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Asset Growth Archives - Red Ribbon Asset Management

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

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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.

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.

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

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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.

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

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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.

Who is J Christopher Giancarlo anyway, and why is India the future of Blockchain?

Who is J Christopher Giancarlo anyway, and why is India the future of Blockchain?

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Just when we were waiting for Theresa May to leave Downing Street and Donald Trump to come to Regents Park, J. Christopher Giancarlo has pulled stumps without fanfare or ceremony and left altogether, he just went. But who is this fellow and why should we be interested in him anyway? Well, taking those questions in order: he is (or rather was) the Chairman of the US Commodity Futures Trading Commission (“UFTC”), and we should be interested in him because he’s only been regulating our crypto and Blockchain markets for the last two and a half years.

This is the man who describes himself as being humbled at being called “Crypto Dad”; a regular chap who grew up amongst the exotic complexities of Blockchain, and a self-confessed “quantitative regulator” with an “exponential growth mindset” (whatever those might mean).

But the fact remains that although this Bitcoin ubermensch made it his mantra in office to  “embrace market based solutions” in a period of digital revolution, he ultimately turned out to be a reactionary: the Flight Control Jeremiah with a divine mission to tell anyone who will listen that landing on the moon is impossible. In 2017 he told us (without a smile on his face) that fiat currencies and ICOs were too complicated for your average Joe, that they should be discouraged and it might be better to stick with paper stock and assets you can photocopy. So much for embracing our digital times…

But, as someone once said (Margaret Thatcher actually), you can’t buck the market and as e watch J. Christopher Giancarlo retreat from the world stage to spend more time with his money, the markets are already finding a new home where Blockchain can spread its wings and rise to its full potential: half a world away, in India.

 In particular, the Reserve Bank of India now seems to be regretting its hasty decision to ride on Mr Giancarlo’s coat tails last year, by issuing a directive effectively banning crypto banking activities on the subcontinent. Counter intuitively, and as is often the way with that sort of precipitate, ill thought out action, the RBI Directive has actually signalled something of a renaissance in Blockchain technologies in India, stepping up to occupy the yawning regulatory gap left by the UFTC.

It did this first through an explosion in exchange escrowed peer-to-peer services, designed to allow cyber markets to thrive with little or no regulation. And secondly, because a lack of regulation is inherently a bad thing (ask Carillion), court proceedings were issued by the Internet and Mobile Association of India (hardly surprising given it is the fastest growing mobile and internet market in the world): the proceedings sought to overturn the Reserve Bank’s 2018 decision on the basis it was unlawful (commercial myopia not being a legal basis of challenge). And significantly, these proceedings have now reached the Supreme Court of India.

 The Supreme Court last month heard submissions in the action on behalf of the Reserve Bank that its Committee, tasked with overseeing regulation of crypto markets, had reached “…the final stages of its deliberations, and these proceedings should be delayed until after its report is produced”. In other words, and in plain English: Dear Judges, delay your ruling because we and the Government are going to give in. Crypto markets, Bitcoin and Blockchain are about to step into the daylight on a new Indian stage after being consigned to the gloom by Mr Giancarlo.

The Court didn’t need telling twice: it quickly granted the Reserve Bank a four-week adjournment to allow an “opportunity for the Government to do the needful”.

And this, in short, is how international markets actually work. One leading regulator declines to accept the challenge posed by a new sector, so another steps forward to take its place. The United States gives way to India, because markets abhor a vacuum. And having called it so badly, last year it is greatly to the Reserve Bank and the Government’s credit that they have now shown themselves ready to take on the challenge. They are certainly unlikely to meet any lack of appetite for Crypto markets amongst its fellow citizens or across the wider commercial world. The torch has been passed to a new generation of regulators….as someone else might once have (almost) said.

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 Private Equity Fund offers unique opportunities to share in the potential of this, the fastest growing large economy on the planet.

 

Executive Overview

I remember being surprised when I read the comments made by India’s Finance Minister in the Union Budget Debate last year, comments which caused the value of Bitcoin to soar on international exchanges and which seem directly to have precipitated the Reserve Bank’s intervention as described in the article. I remember too thinking that whatever the merits of Bitcoin and Blockchain might be, this was at least a powerful statement of the role that India might play in any future Blockchain driven market.

And now we seem to have come full circle.

The comments made in the Supreme Court on behalf of the Reserve Bank of India (and, at least by implication, on behalf of the Government as well) clearly signal a willingness to step into the regulatory void left by the United States and meet the challenges and opportunities posed by Blockchain on a concerted basis. And in a sector so obviously in need of regulation and so obviously lacking in effective oversight to date, that has to be a good thing.

So watch this space, it should get interesting!

Kaam, Daam...thank you Ma’am: Indian Housing Policy and the Congress Manifesto

Kaam, Daam…thank you Ma’am: Indian Housing Policy and the Congress Manifesto

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As the World’s largest democracy rumbles towards the finishing line in its polling marathon and with a final announcement due 23 May, neither of its major parties have been pulling their punches. The Congress Manifesto branded BJP’s Smart Cities Mission a “colossal failure and a waste of money with no visible results”. Unlike Jeremy Corbyn then, Rahul Ghandi doesn’t seem to have any difficulty getting off the fence, but spirited and unequivocal as his comments might be, is Congress right to be so critical of BJP’s performance in this crucial policy area?

In the Kaam (“Employment and Growth”) section of its Manifesto, the Congress Party rightly draws attention to the major implications of India’s increasing urbanisation: with more than a third of its population now living in the subcontinent’s sprawling urban conurbations and growing rapidly day by day, what is to be done about the significant macroeconomic challenges this creates? Certainly it feels like something of an understatement for Congress simply to highlight that “India’s Cities can become engines of growth’ when the real question is surely what does it all mean and where is the trend leading.

And it is here that the Manifesto falls strikingly short on detail. Rather than advancing concrete proposals, Congress promises instead that it expects to “formulate a comprehensive policy of urbanisation after wide consultation” and will “support State Governments to build new towns and cities” all of which means very little, and feel alarmingly like the kind of phrases Sir Humphrey Appleby might have coined (or Theresa May in “strong and stable mode”). Perhaps more bravely (or at least more concretely) Congress commits itself to giving the urban poor a “right to housing” and, until the right materialises, a programme of night shelters and clean water for all.

Especially on such an important issue, it all sounds troublingly like jam tomorrow. But doesn’t Nigel Farage remorselessly tell us manifestos and modern politics don’t mix. What should we make of it all? Has the Modi inspired Smart Cities Mission really been nothing short of a dismal failure?

Well, as with most (if not all) matters political, the BJP Policy has certainly not been an unmitigated diet of bread and roses, but to call it a “colossal failure” and a “waste of money” is going way, way too far the other way.

In July last year Prime Minister Modi announced that the Affordable Housing target would be met by 2022, with 5.4 Million homes already by then having received approval for construction out of the target total of 10 Million. And fast forward, by March this year the number of homes approved for construction had risen to 8 Million: well ahead of the rate required to pipeline a further 2 Million within the next two and a half years so as to meet target. Bear in mind too that 8 million figure already achieved is more than the entire number of properties approved for construction in the 10 years of Modi’s immediate predecessors in office.

The problem, as you might imagine, is the real world difference between approving a property for construction and actually building a property. As of March this year only 1.8 million of these 8 Million homes had actually been topped out and occupied. And whilst it takes roughly a year to secure administrative approval (a figure which has incidentally fallen as a result of the Modi “red tape “reforms), the average time it takes to build a property in India is still currently 8 months. That may be where Congress had intended to direct their fire, despite saying little if anything about what they might do instead.

So lets take a look at the nuts and bolts: there are three key factors giving rise to this serious drag in approval to final construction timing: first, an industry wide deficit across the subcontinent in construction technologies; second, a scarcity of urban land and third, the significantly higher price of land in areas such as Mumbai and Delhi. You can’t do much about land availability and market price, so the first of these three is by far the most important.

And that’s one reason why Modular Construction has now risen to the top of the political agenda in India, with a capacity to reduce construction times from 8 months to 6 weeks it is a genuine game changer, which makes it all the more odd that Congress hasn’t made more of its potential in their Manifesto rather than focusing on what are essentially tired and negative platitudes on this, an issue of the greatest social importance.

Modulex Construction is the World’s largest and India’s first Steel Modular Building Company, working to meet the challenge of the subcontinent’s urban housing shortages in a practical and focussed manner. It was established to harness the potential of India’s dynamic and fast evolving markets and to deliver opportunities for investors through Red Ribbon Asset Management.

Executive Overview

Whichever side comes out top in these elections, there will be no escaping the imperative to with the economic after effects of India’s status as the fastest growing large economy in the World, with a burgeoning and increasingly urbanised population projected to be the largest on the planet by 2022. That presents not only challenges but opportunities and that will inevitably make the subcontinent an attractive proposition for any investor.

And as the article points out, there is no escaping the sheer scale of the real estate challenge India currently faces. Traditional technologies just can’t cope with the sheer scale and pace of the delivery required, no matter how successful BJP policies might have been (and they have been successful) in cutting away the unacceptable levels of red tape that previously disfigured the subcontinent’s approval process.

No wonder then than Modular Construction has become policy priority for the Modi Administration. I expect it will only be a question of time before others follow suit…

India’s economic growth outlook remains positive despite weaker-than-expected GDP

By Archive, India, News No Comments

An initial glance at India’s third fiscal quarter GDP data may have proved mildly disappointing for some. However, looking into the deeper details of the report shows a brighter picture than might have been expected. In addition, the data is backward looking and not overly indicative of what the future holds for India’s economy. This week, we take a closer look at the data and consult more timely measures and assessments of India’s economic performance.

Last week India’s Central Statistics Office (CSO) published the latest GDP figures for the country, which showed growth slowed to 6.6% in the final three months of 2018, the third quarter of India’s fiscal year.

The initial reaction was of disappointment, as the number was below the median estimate for GDP to grow 6.7%. Added to that was the downward revision to GDP growth in the previous quarter; the CSO now calculates GDP grew by 7% in the second quarter of India’s fiscal year cycle, down from the 7.1% increase previously reported. However, the report also contained some positive details, particularly with regards to investment activity.

Separately, more timely survey data on the country’s manufacturing sector along with a broadly upbeat assessment from Moody’s Investor Service also provided brighter news on an economy that is still expected to grow at a rate above that of the broader global trend, for some years, thanks to increasingly business friendly policies and the continued urbanisation of a country with a population of around 1.34 billion.

India’s third quarter GDP details

The details of the GDP data showed a mixed performance across the country’s shifting economy. Growth in the agricultural sector proved a disappointment, as it was notably weaker when compared with GDP from the previous year.  The manufacturing sector also posted a slower pace of growth.

Other sectors were much more promising for the future outlook of the country, including strong readings from the construction and the financial and real estate professional services sector.

Meanwhile, the report also showed that average per capita incomes, were higher than the previous year. Add to that, higher levels of consumer spending and investment, along with stronger exports levels and the overall picture of India’s countrywide economic performance in the third fiscal quarter, is indicative of broad health.

In addition to the detail highlighting strength across India’ economy, was the news that despite a weaker than expected reading and a downgrade to the second quarter growth number, other economies are slowing too. That shows that while India is being affected by other global issues, so far it hasn’t lost as much momentum – or looking likely to – as some other countries have.

But, as we know, while the GDP numbers provide plenty of interesting details on India’s economy, it is a backward-looking assessment. Other, more timely surveys and assessments, proved that despite a situation which has resulted in a tough period for many farmers and led to the Government creation of a financial relief package for them and difficulties with Pakistan, the Indian economy remains in a promising position.

Manufacturing growth expands, growth seen steady

The latest manufacturing purchasing managers index from IHS Markit, meanwhile, which was published just hours after the GDP data, showed that activity in the sector grew at the fastest pace in 14 months. Orders, output and employment across the manufacturing industry were all upbeat, providing a boost.

But that wasn’t the only up-to-date piece of positive news on India’s economy. In its latest Global Macro Outlook, Moody’s Investor Service predicted stable economic growth for the country over the next two years. That was despite its view for the global economy to weaken across 2019 and 2020.

As asset investment managers with a specific interest in India, we pay close attention to all relevant details about the country’s economy, plans, Government and investment-related news and opportunities. We know that the final months of 2018 weren’t quite as strong for India as previous quarters. However, policy makers are also acutely aware of this and that detail was among the reasons for the recent interest rate cut – action that will likely be repeated in a few months.

For Prime Minister Narendra Modi, the headline GDP data was likely considered a bit of a blow, coming as the 2019 General Election approaches. As we’ve detailed though, it’s not the only measure to take notice of.

Investment in India remains strong and not surprisingly, worthwhile opportunities are developing all the time. Whether you’re interested in eco-friendly assets, modular construction possibilities or infrastructure related options, India is currently a real land of opportunity for investors and will be for some years to come.

Red Ribbon CEO, Suchit Punnose said:

The latest CSO release of India’s third quarter fiscal GDP are a case in point. The headline number was a little disappointing. However, the details showed key areas performed well and are primed to remain economically supportive going forward. Overall, India’s economy is in a stronger position than other major countries, which is good news for existing and prospective investors.

We continue to identify the best investment opportunities for ourselves and our clients and believe there are many more years of positive investment outcomes across India, ahead of us.

Affordable housing and slum redevelopment

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

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

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

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

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

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

PPP and affordable housing

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

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

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

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

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

How to access India’s affordable real estate investment opportunities

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

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

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

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

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

 

Red Ribbon CEO, Suchit Punnose said:

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

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

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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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