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The Lessons of History…Indian Real Estate and Equity Markets still go Hand in Hand

By COVID-19, Housing policy, India, Mainstream Impact Investment, News, Real Estate Markets

For every action there is an equal and opposite reaction: that’s why you can expect a reaction (quite a powerful one actually) if you present your loved one with last minute flowers from the service station. But not so fast, not every action produces pushback: some move together, following the same trend in lockstep. And nowhere is that more true than economic markets. Take equity and real estate for example: history tells us that in the long term, stock and property prices will tend to move together in the same direction (up or down), and in the short term an increase in residential property prices will also push stock prices up.

But before you get on the phone to your broker, a word of warning about what history can tell us about the future…

Although the 1960’s were written in Technicolor, the 1970’s were distinctly beige: the sixties swung, landed a man on the moon and gave us the Beatles, but the seventies limped through Watergate to the music of the Osmonds (I’m using the word “music” loosely here)…and they also gave us Stagflation. Anyone who studied economics in the dark days before Kylie Minogue recorded “I should be so lucky” will be familiar with the Phillips Curve: the theory that high rates of unemployment couldn’t co-exist with high inflation, because higher unemployment meant less earned income, and less earned income meant lower inflation. It all made sense on paper and for a while it worked in practice too, but there was a small flaw in the theory…it was nonsense. Stagflation reminded us that unemployment and inflation could be delivered together, at unprecedentedly high levels as part a beige coloured double whammy. The Phillips Curve said it couldn’t happen…but it did.

So is economic orthodoxy equally flawed when it comes to that important correlation between short-term housing and equity markets?

Well, to test the theory, let’s take a look at trends in Indian markets over the last six months (which, as the short term goes, is pretty short term).

After the initial shocks of COVID 19 had been absorbed and lockdown measures eased, there has been a marked increase in confidence across the subcontinent’s real estate sector, driven in substantial part by the Indian Reserve Bank’s fiscal stimulus package and interest rate reductions, as well as tax breaks and incentives introduced by Prime Minister Modi’s Government. And that old perennial was helping too: moving into your new home by Christmas. Knight Frank India reported “improved sentiment” (www.knightfrank.co.in) and the mid (affordable) segment saw bellwether rental prices increase sharply by up to 9% year on year. After the COVID enforced lull, developers are also resuming and accelerating construction projects to pick up the slack, with 90% of the labour force now back on site. Property prices are rising across the board.

That’s all well and good, but what about India’s Equity Markets? What were they doing over that same six-month period?

The answer is that since June of this year 95% of BSE500 stocks have risen in price, with the benchmark BSE Sensex Index surging by 37% (after hitting a 52 week COVID low in March). And tellingly for present purposes, Indiabulls Housing Finance more than doubled returns for investors in Q4 (www.indiabullshomeloans.com), further fuelling demand for India’s burgeoning demographic and bringing closer the dream of owning a home of their own.

All of which means that when it comes to Indian Real Estate, it looks like economic orthodoxy still holds good after all: Property Markets and Equity Markets are moving upwards together. But even so, think twice before bringing home those service station flowers for Christmas…you might not get the reaction you were expecting.

Executive Overview

As someone who works on a daily basis in financial markets, I know economic theory can go wrong as often as it sets us right: but keep an eye on that key variable between property and equity markets, it’ has to be a core part of our forward planning.

And the variable is working better than ever in India.

Have a great Christmas and a prosperous new year from all of us at Red Ribbon.

If you would like to know more about joining our Mainstream Impact Investment journey click here

Housing Markets are Broken…We can fix them with Modular Technologies

By COVID-19, Emerging Technologies, India, Mainstream Impact Investment, News

Our Broken Housing Market is one of the greatest barriers to progress”: that’s not Jeremy Corby or Bernie Sanders, or even some green haired social agitator…that’s the Conservative MP for Maidenhead, Theresa May (remember her).

And to drive the message home for those with a short attention span, her Government even called its 2017 Housing Policy “Fixing our Broken Housing Market”: but no matter how clear the message, it was eventually overwhelmed by Brexit, and Brexit did for Theresa May too. The Policy Paper was consigned to the waste paper basket and a commitment to build 300,000 new homes every year by the middle of the decade died on its knees: last year fewer than 60,000 new affordable homes were built in Britain …But Modular Construction can fix all that.

The housing market is broken

Like her or loathe her (and plenty do both), Theresa May got that one right…the housing market is broken. Not just in the United Kingdom but across the globe, with rising levels of homelessness and housing need. So if it’s broken why aren’t we fixing it? Why are dinosaur developers still struggling with bricks in the mud, like a mediaeval crofter fumbling with wattle and daub?

Some of the of the key answers are in that discarded Policy Paper, so it’s worth fishing it out of the bin, and when you do, take a look at one section in particular: “Supporting Developers to build out more quickly”.

Skip over the unpalatable reference for a “strategic licensing of protected species” (basically allowing building on nature reserves, so tough luck on the ducks), that one can stay in the waste paper basket: focus instead on the all important key word: “quickly”. Construction has been doing anything but for years, with an overall slowdown of 15% in UK delivery rates in the decade up to 2018: a trend that is sadly reflected across the planet (www.ourworldindata.org).

A commitment to modular construction

That’s why Theresa May’s Government committed itself to Modular Construction: because it can produce affordable homes 30% faster than conventional technologies, maximising design efficiencies through production of basic components in a climate controlled environment (without sloshing about in the mud), as well as reducing the disruptions anyone who has ever set foot on a building site will be all too familiar with.

And it’s not just a question of speed of delivery. The average cost of building a traditional housing unit is £150,000, but by adopting modular technologies the bottom line spend is reduced by securing optimal delivery times and minimal labour costs.

The UK Policy Paper estimated that by prefabricating units offsite overall construction budgets could be reduced by as much as 25%. And they’re more environmentally friendly too…reducing waste levels by up to 50%, so that means less trucks chugging painfully to the landfill site as well. Modular buildings are better designed, better insulated and greener, reducing energy consumption by up to 20%. 

History may look kindly yet on Theresa May…

Modulex Construction (www.modulexglobal.com) is the World’s largest Steel Modular Building Company. It was established by Red Ribbon (www.redribbon.co) to harness the full potential of fast evolving technologies and deliver at pace to meet the evolving needs of the community.

Executive Overview

Especially in these testing times, we need to learn to make the most of what we already have: and when it comes to housing need across the Planet, that means Modular Construction.

We need to build better on pre COVID policies and do our best for the future…

If you would like to know more about joining our Mainstream Impact Investment journey click here

Artificial Intelligence

Who the Hell is Geoffrey Hinton…How a Man in Hush Puppies Changed the World with Machine Learning

By COVID-19, Emerging Technologies, India, Mainstream Impact Investment, News

Chances are you’ve never heard of Geoffrey Hinton, but humble as he is, Geoffrey changed the world forever. Most likely you haven’t heard of Backpropogation either (www.neuralnetworksanddeeplearning.com), but that’s the algorithm that powers Machine Learning, and it’s radically reshaping all our lives on a minute-by-minute basis.

Backpropagation and Machine Learning

Geoffrey Hinton is the father of Backpropogation, so it’s thanks to him that within minutes of Googling up a wedding venue, your screen pings full of adverts for top hats and tails. And it was Geoffrey who made sure speeding motorists are caught and fined, because Geoffrey’s behind number plate recognition too: no matter how complex the data, no matter how fast you try to dash away from the camera, Geoffrey’s always there. This unassuming, gangling man in a dubious sweater and hush puppies has changed the world forever…and, unsurprisingly, Geoffrey works for Google.

Perhaps alarmingly for some (and despite the avuncular air created by those hush puppies and sweaters) Geoffrey Hinton is also a Terminator 2 man. He doesn’t rule out ever more expansive decision-making by all those supercomputers, because, as he dryly puts it: there isn’t a good track record of less intelligent things controlling things of greater intelligence“.

He might have a point there…

But fundamentally Machine Learning isn’t about science fiction at all, it’s about science fact. Geoffrey Hinton’s algorithm already enables huge swathes of complex data to be gathered together (including who you are, where you live, what you buy, where you bought it and how); and then (this is the crucial bit), to enable computers make an educated guess (albeit a very good one) about what you’re going to do next. Hence all those pop up adverts for top hats and tails…

Artificial Intelligence and Machine Learning

Artificial Intelligence is the next step forward: using Machine Learning technologies the supercomputer takes note of its “environment” and maximises the chances of delivering on a set of predetermined goals, mimicking human cognitive functions including “learning” and “problem solving” capabilities. That’s how the machine can issue you with a speeding fine, but it’s also why it can already understand human speech (thank you Alexa) and why, in the fullness of time, we are likely to see driverless cars tootling up Streatham High Road (www.ucsusa.org/resources/self-driving-cars). 

The economic consequences of all that should be obvious to anyone not currently living in a cave: Blockchain is already a big thing, but its future development will inevitably be turbocharged by Machine Learning and Artificial Intelligence. The decentralised ledger systems at the heart of Blockchain will become faster and more efficient, matching up buyers and sellers more effectively and cutting out intermediaries to make worldwide markets super efficient too. 

The Internet of Things

And The Internet of Things is also already on the horizon: physical objects from toasters to climate control systems will be embedded in future with sensors and software to connect and exchange data over the Internet, making the “smart home” a practical reality. As soon as you wake up your iPhone will put the kettle on, and when you take the train home, the Oyster reader at the station will turn on your central heating. And if that sounds a little frivolous, think about this…if you have a heart attack, the on board radio in the ambulance can prep the intensive care facility in the hospital. So the Internet of Things might just save your life as well.

And we’ve got Geoffrey Hinton to thank for that. 

Executive Overview

Especially at the moment, emerging technologies are changing all our lives: think Zoom and Amazon, Ocado and Netflix. So it’s more important than ever to keep a keen eye on the future, if only because that’s where we’re all heading.

If you would like to know more about joining our Mainstream Impact Investment journey click here

Voting with Their Feet…Indian Migrant Workers are Redefining the Subcontinent’s Housing Market

By Affordable Housing, COVID-19, Housing Need, Housing policy, Modular Construction, News

India’s migrant workers are voting with their feet: streaming onto railways and roads, taking to bikes and byways and making their way back to the Cities they deserted in the aftermath of the pandemic. It’s the biggest movement of people on the subcontinent since Independence more than seventy years ago, and it’s set to have a profound impact on the future of Subcontinent’s housing market across India, from Chennai to Mumbai and all points in between (more of which in a moment)…

Movement of workers back to the cities

A recent survey conducted by the Inferential Survey Statistics and Research Foundation (snappy name, snappy stats) reported 67% of 2,917 migrant workers from 34 Districts are determined now to make their way back to jobs in the City (www.issrf.org.in): a fact already confirmed by the volume and value of cash transfers since the lockdowns were imposed in March.

That old reliable bellwether of migrant activity: sending money home to mum and dad. In the first few weeks after COVID-19 struck cash transfers fell in value by up to 90%, but now they’re back now at 85% of pre-pandemic levels…a sure sign workers are moving in high numbers from the countryside. And since August, non-suburban passenger traffic on India’s railways has virtually doubled.

It’s impossible to overstate the importance of this trend, given migrant workers make up 20% of the subcontinent’s workforce and play a vital part in the success of a number of key sectors: especially informal market segments and MSMEs, which together make up 50% of the subcontinent’s GDP.

No surprise then that for India’s construction sector, which is particularly reliant on migrant labour, the Modi Government has been keen to roll out a raft of new measures to make sure they get back on site as quickly as possible. In May the Minister of Home Affairs produced a policy paper recommending migrant workers should be automatically enrolled for Ayushman Bharat: the Government’s flagship health insurance scheme, providing them with ready access to cashless medical facilities on site (which the vast majority either don’t have back home in the countryside, or are denied by discordant local government regulations). There will also be a new Migrant Workers Welfare Fund to make sure help housing assistance gets to where its needed most (which in this case means India’s Cities: www.labour.gov.in)so you can be sure the pace of urbanisation on the subcontinent isn’t going to be slowing down any time soon.

India and the Subcontinent’s Housing Market

And given India’s already burgeoning need for affordable housing, it should come as no surprise either that the demand for City based real estate is likely to result in an unprecedented surge in real estate growth.

All those workers have to have somewhere to live…and there’s certainly no shortage in demand for something to build.

Which brings us back to Chennai and Mumbai: along with Bangalore, both have become centres of technological excellence, as India continues to establish itself as the planet’s distribution hub.

Skilled workers are moving there and new infrastructure systems (roads, railways and business parks) are being created on an almost daily basis, pushing house prices through the roof (so to speak). That’s undoubtedly a trend that is likely to gain added vigour from the return of migrant workers.

India needs those construction workers back on site, but it also needs to deliver affordable homes at sufficient pace to meet the dizzying needs of what was already the fastest growing population on earth.

That’s why developers on the subcontinent (and around the world) are increasingly turning into modular construction technologies, which not only reduce delivery times by 60% but also ensure cost efficient and compliant delivery standards. This is a sure-fire way to improve the subcontintent’s housing market.  

After all, as India votes with its feet, it also needs somewhere to live…

Executive Overview

Modular Construction delivers faster, at lower cost and with higher quality than traditional alternatives: it’s perfectly positioned to meet the growing demand for affordable housing, not only in India but also across the world.

So as we welcome news that migrant workers are coming back to the Cities, yes: let’s give them somewhere to live too.

If you would like to know more about joining our Mainstream Impact Investment journey click here

More Spark Plugs than Sustainability…The Green Industrial Revolution is already here and Boris has Missed the Bus

By Climate Change, COVID-19, Environmental Policy, Natural Capital, News, Sustainable Growth, United Kingdom

Boris Johnson may have many talents (it’s possible). But when it comes to climate change mitigation, facing up to facts isn’t one of them: his much trailed Ten Point Plan, flagged as a “Green Industrial Revolution” and launched earlier this month. This commits the UK Government to phasing out the internal combustion engine within the next decade and increasing investment in a range of new technologies, including the Flash Gordon sounding (and currently non existent) Jet Zero Aircraft and Green Ocean Liner.

But well intentioned as it might be, the Plan has more in common with spark plugs than sustainability, and especially so given (despite its snappy title) the Green Industrial Revolution is already well underway, with or without Boris.

It’s about time…

According to the UN based World Meteorological Organization (“WMO”), and despite the impact of COVID restrictions that resulted in short term reductions of between 4.2% and 7.5%, carbon emissions have now reached record levels: global warming has increased by 45% since 1990, with a “growth spurt” throughout 2019 added in for good measure (www.public.wmo.int). The last time there was such a sustained build up in CO2 levels was 5 Million years ago, and we weren’t around then to take note of the statistics then.

So what exactly is Boris planning to do to meet that challenge of the Green Industrial Revolution? 

Well, he aims to phase out the internal combustion engine by 2030 (see above) and that’s obviously an eye-catching measure, but the Ten Point Plan also commits the Government to investing £385 Million in the “next generation” of nuclear power stations.

Despite the fact that even if nuclear capacity was quadrupled by 2050 it would still only account for 10% of UK energy needs, not on any basis sufficient to replace fossil fuel generation and particularly so given the limited investment in wind and solar power envisaged by the Plan.

And that’s leaving aside the inherent dangers and the well-worn capacity of nuclear sites to generate dangerous levels of hazardous waste. It doesn’t sound especially environment friendly. 

Take another look too at that figure of £385 Million. Its chickenfeed bearing in mind the new Hinkley Point C Nuclear Plant Project is expected to cost £22.5 Billion: £3 Billion over budget and fifteen months behind schedule.

A new offshore wind turbine costs an average of £3 Million, so you could build 1000 of them for the cost of one Hinkley Point. In that context the Plan projects a meagre £160 million of new investment in offshore wind technology, so just 80 new turbines… chickenfeed.

The current shortsighted strategy?

And neither will the Plan commit the UK Government to phase out the current short sighted strategy of purchasing carbon offsets from abroad, meaning carbon emissions are effectively exported to territories with lower (non Paris compliant) protocols.

That’s hardly a full-throated commitment to truly international climate mitigation: as though importing “dirty” electricity is fine because it’s not produced in Hampshire. Tell that to anyone living next to a power station in Poland.

To be fair to Boris, there’s also a plan for more bicycles and footpaths, but bikes and boots on their own won’t amount to any sort of revolution: green or otherwise.

So, what about the Ten Point Plan?

In truth, the Ten Point Plan will leave the United Kingdom significantly behind the EU on climate change mitigation (www.ec.europa.eu.).

After Brexit goes live in January, the UK will silently fall out of the Bloc’s sharing arrangements on carbon reduction which are expected to deliver a 55% cut in emissions by 2030.

And India is well on track to secure carbon emission levels to meet a global warming goal of 2 Degrees Celsius within ten years (despite the peculiar challenges posed by its rapidly burgeoning population and fast expanding economy): 40% of the subcontinent’s electricity will be non fossil fuel generated by 2030 and “emission intensities” will be a third of 2005 levels by the same date.

The subcontinent has also increased solar capacity by 1,200% since 2014 and introduced groundbreaking initiatives to minimise domestic consumption levels. In stark contrast the UK Government has actively promoted measures that reduce solar capacity and done little or nothing to reduce consumption.

In short, while Boris scrambles around to define his Green Industrial Revolution the rest of the world has already moved on… the future already belongs to sustainable innovation.

Red Ribbon (www.redribbon.cohas always been committed to pursuing Mainstream Impact Investment strategies that are not only consistent with sustainable growth but also offer above market rate returns whilst at the same time protecting precious natural resources through innovative programmes like the Eco Hotels Project (www.ecohotelsglobal.com).

Find out more about Eco Hotels

ECO HOTELS

Red Ribbon Asset Management is the founder of Eco Hotels, the world’s first carbon neutral mid-market hotel brand, offering “green hospitality” as part of a progressive roll out across India which intended to take full advantage of current market opportunities on the subcontinent.

Executive Overview

Welcome as they might otherwise have been, I can’t help feeling a little disappointed by the obvious lack of ambition in the UK’s Plans for a “Green Industrial Revolution”: not least because they seem largely ignore the radical steps being taken elsewhere in the world on climate change mitigation, and particularly in India.

But having placed Planet, People and Profit at the heart of Red Ribbon’s corporate vision since it was founded more than a decade ago, I remain on any basis committed to the long-term potential of those international strategies, whatever the short-term future of the Ten Point Plan might be.

Better Connected than Ever? – How Connectivity boosts Indian Real Estate.

By Affordable Housing, Blackstone, Construction Technologies, COVID-19, Economic Growth, Environmental Policy, Housing Need, Housing policy, India, Natural Capital, News, Real Estate Markets, Sustainable Growth

All roads lead to other roads: a dizzying complexity of cables, rail and road networks have literally girdled the earth, making us better connected than ever before. A hundred years ago it took twenty days to travel by steamship from London to Mumbai, now it takes nine hours by plane.

Subject to lockdown restrictions, you can cross the English Channel in two hours by ferry (plus three more waiting for the driver in front to get back to his cab), or else zip through the Tunnel in 30 minutes; and the electrons that carry your Internet messages travel at 2,200 Km a second, which is probably why Zoom is doing so well at the moment.

But none of this happened by accident: it was all planned, built and delivered to meet economic demand…except, of course, the electron, which does what it does by itself. Economic progress is everywhere driven by connectivity.

And that’s where Big Government comes in: periodic swings in the private funding cycles needed to build all those airports, roads and railways are increasingly being offset by government deficit spending programmes (or quantitative easing as it’s now known: the deficit’s more attractive, younger sister). Only big government is big enough to dampen regular (and inevitable) private sector investment fluctuations, which is why most advanced economies over the last forty years have set fiscal spending targets of up to 20% of GDP.

Nothing less will level out the swings and troughs, and without it the roads, railways and airports won’t get built at all…the Channel Tunnel started out as a private venture, ran out of money and finished up nationalised in all but name. Without Big Government you wouldn’t be able to zip under the Channel …you’d be stuck behind a lorry at Dover.

It’s a lesson India has taken to heart.

Connectivity boosts Indian real estate. How?

Over the next ten years the subcontinent is expected to invest a staggering $715 Billion in its new rail networks, with full electrification expected by 2024 and the entire system becoming carbon neutral by 2030 (www.ibef.org/industry/indian-railways).

By 2050 India’s railways will comprise 40% of rail services across the world, meeting a surge in passenger numbers driven by an increasingly wealthy travelling public. All of this is being powered by Big Government (Prime Minister Modi’s Government to be precise): including a programme to expand investment in new rail terminals, new stations and more extensive container operations across the subcontinent (www.outlookindia.com).

And the picture is pretty much the same on India’s highways where the network has doubled in size (from 71,000 Km to 142,000 Km) in the last ten years. As with rail, the expansion is being driven at pace to meet unprecedented levels of demand from a burgeoning and increasingly wealthy population, in stark contrast with the United Kingdom where road traffic levels have increased by 80% over the last twenty years, but capacity has risen by a sluggish 10% annually: and even that unimpressive figure is falling off year by year.

All of which means India is now better connected than ever before; and in combination with those same (unprecedented) demographic trends on the subcontinent, enhanced connectivity is also having a radical impact on India’s domestic housing markets. New Science parks in Chennai and Bangalore and new railways and highways in Mumbai are pushing prices through the roof as an increasingly urbanised population embraces the opportunities offered by better communication systems.

The improvements to connectivity boosts Indian real estate. So with all roads leading to other roads, it means we’re better connected than ever before…but nowhere is that more apparent at the moment than India.

Invest in Red Ribbon Asset Management

Red Ribbon is committed to identifying and building on investment opportunities that are fully in compliance with its core Planet, People, Profit policy: not only offering above market rate returns for investors but also protecting our Natural Capital through innovative programmes like the Eco Hotels Project.

Executive Overview

I suppose it’s a truism that property values are all about location (and location, location): but what’s interesting in India at the moment is just how radically the location itself is changing.

Taken together with an increasingly wealthy, tech savvy and burgeoning population, the Modi Government’s radical infrastructure programmes are re-shaping the commercial environment and pushing property prices higher than ever before.

Back Again, Front and Centre…Joe Biden has Climate Change Top of his Agenda and he’ll find a Key Partner in India

By Climate Change, COVID-19, Eco Hotels, Economic Growth, Environmental Policy, India, Natural Capital, News, Sustainable Growth

Joe Biden intends to reverse Trump’s “dangerous and destructive climate policies” (Joe’s words), and whatever delusions Trump might still entertain on Twitter, Biden is the President Elect of the United States.

Under his stewardship the United States will re-join the Paris Climate Accordson day one” of the new Administration, work to “seek higher ambition from nations across the world” (Joe again), and “follow the science” to reduce emissions while protecting precious resources. So climate change mitigation is back, front and centre …and it’s about time too.

Over three turbulent years Donald Trump systematically cut a swathe through a raft of environmental protection measures: enabling mining companies to dump waste in local rivers, removing prohibitions on methane gas emissions and even abolishing prohibitions on (endangered) species of birds being shot out of the sky and their lifeless bodies made into ashtrays for sale in tourist shops (I’m not making that up). So whatever you might think of Donald Trump’s chutzpah and mutton headed resolution, he was demonstrably bad for the environment.

The stage is finally set for the United States to resume its role in climate change mitigation across the globe, and the totemic significance of Biden’s intention to reaffirm the Paris Climate Accordson day one” simply can’t be ignored.

The US will now be freed up to move to zero carbon emissions from power plants by 2035 (instead of actively promoting fossil fuel dependence under Trump); freed up to dramatically expand solar and wind energy production and to stop endangered birds being made into ashtrays.

So, how are Joe Biden and climate change the perfect partners for each other? Well, the new Biden Administration will also look to build 60,000 new wind turbines, new community solar infrastructure and 500 Million more solar panels across the country within the next five years: and the obligations imposed by (and freely accepted) under the Paris Climate Accords are the backbone of those commitments.

Joe Biden and Climate Change

The Biden Administration’s Green Deal (www.joebiden.com/climate-plan/) is budgeted to cost an eye watering $3 Trillion.

But take a look again at the elements of that package, and in particular the central part played by solar and wind power generation: those are positive and eye catching strategies in contrast to (negative if necessary) emission controls.

On that front India is already a world leader in the production of renewable resource energy: by September this year 36.7% of its capacity was sourced renewably and the subcontinent was also the first in the world to create a Ministry of New and Renewable Energy. It is a net exporter of wind turbine and solar technology to the United States and, especially in its Northern States, India has the perfect climate to power those technologies as well. By 2022 Prime Minister Modi’s Government is planning to install 40 GW capacity of new solar panels on rooftops throughout the country and intends to generate 57% of its total energy needs from renewable sources by 2027 (www.sustainabledevelopment.un.org): 17% in excess of its Paris Climate Accord commitment.

So this much we can certainly be sure of: as the world turns slowly back onto its axis, Joe Biden won’t find a better environmental partner than India.

Red Ribbon Asset Management (www.redribbon.co) 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 Private Equity Fund (www. redribbon.gi) offers unique opportunities to share in this potential.

Find out more about Eco Hotels

ECO HOTELS

Red Ribbon Asset Management is the founder of Eco Hotels, the world’s first carbon neutral mid-market hotel brand, offering “green hospitality” as part of a progressive roll out across India which intended to take full advantage of current market opportunities on the subcontinent.

Executive Overview

I don’t know how history will finally judge the last three and three quarter years of US foreign and domestic policy, but I do welcome the change signalled last week by the President Elect for a new approach to climate change mitigation.

And, of course, that approach isn’t really that new after all. Most nations across the world have maintained their commitment to the Paris Climate Accords since 2016 and will, I’m sure, welcome the US back into the fold.

Nowhere more than India…

A Disruptive Innovator…Modular Construction has become Housing’s Future

By Affordable Housing, Construction Technologies, COVID-19, Economic Growth, Environmental Policy, Housing Need, Housing policy, Modular Construction, News, Productivity, Sustainable Growth

“The arrogance of success is assuming what you did yesterday is enough for tomorrow”: William Pollard wrote that 100 years before Disruptive Innovation theory was formulated in 1955’s Harvard Business Review, but he perfectly captured the essence and importance of understanding disruption innovation in a modern economy.

Think of established companies like Amazon, Google and Uber, business models that have all disrupted existing markets and delivered outcomes that are radically reshaping our future (and our present come to that).

But disruptive innovation is driven as much by market need as invention, and burgeoning housing demand across the planet is currently driving change like never before…so welcome to the world of Modular Construction, and a new future for housing.

Using outmoded technologies, traditional construction companies have become increasingly focused on long-term (high value) projects, where profit margins are high enough to nurture a culture of inefficiency.

All those piles of rusting steel and timber left scattered around when the project finishes, fossilised remnants of yesterday’s world: all those days lost to rain when workers huddle in huts waiting for the sun to come out, and still more days lost waiting for delayed (piecemeal) deliveries, brought slowly to the site by a seemingly endless convoy of lorries.

But, by definition, all that waste matters more if margins are tighter: on lower margin projects, waste and delay on such an industrial scale can turn a viable development into a loss-making disaster.

That’s why traditional developers have (traditionally) paid far less attention to affordable and mid market housing projects, preferring to focus on profitable customers and build yet another penthouse studded glass tower: the inefficiencies of their business model matter less when the client is a Russian oligarch.

Which means more rusting steelwork, more days lost and more time wasted waiting ankle deep in mud for the latest lorry full of bricks to make its way at walking pace through another inner city traffic jam. This outdated model largely ignores speed of delivery, because speed of delivery largely doesn’t matter. Russian Oligarchs have all the time in the world…they can wait.

But the homeless can’t wait: according to Shelter (www.shelter.org.uk) 320,000 people are currently homeless in the United Kingdom (one in 201 of the population), in the United States the figure is 567,000 (a year on year increase of 40% since 2017), and in India 1.77 Million are in housing need despite the Modi Government working to deliver its ambitious Affordable Housing Programme (www.bajajfinserv.in/housing-schemes), striving hard to meet the demands of the fastest growing population on the planet.

And that’s where disruptive innovation comes in…

Adopting smarter and more efficient technologies, smaller construction companies can challenge these dinosaur incumbents: targeting market segments they either can’t or won’t reach, and that means in particular the homeless and those in housing need.

Economic orthodoxy tells us these smaller (disrupter) companies will then move on to gain a progressive foothold in increasingly higher margin segments by delivering better functionality at a lower price.

By making use of their core technological advantage: and finally, the dinosaur developers will also adjust their own business model as disruption takes root: bad news for Russian oligarchs looking for another penthouse, good news for the rest of us.

Modular Construction is a paradigm case in point: units are fabricated off site and delivered in ready to build panels, so no more convoys of lorries delivering materials piecemeal and no more waiting endlessly for them to arrive.

Built to order in a controlled environment, modular units are also higher quality and waste levels are lower, and costs are lower too.

It enables modular platforms to deliver projects at a third of the cost of traditional alternatives, which is why they are moving into (and will eventually take over) lower margin segments in a way traditional developers at the moment find unfathomable.

And it’s why in time dinosaur developers will be forced to change their business model …that’s the power of disruptive innovation.

What we did yesterday is no longer sufficient for tomorrow: Modular Technologies are important for all our futures.

Find out more about Modulex

Modulex modern method of construction

Modulex is setting up the world’s largest steel modular buildings factory based in India. It was established by Red Ribbon to harness the full potential of fast-evolving technologies and deliver at pace to meet the evolving needs of the community.

Modulex is setting up the world’s largest steel modular buildings factory in India.

Executive Overview

According to McKinsey more than 80% of developers are now to a greater or lesser extent committed to modular construction models: that should come as no surprise to anyone. Modular construction delivers faster, at lower cost and with higher quality thresholds than traditional alternatives.

And now, more than ever, we need those benefits to meet the planet’s burgeoning housing need. It’s time for the world to move on…

COVID or no COVID…Demand Trends across the Indian Housing Sector are signalling stronger growth

By Climate Change, COVID-19, Eco Hotels, Economic Growth, Environmental Policy, News, Sustainable Growth

India’s Real Estate sector is the second biggest source of employment on the subcontinent, and a key driver for meeting housing and infrastructure demands across the fastest growing population on the planet. But, of course, COVID lockdowns brought a sudden halt to construction, with many workers returning to their hometowns and leaving sites at a standstill. So, as the industry emerges from its enforced slumber, what do current trends in the Indian housing sector demand tell us about the wellbeing of this vital part of the economy?

Well, the first point to make is that, like most economic shocks, COVID will inevitably be short lived in the long life of the country, but it will also accelerate key changes in the near term …

Phased construction activities have already resumed and more property sales were registered on the subcontinent from June onwards than in COVID blighted March to June. As a result developers are reporting that between 80% and 90% of their labour force is now back on site, and there has been a parallel blizzard of Government MOU’s inviting tenders for new public sector building projects, especially in Bangalore and Chennai (more of which in a moment).

The Indian Government has been particularly anxious to kick start supply side metrics by offering developers a wide variety of incentive packages, including a recently announced six-month extension in project deadlines under the RERA Force Majeure clause.

And back in March The Reserve Bank of India announced a three-month moratorium on developer loan interest (later extended to the end of August: (www.rbi.org.in), as well as a typically aggressive quantitative easing programme which injected a further $ 24.4 Billion into the economy, enhancing short term liquidity for developers and home buyers alike: stamp duty was also reduced as were property registration fees in many States. 

On the demand side, rates for buyers looking for loans are currently running at their lowest for twenty years (about 7%), with added tax exemptions too including a rebate on loan repayments up to $4,747 annually. Small wonder then that key economic indicators have been showing an uptick in the subcontinent’s property markets since September, with a much more positive growth trajectory (expected to tick up further over the next twelve months). 

JLL India reported recently that the first signs of this recovery in the housing market are being seen in major conurbations (with IT magnets like Bangalore and Chennai leading the way: www.jll.co.in), manifesting itself in particular in the affordable and mid-price segments: the Survey found more than 50% of prospective homebuyers are expecting to complete their purchase within the next six months, so it seems the uncertainties of COVID have actually reinvigorated that most basic of human instincts: a home of your own…and one you can move into quickly.

The way Indian homes are being bought is changing too: consumers are determined to move in as quickly as possible and that, combined with GST exemptions, means so called ready homes are currently winning out over off plan sales (which, by their nature, take longer to deliver). That trend will inevitably favour developers making use of modular technologies. Speed of delivery is, after all, everything in the post COVID era and Modular Technologies deliver three times quicker than conventional construction techniques (www.modulex.in).

In turn this has led to a demand side shift in property price structures: off plan properties for completion in six to eight months may not qualify for stamp duty exemption, but the inbuilt delay in completion means they are now 10% cheaper than the ready home alternative: this will fuel greater near term demand as buyers seek out less expensive options, so both models should see benefits as we emerge from the cloud of COVID.

And as we pointed out on this site recently, government funded programmes are also playing their part. India continues to expand its infrastructure base like never before (COVID or no COVID), and that brings us back to Chennai…

Property prices in in and around the conurbation were more or less static between April and June, but from June onwards analysts reported a rapid increase in demand for the ready home, affordable and mid-price segments (see the Insite quarterly report produced by property portal www.99acres.com). Demand for affordable housing in Chennai has risen by more than 60% this quarter, and a key factor is public infrastructure. Affordable properties within easy reach of the new Siruseri IT Park saw a 9% increase in demand (for sales and rentals), and new highways and improved connectivity to the northern and southern belts of the City have seen sales from Sholinganallur to Tambaram skyrocket. The influx of IT workers together with all those new highways and science parks are pushing prices the roof.

So across the vast territory of the subcontinent, demand in the Indian housing sector is trending inexorably upwards…COVID or no COVID. That can only be good for the future of the economy.

Invest in Red Ribbon Asset Management

Red Ribbon is committed to identifying and building on investment opportunities that are fully in compliance with its core Planet, People, Profit policy: not only offering above market rate returns for investors but also protecting our Natural Capital through innovative programmes like the Eco Hotels Project.

Executive Overview

The subcontinent’s real estate markets are starting to move steadily forward: supported by innovative Government and Central Bank initiatives, but most of all by resurgent levels of consumer demand.

Construction is already (and always has been) a key element of the economy so that can only bode well for the future.

Growing Better by Being Smarter… Sustainability and Economic Growth go Hand in Hand

By Climate Change, COVID-19, Eco Hotels, Economic Growth, Environmental Policy, News, Sustainable Growth

According to NASA figures (and who’s going to argue with them), we’ve just lived through the hottest September ever: wildfires raged in California, the Amazon Rainforest is still on fire (as it has been since August 2019) and Donald Trump was driven to muse about new “Forest Cities”.

The United Kingdom recorded its wettest September day ever, with a single day’s deluge producing enough rain to fill Loch Ness. And over the last twenty-five years, the Great Barrier Reef has more than halved in size, having been around (undiminished) for more than 500,000 years before that. Every successive decade since 1980 has been hotter than the last, and the previous five years have been the hottest ever.

Only the most swivel-eyed, gimlet lipped climate change denier; only Forest City fantasists of the most extreme kind, could fail to see the signals. Our precious planet is in trouble…

Which is precisely why most countries around the world (except for those currently led by swivel-eyed fantasists) are now committed to ambitious climate mitigation programmes of various stripes and colours: and even in the United States, Joe Biden’s Democrats are committed (if elected) to deliver their Plan for Climate Change which will cost something in the order of $ 2 Trillion. The European Green Deal has been costed at $180 Billion, and China’s National Strategy for Climate Change Adaptation is expected to cost a nose bleed inducing $6.6 trillion: all of those figures daunting, but doing nothing isn’t exactly an option (see above).

So where’s all this money supposed to be coming from? Most economies across the globe are still struggling to come to terms with the impact of COVID-19, and we aren’t exactly living through a period of sustainable economic growth.

Added to which most climate mitigation programmes slow down traditional growth vectors, especially so in economies with a high dependence on fossil fuels (like China), those undergoing rapid economic expansion (like India) and those experiencing exponential population growth (India and China).

So how can effective mitigation actually be delivered in an employment and growth-friendly way, protecting key economies and ensuring, perhaps above all else, that the world’s poor aren’t left behind in the process? How can a policy with a built-in tendency to slow down an economy also create the growth it needs to move forward? As Hamlet might have said (in an expanded script) that’s a very interesting question…

And it turns out there’s an equally interesting answer.

The IMF this month produced a blueprint for sustainable economic growth of precisely the kind required, dauntingly titled “A Long and Difficult Ascent” and structured around the central thesis that climate mitigation strategies can also foster growth, even in those vulnerable economies with high levels of fossil fuel dependency and fast-expanding populations. It can do it through a twin-track strategy of creating “an 80% subsidy rate for renewables production” and then combining it with a ten-year public investment programme, which the IMF calls a “Green Investment Push”. And not only is that a much more jaunty tagline than the puritan sounding “long and difficult ascent”, but it is substantially based on policies that have (to a greater lesser extent) already been tried and tested. Analysts predict that in conjunction with a programme of steadily increasing carbon prices (which has also been tried before), the “Push” can increase growth rates annually globe by 0.7% over the next fifteen years and decrease carbon emissions to zero by 2050.

And that 0.7% may not sound a lot, but based on Global GDP last year it amounts to $994,000,000,000 every year for the next fifteen years, or $14.9 Trillion in all: more than seven times the amount needed to pay for Joe Biden’s Climate Mitigation Plan and enough to make the European Green Deal look like a pocket money project. And that, in a nutshell, is how climate change can be addressed, mitigated and paid for in our rapidly changing world.

With the typical understatement of a bureaucrat wearing hush puppies and checking for typos, the IMF’s Chief Economist predicted The Green Investment Push would put the global economy “on a stronger and more sustainable footing over the near term”.

You can say that again…it certainly beats watching more forests blaze into flames live on Fox News, and Loch Ness brimming over with rain. It just takes a little ambition and pluck (as Hamlet might also have said).

Red Ribbon is committed to identifying and building on investment opportunities that are fully in compliance with its core Planet, People, Profit policy: not only offering above market rate returns for investors but also protecting our Natural Capital through innovative programmes like the Project.

Find out more about Eco Hotels

ECO HOTELS

Red Ribbon Asset Management is the founder of Eco Hotels, the world’s first carbon neutral mid-market hotel brand, offering “green hospitality” as part of a progressive roll out across India which intended to take full advantage of current market opportunities on the subcontinent.

Executive Overview

We desperately need to square the circle and reconcile economic growth with sustainable, planet friendly programmes; and to my mind the newly unveiled IMF Green Investment Push is capable of doing just that. 

It’s certainly a programme we as Red Ribbon can happily buy into, having placed Planet, People and Profit at the very heart of our vision since the company was founded more than a decade ago.

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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