified shell of your building quickly and to approved safety standards.

Once those elements of the building, be it a home, a commercial office or even a hotel, are created, it’s then checked and verified through a reliable, tech-based system. This ensures all the required parts are there, of the right size and structure and are ready to be transported to the previously prepared building site.

This is where the costs savings come into play. Where a traditionally built property can require up to hundreds of on-site construction professionals to build up walls, ensure measurements are perfect and all the materials are as they should be, a pre-fabricated construction team is typically much smaller. That smaller team will also need much less time on site to construct the unit and ensure its safely in situ as planned, ready for the next step.

Again, with so much of the required works already done, the modular building requires only a little additional work on site, before the owner can get to work on the inside and make it habitable.

This means that while the cost of the materials used to construct a modular building aren’t particularly cheaper than for any other property, costs are saved through the shorter period of time skilled construction professionals are required on site. Meanwhile, the requirement of fewer construction professionals is also a financial benefit.

Environmental benefits

We then move onto the environmental benefits of the modular construction sector. First of all, the question of sustainability is one the massive global construction sector is increasingly being asked to answer:

  • Are the chosen materials sustainable, eco-friendly and long-lasting?
  • Can the pre-fab factories use sustainable energy sources?
  • Are the pre-fab factories sustainable and energy efficient?
  • Can they construct increasingly eco-friendly modular homes off-site?    

These are just a few details that require a positive answer from those modular construction companies who are beginning to gain support, momentum and business across India.

Modulex Modular Buildings PLC is one modular construction firm that can answer in the affirmative to the above questions and many more. It’s the world’s largest and India’s first, steel modular building factory.

Like all Red Ribbon investment projects, Modulex was created with three essential pillars of sustainability in mind:  Planet, People and Profit.

At a time when we need to find more economical ways of providing everything the huge population of India needs, in a way that protects their environment, while also delivering on profit to the investors who support those businesses, Modulex delivers on all three and is well-placed to do so for many years to come.

Red Ribbon CEO, Suchit Punnose said:

India’s Modular Construction market is expected to be worth close to $130 billion by 2023 and at Red Ribbon we think its imperative that as much of the growing industry as possible, is created with sustainability in mind, from the outset.

Providing the answers to India’s housing and construction needs is one thing, but doing it in a way that future generations can benefit from it on multiple levels, is something every investor in the industry should aspire to. That’s why we support Modulex and strive to ensure its green credentials can match its productivity and investor returns.

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Red Ribbon

At Red Ribbon we understand that the transition towards a resilient global economy will be led by well-governed businesses in mainstream markets, striving to reduce the environmental impact of their production processes on society at large and on the environment as well.

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