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Why India is still on track

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As Philip Hammond is about to find out, the end for any Chancellor of the Exchequer is rarely other than nasty, sharp and brutal. When Hugh Dalton was sacked for leaking budget information to the Standard (of all papers), Clement Attlee got rid of the grand old man of the party with a shrugged “not up to the job”. And when Norman Lamont went prematurely French while sterling crashed out of the ERM in 1992, he quickly found out that far from having “rien” to worry about he actually had plenty to “regrette”. He was out on his ear in days. So the lengthening shadow of Boris outside Downing Street is, indeed, plenty for Mr Hammond to worry about.

Of course politics on the subcontinent can be equally nasty and brutish and we saw some of that in this year’s election, but India’s Prime Minister hasn’t had a Chancellor of the Exchequer to kick out since 1947 (a certain Hugh Dalton as it happened, ironically enough) and nowadays Nardendra Modi doesn’t even have to drive to the Palace so think of the savings in petrol. In truth, India’s State Finance structures have changed beyond all recognition since the Raj retreated to Whitehall.

For a start, The Chancellor of the Exchequer is now the Finance Minister and he is now a she. The redoubtable Nirmala Sitharaman ditched the colonial red box in favour of a red “bahi-khati” or “ledger book”, which sounds a much more professional accessory for this very modern Minister, tasked with stewarding the finances of the world’s fastest growing large economy. The Chief Economic Adviser, Krishnamurthy Subramanian, went even further, claiming the new look ledger symbolises India’s “departure from the slavery of Western thought”.

And the first Union Budget of the new Modi Administration wasn’t short on radical departures either.

Looking to kick start a growth rate of 7% GDP that Philip Hammond would die for, the Finance Minister has introduced cuts in corporate tax rates, provided improved support for digital payment systems (that will make life easier for small businesses) and additional tax breaks for the Real Estate sector.

That last one, Real Estate, has of course become something of a totemic theme for Modi’s Government and there will now be a slew of new tax incentives as part of the Affordable Housing Programme: additional interest deductions on loan payments, stamp duty breaks, a realignment of the definition of “affordable housing” itself to conform with GST and income tax legislation and a new model Tenancy Law to encourage rentals. Conditions relating to tax exemptions for long-term capital gains on property have also been relaxed…and the list goes on…

So it’s obvious if only from the focus given to it in the Budget, that Prime Minister Modi’s Government will continue to pay close attention to the subcontinent’s real estate markets for the foreseeable future: given the exponential growth and increasing urbanisation of India’s population that’s certainly not a surprise, with these trends only likely to increase in significance over the coming years it’s hardly an area the Government can afford to ignore.

And unlike India’s last Chancellor of the Exchequer, Nirmala Sitharaman has shown on her first major public outing in the role that she’s certainly up to the job…

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, Red Ribbon offers unique opportunities to share in the potential of this, the fastest growing large economy on the planet.

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Executive Overview

I was pleased to read the terms of the Union Budget that struck me as setting exactly the right tone for the new Administration: continuing where they left off before this year’s elections and with an added focus on critical areas like housing and real estate generally. I feel sure that with this drive and determination the new Modi Government will be more than capable of rising to meet the challenges and opportunities the subcontinent’s real estate sector has to offer.

Here at Red Ribbon we’ll certainly be keeping a close eye on what comes next…

From Cannonballs to E-Mails… The next leap forward is Blockchain

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Like a lot of tourists, Walter Raleigh brought cigarettes back from America but he came home too with a simple if quirky question: what’s the best way of stacking cannonballs in a crate, in flat sections or pyramid fashion? It puzzled the best minds of his day (and beyond), before the astronomer Johannes Kepler explained why it had to be the pyramid. And, believe it or not, we wouldn’t have e-mails today without his solution: the so-called Kepler Conjecture is the founding father of e-mail traffic and proof, if proof be needed, that science develops in odd and wonderful ways. Nobody today is surprised that radio waves are used to carry wireless Internet signals, and not just carry news read by some fellow in a dinner suit. But what did Marconi know about the Internet?

Which makes it all the odder that so many of us still treat Blockchain as synonymous with Bitcoin: true, they might have grown up together but in truth Blockchain and Bitcoin have about as much in common as cannonballs and e-mails, or WLAN and dinner suits come to that. When did you last see an IT technician in anything other than a tee shirt?

So take, by way of example, the latest Blockchain initiatives that are now being developed in India, now the technology’s spiritual and regulatory home.

The subcontinent’s Healthcare Sector has advanced plans to use Blockchain to prevent and detect counterfeit drug production, create new anti tampering capabilities during the manufacturing process as well as to introduce improved accountability and transparency in clinical testing. Market leaders in the sector are also bringing closer the very real prospect of patient generated data empowered by Blockchain: and not a Bitcoin in sight.

And in the Financial Sector YES Bank has launched the first ever Issue of Commercial Paper using a Blockchain platform (on behalf of Vendata, with a market value of $14.6 Million): as a result of technologies used on the Issue, subscribers will now benefit from reduced issuance and turnaround times, better record keeping, reduced operational risk and real time visibility of issue and redemption numbers. What’s not to like?

And again, not a Bitcoin in sight…

Blockchain’s virtually untrammelled potential is breathtaking: the co-founder of the Blockchain India Foundation, Manav Singhal, described it as the “future of technology itself” and who in the circumstances would be rash enough to disagree with him?

Certainly not the Indian Government, which has not only given the green light for a new regulatory regime designed to nurture Blockchain’s growth on the subcontinent (the so called Regulatory Sandbox which we covered on this site last month), but has also unveiled in last week’s Union Budget a vision for a $5 trillion economy built on digital technologies that have Blockchain at their heart.

The Budget puts its money where its mouth is too, with new digital payment structures, a dedicated online portal for processing (and approving) loans to medium and small enterprises and a reinvigorated focus on so-called “new age skills”, including the internet of things, big data and AI. Enigmatically, the Budget also included funding for a new electronic fundraising platform: a Social Stock Exchange that will nurture and list new “socially based” commercial enterprises.

Blockchain is a vital component in all of that, so in future let’s try to make a real distinction between the Cannonballs and the E-Mails, the bow ties and the WLAN: after all, as Kepler might nearly have said, the box is never any bigger than our collective imagination.

                                                                                                                                                                                                 

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North Block Capital Fund is an open ended fund which acts 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.

Executive Overview

I firmly believe in the vast potential Blockchain has to change the way we all do business, so it was interesting to see the innovative uses Indian Healthcare is planning to make of these technologies by creating safer drug production methods and additional efficiencies within the sector. And of course, as someone who has grown up in the financial sector, I was also fascinated to hear news of the first ever Blockchain supported Issue of Commercial Paper, which I am sure will act as a further catalyst to speed up change in the future.

As an Indian national, I’m obviously proud too of the increasing role the subcontinent is taking in shepherding these new technologies forward.

These are truly exciting times, filled with opportunities for our investors and I can’t wait to see what happens next.

Blockchain… it’s never been easier to predict its future in India’s financial markets

By India, News No Comments

The iPhone will get no significant market share…no chance”: step forward Steve Ballmer, former CEO of Microsoft and creator of quite possibly the worst market prediction ever. But it’s not by any means a walkover: Mr Ballmer has stiff competition from Alex Allen, the senior policy adviser who warned John Major in 1996 that ”e-mail will never catch on”. Mystic Alex was also concerned about the prospect of any old Tom, Dick and Harry being able to reply the Prime Minister at will, so he was “cautious about rushing into it”. And when they fired up the first transatlantic phone line between London and New York in 1926, one mutton headed stockbroker predicted it might result in two or three extra trades a day, but things would muddle along more or less as they were, with chalk boards and boys rushing around with messages in cleft sticks. Three years later Wall Street crashed…and stockbrokers have been extinct since 1986.

But the future isn’t always so hard to predict: India is currently shaping international financial markets with commendable transparency.

The snappily named Institute for Development and Research in Banking Technology (IDRBT), a division of the Reserve Bank of India, announced last week that it is developing a model Blockchain platform for use in the subcontinent’s banking sector. The new system is expected to go live early next year and will host a full spectrum of Blockchain applications capable of engaging with each other, something the sector has so far avoided despite its obvious appetite for and recognition of Blockchain’s potential.

And although the IDRBT has counselled “a cautious approach”, fresh initiatives are rapidly being set in train to push things along even faster, as exemplified by the vigour of India’s Fintech Forum. IDRBT’s Director, AS Ramasastri, certainly isn’t taking any Steve Ballmer style risks: “The dialogue is on and we are expecting good outcomes…India’s Fintech companies are rapidly accelerating and reshaping the financial services industry”: and they’re going to be doing it with improved cyber security, improved analytics, better payment systems and, most of all…with Blockchain. The Fintech Forum will play a central part in this by establishing a platform for continuous innovation.

And if that all sounds like complex systems and vague aspirations, take another look: the entire process is being overseen by one of the world’s biggest and most important regulators, and even if the agency it has chosen to front it all has an ugly and easily forgettable acronym on its brass plate, what does that matter? Even the best looking kid can have an ugly name and no other country in the world has seen a regulator of this stature taking an active and focused role in shaping our shared financial future.

So we can forgive it the faltering start, the Reserve Bank of India is obviously keenly aware of the central role Blockchain will play in that future.

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North Block Capital Fund is structured specifically to make the most of the exciting opportunities India has to offer, launching in Blockchain DLT and Crypto Currencies. It draws specifically on the company’s unparalleled expertise in the subcontinent’s markets because when it comes to India, nobody understands those markets better than Red Ribbon.

Executive Overview

As I have previously observed on this site, there is every reason to believe the governmental and regulatory changes in India will shortly make the subcontinent the Blockchain capital of the world: all the time, new technologies and systems are being put in place which are steadily (but inevitably) placing Blockchain at the heart of the subcontinent’s digital economy, and unlike anywhere else in the world India’s regulator is showing a serious appetite to take on the challenges and manage the opportunities this presents for global markets.

I have no doubt the key innovations Blockchain has to offer will fundamentally change the way we all do business in the future and I’m proud Red Ribbon’s Crypto Fund will be part of that.

Is Costain the next Carillion?

By India, News No Comments

In 1865 Richard Costain persuaded his brother in law to take the boat to Liverpool, setting up business as jobbing builders and undertakers, and the company they founded went on to build Mulberry Harbours for D Day, assembled the largest dredging fleet ever to create acres of new land for Hong Kong Airport and was a founder member of the Channel Tunnel Consortium. Unhappily, history doesn’t record what happened to the undertaking business, but we can probably assume it was less successful…or at least we could until last week. Shares in Costain collapsed last Friday by 35% following news that the HS2 southern section will be delayed (again), as will the M6 smart project and a new road system in Preston. It’s all beginning to sound a bit Carillion: yet another ratcheting up of the seemingly unstoppable malaise affecting UK infrastructure projects.

Costain might now be regretting its dependence on the UK sector which would be ironic not only because it was a key player at Hong Kong Airport, but also in a string of prestigious projects across the globe, including the Amlohri Mine redevelopment in Northern India. This involvement by a British company at Amlohri also seems particularly ironic now given the disparity between the UK (with its record of projects being pulled, cancelled or delayed) and India’s vibrant, homegrown construction sector.

Construction is second only to agriculture as the largest employer on the subcontinent, and in a sector that was once dominated by small, barely regulated entities, there has been a marked shift towards consolidation: just the kind of consolidation that would have warmed the cockles of Richard Costain’s heart. And a major factor behind this was 2017’s Goods and Services Tax (GST), widely seen as having disrupted smaller (and all too often shadier) sector participants: the new system of reverse charging in particular means tax is now charged upfront to the client and collected by the contractor, but only if the contractor is state registered. Smaller, unregistered companies now have to leave it to the customer to record and pay GST and with rates on cement (still the crucial construction material) currently running at 28%, that’s on any basis an accounting and cashflow headache the client can do without. So they’re turning to better regulated, more compliant (and usually bigger) companies to do their work for them.

And given the extraordinary growth of construction on the subcontinent, reflecting an increasingly urbanised and rapidly expanding population, this kind of regulatory and market stability has to be a good thing: it provides a solid and stable base for further growth, as well as a platform for the technologies required to deliver more buildings at the dizzying rate India demands: technologies like modular construction and lightweight steel structures.

Modulex Construction is the World’s largest and India’s first Steel Modular Building Company, working to meet the challenges of the subcontinent’s construction boom in a practical and focused manner.

                                                          

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Executive Overview

We’ve definitely seen a seismic shift in the global balance of infrastructure and construction power: I think we’ve all sensed it, and the reasons aren’t hard to find.

India now has the fastest growing population on the planet and will soon have the biggest population in absolute terms too (overtaking China). Added to that the subcontinent is going through an unprecedented process of urbanisation, all of which requires more homes and buildings to be delivered at a rate never seen before in the country’s history (or any other country’s come to that).

Prime Minister Modi’s government has responded by securing regulatory and compliance structures like never before, consolidating markets and supporting structured corporate growth. But when it comes to construction, bigger and more reliable businesses won’t be enough by themselves because traditional building technologies just can’t cope with the sheer scale and pace of delivery required. That’s why innovative techniques like modular construction will always be part of the solution.

I expect Mr Costain would have agreed…

The Subcontinent’s Soft Growth Revolution…More Water and less Smoke

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Think Economic Growth and most of us conjure up images of thundering Turbines and Power Stations belching out smoke, but Growth comes softly too: and nowhere is that better illustrated than India’s Tourism Sector, which this year contributed more than 9% to GDP and created 42 Million jobs across the subcontinent (8.1% of the total workforce). And that’s not all: Indian Tourism is projected to grow by more than 6.9% annually over the next decade, with more than 13 Million visitors last year and a projected turnover of $800 Million in 2019. It may not conjure up such graphic images, but Soft Growth can be just as lucrative and long lasting as its smoke belching cousin. Even so, and with economic expansion on this scale, Soft Growth can also come with a hefty price tag.

Take Tamil Nadu for instance, where an estimated 8000 hotels of various sizes and qualities between them require a minimum of 150,000 litres of water a day to stay in business, mostly doled out each day by privately operated water trucks ponderously circulating the area. But water, of course, is one of India’s most precious commodities and it became even more precious in Tamil Nadu last month when a severe drought imposed potentially catastrophic stresses on Chennai’s hospitality sector. All those water trucks have suddenly become scarcer (and more expensive) downtown and almost non-existent in the City’s suburbs.

The CMD of Empee Hotels, MP Purushothaman, put the case for economic survival with characteristic bluntness: “Hotels are managing somehow but only by paying more than double for water. It will be difficult to continue much longer if the dry spell continues”. And Empee Hotels is certainly not a peripheral player: it owns the Hilton Hotel in Chennai. If they’re struggling, others will be struggling too.

Restaurants in Tamil Nadu had started to use banana leaves rather than plates to save water: but even the leaves are now in short supply because of water shortages.

Faced with localised events of this extremity, we can’t help but recognise just how valuable and precious our natural resources can be. Eight thousand hotels sucking up water like a sponge can be just as damaging as a power station belching carbon dioxide into the atmosphere. And that’s why hotel groups with more robust and long term business plans are now looking to operate from much leaner resource platforms: hotels like Eco Hotels and Lemon Tree Hotels, with their innovative low burn models are not only greener and more environmentally friendly, but Green Hotels mean lower operating costs and bottom line liabilities too, plus a higher return on investment than their resource hungry counterparts.

And that, in a nutshell, is why Green Hotels are more popular than ever before on the subcontinent and look set to become an integral part of the Soft Growth Revolution.

Bad news for all those water trucks…

Red Ribbon is the founder of Eco Hotels, the world’s first carbon neutral hotel brand which offers “green hospitality” as part of a progressive roll out across India designed to take advantage of current market opportunities on the subcontinent. The brand meets all key sustainability criteria without compromising on either quality or standards of hospitality and is designed to cater for commercial and recreational travellers alike.

Executive Overview

Nobody can now seriously doubt the future economic importance of Soft Growth on the Subcontinent, and India’s Tourism and Hospitality Sector is a striking example of the phenomenon. Currently contributing nearly 10% of GDP Growth annually, Tourism and Hospitality deserve just as much attention as the most imposing infrastructure projects. That’s why Green Credentials are so important.

As an integral part of any serious and sustainable long term economic planning we can no longer afford to ignore the impact of Soft Growth on the environment, any more than we can ignore its Hard variant: India’s precious water supplies are just as important to our shared future as our clean air.

To deliver properly on these imperatives, hotels across the world now have to be constructed with eco compliance built into their DNA, part of the original design and central to the whole project from the ground up. Only in this way will cost savings and sustainability come together properly and deliver the range of benefits mentioned in the article.

I’m proud that Eco Hotels have done just that from the very beginning and proud too of the part Red Ribbon has played in developing the project and its ambitions over the last decade or so, spearheading an environmentally friendly response that also makes good business sense for our investors.

Safe as Houses: It’s the fundamentals that matter and India has got them right

Safe as Houses: It’s the fundamentals that matter and India has got them right

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Safe as Houses? Not quite. Even without the market shredding impact of America’s Sub Prime crisis of the last decade, house prices had fallen in the United Kingdom by 18% between 1989 and 1995 (in London the fall was closer to 37%), and in Japan prices fell by more than 60% between 1990 and 2000: between 1987 and 2007, the S&P Index in the States rose by more than 500%, compared with a 200% growth in US real estate. And of course, the seemingly overwhelming case for equities over bricks and mortar during this turbulent twenty-year period wasn’t hard to explain. The United States, in common with most western economies, was riding high(ish) on a tide of acronyms, CDOs and CDSs, not to mention the sliced and diced (and dodgy) mortgage portfolios taken to market with a guaranteed AAA rating.

The lesson for Real Estate markets across the globe is, equally obviously, straightforward: look beyond the froth and examine the fundamentals…examine them closely and examine them carefully.

So when it comes to India, and despite some low voltage gloom earlier this year in the run up to the elections, the fundamentals of the Real Estate Market couldn’t be looking better. Even India’s acronyms are more encouraging: RERA and GST represent massively significant policy initiatives from the Modi Government that have, if anything, strengthened the sector’s fundamentals. But most of all, demand for real estate on the subcontinent is running at a high because it reflects the economic realities of the fastest growing large economy in the world, with a burgeoning and increasingly urbanised population looking for affordable (and, for some, not so affordable) homes among India’s rapidly expanding conurbations.

And that’s not froth…it’s hard, crystalline fact.

In New Delhi last week, the City’s Development Authority (DDA), received more than 50,000 applications for funding under its Housing Scheme, with some Rs 570 Crore, or nearly $82 Million, having been collected by sponsoring banks (it seems it would have been more but for a certain bureaucratic ineptness among the banks involved, which is also something of a global phenomenon over recent years).

The DDA will shortly draw lots to select those applicants who are lucky enough to be allocated flats, but the number of properties on offer is barely a third of the overall subscription (17,922) and that is a striking testament to the continuing strength of the market at large: after all, in a parallel world, any IPO that was three times oversubscribed would see an immediate jump in the underlying share value. In New Delhi today, we are witnessing an unmistakable bellwether for future real estate growth.

Then, of course, there is that other important acronym to consider, NRI: the Non Resident Indian.

Historically Indian Real Estate had been at the top of the wish list of most NRIs looking to invest in the subcontinent, but delays in construction (not to mention a few high profile, fly by night developers) had dampened this demand significantly.

But that all changed with RERA (the Real Estate (Regulation and Development) Act 2016): key legislation which gave enhanced protection for those purchasing properties under construction, with the result that more and more NRIs (as well as, of course, domestic buyers), have steadily moved back into Indian Real Estate. So too, GST (the ground breaking new Goods and Services Tax) reduced the tax payable on newly constructed properties from 12% to 5% (1% for those covered by the Affordable Housing Programme) and Investors haven’t been slow to see the opportunities.

Added to all that, a stronger Dollar has also turbo charged levels of NRI interest, with Housing and Makaan.com reporting an increase from 30% to 40% in NRI leads last year, and those NRIs based in the UK, US, UAE and Singapore between them now account for 55% of real estate purchases in India.

Yet another bellwether for future growth: more real world facts that make for more attractive fundamentals (and with only three acronyms in sight).

Modulex Construction is the World’s largest and India’s first Steel Modular Building Company, setting out to meet the challenges posed by India’s urban housing shortages in a practical and dynamic manner. The company is at the heart of a project established by Red Ribbon to harness the potential of India’s real estate markets and deliver added opportunities for investors. Because, when it comes to investing on the subcontinent, nobody knows India and its markets better than Red Ribbon.

 

Executive Overview

I for one have never found it surprising that with such an increasingly mobile, increasingly affluent and rapidly expanding population, India is creating one of the most buoyant real estate markets in the world: almost by definition, a mobile and much more urbanised population will difficult to keep still.

And that, in essence, is what I think makes the subcontinent’s property markets so different from their Western counterparts: the fundamentals of demand are not artificially created at the desk of an investment banker in Manhattan, they are real people looking in ever increasing numbers for real (and affordable) homes.

That’s why Red Ribbon has been committed to Modulex Construction from the very beginning of the project, and why we remain committed to the project today. I’m convinced its innovative technologies are a vital answer to the challenges created by these extraordinary markets: a practical and cost effective solution for the extraordinary times we live in.

Why Donald Trump’s Twitters mean more Infrastructure Investment in India…and soon

Why Donald Trump’s Twitters mean more Infrastructure Investment in India…and soon

By Archive, India, News No Comments

There’s a good reason why global financial markets responded so positively to last month’s landslide BJP win in India, and it’s called Donald Trump: the President’s announcement of a 25% tariff on steel imports last year, with 10% on aluminium and an increasingly bitter trade war with China has sparked a worldwide economic slowdown. Mr Trump might think “trade wars are good and easy to win”, but he’s in a small minority because most of the engaged world dislikes nakedly protectionist policies for good reason: because they’re bad for global trade and worse for market stability.

Which brings to the new Modi Administration. Financial Markets have responded positively to BJP’s return to Government on the subcontinent precisely because of the lengthy period of stability it heralds in an increasingly unstable world (take note Theresa May), added to which, unlike Donald Trump, Mr Modi has already earned his economic spurs through a series of groundbreaking market reforms that have improved India’s global economic standing: rising from tenth in the world to third in just four years on Cebr rankings. And the financial markets aren’t slow to catch on either: since January of this year, the Bombay Stock Exchange Sensex Index has risen by 7%.

But there’s a snag, in this sea of global turbulence India’s very stability and growth means more that than ever before the subcontinent needs to fuel its domestic markets to become less dependant on imports.

It’s not a lesson lost on Modi.

The BJP Manifesto for this year’s election included spending pledges of $ 1.4 Trillion to fund infrastructure projects over the next five years with the clear intention of building (domestically) on its economic growth and turning India into a global manufacturing hub. Infrastructure projects are the turbo charger of any advanced modern economy, and the Modi Government has already borrowed 4.4 Trillion Rupees ($ 63 Billion) since January to continue them at a faster rate than ever before.

And it’s not as though it can’t afford to do it either…India’s debt to GDP ratio is the lowest of all major global economies, running at at 67% compared with China’s astonishing 253%: so if all this looks overly ambitious, bear in mind that in the single year 2018/19 the subcontinent’s overall public sector expenditure was $352 Billion (more than five times the BJP Manifesto pledge) and it all means greater future public involvement in long-term infrastructure investment, which is good for India’s burgeoning real estate sector, good for the subcontinent’s economic prospects and, with a certain sense of irony, good for the global economy too.

Eat your heart out Donald Trump.

Modulex Construction is the World’s largest and India’s first Steel Modular Building Company, working to meet the challenges of India’s rapidly burgeoning real estate and infrastructure markets, delivering exciting opportunities for investors through the platform of its Red Ribbon’s Real Estate Fund. Because, when it comes to investing on the subcontinent, nobody knows India and its markets better than Red Ribbon.

Executive Overview

The exponential growth in India’s real estate sector over recent years, linked to an unprecedented growth in the subcontinent’s population and increased urbanisation, provides a powerhouse for future growth within the economy and, in conjunction with increased infrastructure spending over the next five years, that looks likely to take India’s economy to new heights. Not before time too: as the article points out, there is a pressing need for India to drive domestic growth further so as to insulate itself from increasingly turbulent international markets.

That’s why Red Ribbon has committed itself to supporting real estate investment on the subcontinent through its Real Estate Fund, established not only to meet the challenges of its markets but also to give our investors the best of the opportunities they have to offer.

Setting up the Sandbox…India’s Blockchain Technologies take a leap forward

Setting up the Sandbox…India’s Blockchain Technologies take a leap forward

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The Reserve Bank of India (“RBI”) might still be hedging its bets on Cryptocurrencies (more of which in a moment), but it has more or less given up trying to stop the inexorable rise of Blockchain, and given the technologies involved have never recognised national boundaries, that means imminent de facto regulation of Blockchain not only in the subcontinent’s own financial backyard but in financial markets everywhere. And it’s a smart move too: with no other major regulator showing the slightest willingness to step up to the plate, RBI’s decision to pave the way to full Blockchain regulation will almost inevitably lead to it becoming a lead regulator for Blockchain worldwide.

Which is a good place to be, because Blockchain technologies are set to radically change the way we all do business, the way we buy things and how we deal across boundaries in increasingly globalised markets, all of which demands an innovative regulator with the oversight skils to steward the complex processes involved.

And, at last, we have one.

RBI’s Framework Report was issued on 18th April and announced that a Regulatory Sandbox will be set up, a common regulatory tool that enables innovators, financial service providers and regulators to work together with a small number of consumers over a short(ish) period, conducting field tests and collecting evidence as a basis for future formal regulation. Or, in other words, as the RBI’s bloodless boffins put it: “a structured avenue for the regulator to engage with the ecosystem and to develop innovation-enabling or innovation-responsive regulations that facilitate delivery of relevant, low-cost financial products”. Talk about sucking the excitement out of a project…

But don’t let the geeky language get us down, let us instead unite in praise of the Sandbox because it gives Blockchain a lead into the fastest growing large economy on the planet as well as some of the world’s most innovative and exciting markets. With those factors in play, just imagine what India and Blockchain might do together. And according to the RBI’s Report these flesh and blood consumer trials will be completed within a mere six months, so in theory we can look forward to a Blockchain Christmas. What could be more exciting than that?

Interestingly the Reserve Bank has also given us a glimpse of the specific new technologies that will be tested in the Sandbox: mobile device payments, digital identity software, data analytics, AI and machine learning applications: all of which are certain to make the hearts of bankers and on-line retailers skip a little faster; as will the “eligible sectors” of the programme, which include well know finance friends such as retail payments (obviously), money transfer platforms, KYC checks (hurrah) and a limited number of cybersecurity products (admittedly not so exciting).

And for those of you who are now starting to re-read that list again, don’t bother: Cryptocurrencies aren’t in it (yet). At least as far as India is concerned, the non-fiat end of the currency spectrum is still struggling to get out from under the Finance Minister’s Budget Statement from 1st. February last year. But even so, industry pressure groups are already stepping up their lobbying for Crypto’s exclusion from the Sandbox to be removed. Take Nasscom for example (which represents Indian IT companies, so its voice certainly counts), which has called for a regulatory re-think, arguing (correctly) that “…cryptocurrencies are an important part of Blockchain technologies and their exclusion will inhibit testing for technologies already approved for use in the Sandbox”. And the Payments Council of India has also weighed into the debate: arguing that the exclusion of non-fiat currencies is likely to be a major fetter on innovation. Those are pretty powerful arguments, coming from highly influential bodies and they’re certainly not alone. For one, the Supreme Court has now re-listed the Cryptocurrency appeal for the second week of July (to give RBI time to come forward with a new regime rather than have its 2018 policy declared unlawful), so don’t bet against another U Turn from Mint Street in the not too distant future.

North Block Capital Fund I is an open-ended regulated fund listed on the Gibraltar Stock Exchange specialising in crypto assets and blockchain related technology.

Executive Overview

Like most of us, I suppose, I listened with interests to the comments made last year by India’s Finance Minister as part of the Union Budget Debate, which not only caused the value of Bitcoin to soar on international exchanges, but also precipitated the Reserve Bank (as Monetary Regulator on the subcontinent) to issue what now seems to have been a singularly ill advised policy attempting to strangle these new technologies at birth. These policies have since been subject to formal challenge in the Supreme Court of India and, as we have commented on this site before, the resulting litigation has inexorably driven the Regulator to back away from its original position.

This latest announcement of the Sandbox initiative, and likely introduction of cryptocurrencies into the process is all part of that process of re-evaluation and I believe it is to be warmly welcomed.

Because it is now beyond question that Blockchain has the potential to fundamentally change the way we all do business, which is why I’m so proud that the North Block Capital Fund will play a part in that process. India is now squarely at the forefront of major regulatory and technological change, and I want our investors to be able to share in the exciting opportunities this offers.

Anyone for Brexit?…Why India and Commonwealth won’t be coming to the rescue.

Anyone for Brexit?…Why India and Commonwealth won’t be coming to the rescue.

By Archive, India, News No Comments

It’s a big IF, but if the United Kingdom manages to leave the European Union on 31 October, it will at least have managed to sign a clutch of Free Trade Agreements (“FTAs”) with some of the world’s economic leviathans: including the Faroe Islands, Liechtenstein and Chile. What? Not leviathans you say…well, what about our other FTA with the CARIFORUM Trade Block. The what? The CARIFORUM Trade Block…an economic collective of Barbados, Saint Lucia and the Dominican Republic, amongst others. So, if we’re ever in need of cod, false teeth, rum and molasses, things couldn’t be looking better.

But what if (that word again, “if” is now a Brexit institution), what if our ambitions run ahead of false teeth and towards some of the more substantial economies across the world?

After all, Liam Fox told us in 2017 that a Trade Deal with the European Union would be, don’t laugh, “the easiest in human history”; albeit earlier this year in an interview with the Financial Times he groaned his trade deals were getting harder to complete because nobody thinks the United Kingdom Government can handle Brexit. Who would have thought it? And Boris Johnson thought FTA negotiations would be a piece of cake (cake you can also eat). Although, on second thoughts isn’t this the same Boris Johnson who flew to Afghanistan to avoid having to vote on the third runway at Heathrow (having said he would lie in front of the bulldozers) and called Africans “flag waving piccaninnies with watermelon smiles”. Perhaps, it might be better after all if our prospective Prime Minister keeps his appointment in Southwark Crown Court rather than fly over to negotiate a Trade Deal with Ghana.

But what about India, the jewel in the crown of the former Empire: surely we can cut a Trade deal with India?

Don’t count on it.

The former Indian High Commissioner in London, Yashvardhan Sinha, dampened expectations on that front when he pointed out that the Fox Johnson axis of aspiration was nothing more than “pre-independence nostalgia” and who can blame him, given the United Kingdom is far from being amongst India’s front rank trading partners: exporting £3.7 Billion to India in goods and services last year in contrast to the £82 Billion exported by the European Union (the EU makes up 13% of India’s import trade).

Indeed, somewhat controversially, the High Commissioner may have put his finger on something more significant. Pre-Independence nostalgia weighs little against the hard economic fact that more than 44% of UK goods are exported to the EU, as opposed to 9% exported to the rest of the Commonwealth put together. And that progressive decline in the former mother country’s trade with its former colonies has been going on since 1950 with the strengthening of European economies in the aftermath of the second world war, a trend which has only been entrenched by the growth of the very EU’s Institutions Mr Fox and Mr Johnson seem to dislike. An added irony is that the trend was accelerated further by GATT, with its added Tarrifs for Commonwealth Countries: Tarrifs that are now overseen by the WTO (icon of the pro Brexit ERG Group).

And even with its far more significant (in contrast with the UK) trading platform, even the EU has had difficulties negotiating an FTA with India. Talks broke down in 2013 on the (hardly insignificant) issues of market access and tariff reductions, only to “resume” again last year to produce the EU – India Strategic Partnership, which did precisely nothing to address any of the issues that caused the talks to stall in the first place. So don’t hold your breath on that front either.

Bearing in mind that the UK has been part of the EU delegation negotiating with India, can it really hope in some schizophrenic leap of faith now to step into the gap left by its own failures?

India might think otherwise.

And in truth, the former Mother Country’s world has been turned upside down. India is now the fastest growing large economy on the planet with annual GDP growth of 7.3%, and is on track to have the largest, most avaricious consumer population in the world by 2022. The UK grew at less than 0.6% this year and has a population smaller than Thailand. Just where’s the soft power in that?

Brexit anyone?

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, the Red Ribbon Indian Equities Fund offers unique opportunities to share in the potential of this, the fastest growing large economy on the planet.

Executive Overview

I’m always surprised to listen to leading UK Politicians advocating the apparent ease of completing a Free Trade Agreement in a matter of months, not least with major economic powers like India: more surprised still when they speak about the strong ties of Commonwealth putting the United Kingdom in some way at the head of the queue. I’m proud of the links between our two countries, but I don’t think they do anything of the kind and comments from former High Commissioner in London reinforce my reservations.

As the Article says, the world has come a long way since Independence, and I doubt that India will be coming to the United Kingdom’s economic rescue anytime soon if (and its a big “if” as the article also says) Brexit is brought to a conclusion. India is now one of the world’s economic superpowers and it would be as well to start recognising that fact.

I know our two countries will continue to trade together and thrive together, but they will do so in the real world; not a world unduly coloured by pre-independence nostalgia.

 

 

Less Means Too Much: the Sustainability Paradox and India’s Eco Hotel Sector

Less Means Too Much: the Sustainability Paradox and India’s Eco Hotel Sector

By Archive, India, News No Comments

Neil Armstrong will be remembered for his small step, Theresa May for her Brexit stumbles and Boris Johnson for his …well, we’ll have to wait and see about that. But we already know how William Stanley Jevons will be remembered, because we can see the impact of the Jevons Paradox every day, in almost everything we do. With its roots in careful observations drawn from early nineteenth century coal markets (bear with me, I’m not making this up), Jevons discovered that the truism that as technologies become more efficient, they will inevitably consume more resources. So, efficient steam engines will not reduce the demand for coal, they will more and more coal up…and that’s the Jevons Paradox.

So what’s all this got to do with Eco Hotels in India? Well, let’s fast forward from the age of steam, leave ringworm epidemics behind and look more closely at our contemporary climate change policies.

With the exception of the current occupant of 1600 Pennsylvania Avenue and a motley collection of loose jawed climate change deniers, we are all concerned about reducing global carbon emissions and improving energy consumption, and at least superficially one way to do this to make our energy production technologies more efficient. Switching to wind powered technologies rather than burning coal is surely a step in the right direction. Unlike coal, the wind is free at the point of delivery: coal on the other hand has to be dug out of the ground, shipped from there to here and expensively burned up before it can belch carbon deposits into the atmosphere.

But in fact the reverse is the case: by switching to more wind powered technology we are more likely in the long term to increase global energy consumption and diminish sustainability levels.

That’s because the Jevons Paradox tells us that the more wind powered energy we produce (that is, more cheaper energy), the more we will inevitably increase global energy demands. Simply making the output cheaper than conventional production methods means more and more energy outputs will be required in the long term. We cannot hope to promote sustainability simply by focusing on output costs and operational efficiencies.

All of which brings us (at last you might think) to Eco Tourism in India, where consumer demand levels are running at an all time high and business and recreational travellers alike rating environmental sustainability at the top of their criteria for choosing a hotel.

That’s why the Hilton Hotel Group has announced a sustainability vision for 2030 based on locally sourcing less energy hungry products and services, such as soap and laundry supplies. The rationale for the new policy is that cheaper soap, towels and bedding will lead inevitably to more efficient operations and better environmental ratings. But just think about that for a moment: think about it in particular from the perspective of your average cost conscious hotel manager in Mumbai (which means pretty much all of them). Suppose he (or she) has been used to spending Rs 5000 a day on soap for their guests, shipped in by Unilever; but now, under the new Hilton policy, they will spend only Rs 1000 a day buying their soap locally. Ask yourself, under the new regime, are they likely to care more or less about how much soap their guests use? Will she (or he) worry as much about the number of towels being sent to the laundry if the laundry bill is now a quarter of what it used to be.

Exactly. That’s the Jevons Paradox: the very act intended to make operations more efficient has caused the hotel to become more energy hungry and less sustainable.

But there’s a positive flip side. Take a look now at the much more successful Eco Hotel brands on the subcontinent, brands such as Lemon Tree Hotels and Eco Hotels which are responding to the same burgeoning consumer demand by doing more than just toy with their supply costs, soap and towels. Unlike the Hilton’s model, these groups have had “green credentials” built into their corporate DNA from the very beginning of the construction process. Water saving devices are added at the outset to inhibit excess usage (not just make water cheaper to supply); solar devices are installed that will reflect light across the entire hotel environment irrespective of an individual guest’s decision to turn the lights off when they go out; and communal kitchens are built to make shared usage an inescapable fact of occupancy rather than just a lifestyle choice. These are precisely the kind of structural, systemic changes that are likely to entrench environmental efficiencies into India’s hospitality sector and we are seeing the change happen first, in the mid range eco market. Where Lemon Tree and Eco Hotels lead, others are likely to follow.

Eco Hotels, the world’s first carbon neutral hotel brand of its kind offers green hospitality as an essential component of its progressive roll out across India, designed specifically to take advantage of current market opportunities on the subcontinent. The brand meets all key sustainability criteria without compromising on quality or standards and is designed to cater for commercial and recreational travellers alike.

Executive Overview

India’s boom in tourism levels is playing a significant part in driving the subcontinent’s hotel and hospitality sector to unprecedented levels of growth and, as the article says eco credentials are playing a bigger and bigger part in determining where this tide of travellers are deciding to stay. Key surveys have confirm that so called “green credentials” are high up on the scale of priorities they will take into consideration when making their choice.

And as the article also says, tinkering with purely superficial aspects of eco compliance, counting the soap and laundering hotel bedding more cheaply, not only does little to meet these exacting consumer demands, but actually makes it more likely that the business itself will be less sustainable in the future. That’s why at Red Ribbon, when we founded the Eco Hotel project, it was important to us to build sustainability into the initial construction process and to hard wire it into the operation of our hotels.

I’m proud that Eco Hotels has done just that and proud too of the part Red Ribbon has played in developing the brand and its ambitions in the years since, spearheading an innovate and environmentally friendly response to India’ resurgent tourism demands.

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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