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

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

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

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

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

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

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

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

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

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

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

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

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

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

 

Executive Overview

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

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

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

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…

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.

Modular Construction

Saving Time, Money and the Environment through Modular Construction

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Saving Time, Money and the Environment through Modular Construction

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

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

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

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

Saving you time and money

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

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

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

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

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

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

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

Environmental benefits

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

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

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

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

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

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

Red Ribbon CEO, Suchit Punnose said:

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

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

Indian Rupee

Broad-based planning supportive of India’s economic ambition

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It may be a New Year, but in many countries, old worries remain. Take the UK, for example. Brexit is as uncertain as ever and that’s unlikely to change any time soon. Not only have forecasts for economic growth in the country been tempered by the lack of a clear path for Brexit, the latest survey data from IHS Markit have served to underscore the worry felt by consumers and businesses, with the country’s dominant services sector close to stagnation during December.

However, the UK isn’t the only country experiencing uncertainty as to how 2019 will unfold.

India has an interesting 12 months ahead as incumbent Prime Minister Narendra Modi must work hard to maintain his position, after recent state election results make the likelihood of a new leader a real possibility. However, Modi has begun 2019 with ideas and a plan to show his support of the large farming industry, which is unhappy with the lack of fiscal support from the Government.

Speaking at the India Science Congress this week, the India PM urged scientists to find low-cost solutions for ‘social good’, including the creation of more affordable and balanced agriculture industry and using big data analytics to improve crop yields for farmers with smaller holdings. Introducing this element to the PM’s broader outlook for India’s economic development may always have been the plan.

Although, there will likely be many who will say its merely a move to encourage more votes in an election year. Regardless of the truth, this latest step is a further sign that Modi’s economic ambitions for the country remain front-and-centre.

Economic outlook

Even before this latest speech, the outlook for growth in the country was upbeat, particularly when compared with global competitors. Despite some GDP forecast downgrades from the likes of Fitch Ratings and the OECD – to a still healthy 7.2% and 7.3% respectively – India is assessed to have outpaced China during 2018 and to do so again in 2019. India’s finance ministry, meanwhile, forecasts economic expansion of 7.8% during 2019, which would likely be similar to the average pace of growth across 2018, despite the slowdown to 7.1% in the third quarter.

Indeed, it appears that the third quarter GDP number is partly behind most of the forecast reductions, although other details also weigh.

They include:

  • Generally weaker global GDP outlook.
  • Global trade worries.
  • Liquidity squeeze.

Modi and his Government, however, are upbeat and standing firm on their positive outlook. Many would say, with good reason.

Despite the difficult global scenario, some developments have been in India’s favour. The high price of crude oil has receded, despite the sanctions against Iran. Meanwhile, the country has moved up the World Bank’s ‘ease of doing business’ rankings. And while there has been some disagreement over the Government’s demands for the Reserve Bank of India to relax some restrictions on weaker banks, inflation has remained under control.

The decision to remain firm on many fiscal elements of governance while creating a more supportive backdrop for businesses and consumers, has been a core driver of the strong level of economic expansion across India. It appears that focus on moving forward with policies designed to encourage start-ups and innovation is very much still in place.

Modi told delegates at the Science Congress that following on from its success of improving its ‘ease of doing business’ score, it must now work to improve the ‘ease of living’ in India. That requires a broad-based plan; working to support businesses across every industry, supporting innovation and new ideas, job creation across every industry and providing a stronger and more reliable infrastructure for consumers.

At Red Ribbon we understand the importance of introducing innovative developments into an existing industry, which is why we believe the Eco Hotel industry is one that can help ensure India’s economic growth ambitions will succeed and even exceed expectations.

Red Ribbon CEO, Suchit Punnose said:

An economy the size of India’s will only flourish if a broad-based outlook is in place that also supports innovation and allows every industry to move in an agile fashion, particularly when it becomes clear that a new approach is required. India’s leisure and tourism industry is a case in point. It draws tourists from within and without the country to its variety of regions and attractions. Introducing a new type of accommodation, such as Eco Hotels, will work to add yet another string to India’s bow as the destination of choice for an even broader range of holiday-makers and business travellers, while supporting jobs growth and industry innovation at the same time. As long as business start-ups and industry innovations are supported and encouraged, they will only have a positive impact on India’s economy, the standard of living and the global environment.

India Cryptocurrency - Red Ribbon Asset Management Plc

India retains cautious Cryptocurrency stance

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India retains cautious cryptocurrency stance

A raft of recent news reports and blogs posts, suggest that those involved in the cryptocurrency markets are becoming a little impatient with the Indian Government and the Reserve Bank of India’s (RBI) caution relating to that specific financial sub-sector. The reports contain some conflicting views from different members of the two panels that are working to research cryptocurrencies and put a regulatory framework in place. However, despite a lack of real progress it appears the overall, official tone towards the crypto market is less negative than it previously was.

One of the Indian government’s panels currently researching the cryptocurrency markets is set to submit a report on its findings. That keenly awaited report has been delayed from July 2018 and right now, no time line is in place for it to be finalised and published. This detail is the cause of some of that unrest.

With that report being delayed, it’s no surprise that any details on possible virtual currency regulation in India is also taking time to be finalised. Without the approved findings of the official report, it simply doesn’t make any sense for a regulatory framework to be put in place.

Among the most likely reasons behind the slow progress of any official view and policy on cryptocurrencies across India, is the lack of a global steer. Also, and perhaps more importantly, is a lack of detailed knowledge and information on exactly what impact cryptocurrencies can have on the economy, particularly over the medium-to-long-term.

Some support for virtual currencies

While uncertainty over exactly how India will regulate and permit cryptocurrencies to be traded and taxed remains, it does appear that the Indian government is more positive on them becoming a permanent part of its financial landscape, than it was.

The Financial Stability Board (FSB), which India is a part of, has said that virtual currencies are not a threat.

“The FSB has undertaken a review of the financial stability risks posed by the rapid growth of crypto-assets. Its initial assessment is that crypto-assets do not pose risks to global financial stability currently,” the RBI report quoted the FSB as stating.

That’s a positive note and relevant to the discussions and research that are ongoing.

Getting it right

Despite that glimmer of support for crypto-currencies, global governments, central banks and other relevant bodies continue to move slowly with regards to implementing official regulation and plans to regulate Bitcoin, et al. But really, is it any wonder?

After surging in value during 2017, many virtual currencies then lost much of those gains during 2018. And now…? Well, the future for those currencies is very much unknown, particularly coming against a backdrop of so much broad-based uncertainty elsewhere.

Of course, the blockchain system that underpins cryptocurrencies is something that the Indian government and RBI are interested in, as are other countries and industries. But, having regulation and utilising one, is likely impossible without also having the other.

This is without doubt, another major reason why the panels formed to investigate cryptocurrencies are taking their time to collate all the details and submit a detailed and useful report. If blockchain is to become a part of India’s government, business industries and the economy, then it’s essential that any risks relating to supporting a regulated cryptocurrency network is clear, robust and performs the task it was created for.

India as a nation is one that welcomes change and new ways of doing things – provided it’s beneficial for the economy and its population. Even though it’s likely that virtual currencies and blockchain fall under that category, both the government and the RBI are right to be cautious over any policy and regulation that’s created, so they can be certain it’s right for India’s economy and its huge population, with its growing appetite for all things digital.

Nobody understands this market potential quite like Red Ribbon, which has placed India at the heart of its investment strategies since the company was founded more than a decade ago. Drawing on a pool of established expertise on Indian market conditions, Red Ribbon Asset Management offers a unique opportunity to share in that potential.

Red Ribbon CEO, Suchit Punnose said:

India’s appetite to be at the forefront of new technology is continuing to develop. However, even though some countries have begun a light touch regulatory oversight on cryptocurrencies, that doesn’t mean the government or RBI will rush into something that has the potential to impact India’s economy and financial landscape over the longer-term.

Indeed, a cautious outlook doesn’t mean digital currencies have no place, or an insignificant one for India’s economy. In fact, it’s more likely to suggest the opposite and that as a country, the government and central bank want to be sure they get their policy implementation on it, just right.

At Red Ribbon, we have the same attitude to new and developing opportunities. We’re willing to take some risk on new industries and investment opportunities, but only when we know exactly what those new industries have done and have the potential to achieve. With Eco Hotels and Modulex, we’ve worked hard to ensure we understand everything those businesses stand for and what they’re capable of, not only from an investment perspective, but on a global sustainability aspect, too.

Eco Hospitality benefits India economy - Red Ribbon Asset Management Plc

How Eco Hospitality provides a double benefit for India’s economy

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How Eco Hospitality provides a double benefit for India’s economy

The World Bank’s January 2019 Global Prospects Report shows that the United Nations institution continues to expect economic growth across India to expand in 2019 and beyond. The group’s estimate for full-year GDP growth in 2018 is for 7.3%. Meanwhile, the World Bank is also anticipating that level to rise to full-year GDP growth of 7.5% in 2019, 2020 and 2021.

There are many details that go into a forecast like this, which means it is an absolutely achievable and likely outcome. However, if some of the assumptions made in those forecasts don’t proceed as expected. Or, something completely unexpected occurs, then India’s economy could either exceed or fail to achieve that forecast rate of growth.

Another interesting figure that has recently been published about India’s economy, comes from the Indian Government’s Ministry of Statistics. According to its 2018 Environmental statistics, the natural capital in 11 of India’s states has declined. Natural Capital “refers to all types of environmental assets existing in the environment” according to the report.

Once again, a lot of work and details go into creating these data and stats to produce reliable and correct information.
The figures in that painstakingly generated report suggest that, at least in some parts of India, pure economic growth is being achieved at the expense of the country’s natural capital, or native environment. And that’s not something that can be allowed to continue unchecked. At least not if the economy is to remain on a long-term and sustainable, positive economic growth path.

 

Sustainable, eco-industry

With that in mind, we now turn to a specific part of India’s growing economy, the Eco, or green sector. While much thought is being put into how to ensure residential building and consumer habits are increasingly sustainable and Eco-friendly, another key area in which India is already developing an Eco-footprint in, is hospitality.

For a country that welcomed over 10 million overseas tourists during 2017 – an increase of 14% in number and 15.4% in income generation – it’s a sizable industry. In GDP terms, the total contribution from travel and tourism across India made up 9.4% of India’s GDP in 2017, likely rising to around 17% in 2018, according to the World Travel and Tourism Council.

If, however, efforts into supporting and growing the eco-hospitality sector of the travel and tourism industry continue, or even gain pace, not only will green hotels, eco holiday destinations and sustainable tourist hot spots generate welcome income for the economy, it will also help improve and even expand the country’s natural capital. That’s something that’s a double boon for the sub-continent that consistently strives to develop, advance and improve.

Eco Hotels is among the green businesses that are investing in India’s economy, in a sustainable way. The world’s first carbon neutral, mid-market hotel brand has been operating since 2012 and is a popular option, for businesses, investors and also among those travellers who include Eco credentials in their search for holiday accommodation.

Growing India’s eco-hospitality sector is something that is will undoubtedly help ensure the country’s travel and tourism industry will contribute to both the financial GDP figures and its nature capital. But, even better, positive eco changes in one country actually contribute to green credentials and work towards stopping climate change on a global basis too.

With so many benefits to be gained from Eco hospitality, there’s little doubt as to just how valuable it is to India’s economic, business and green ambitions.

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.

Red Ribbon CEO, Suchit Punnose said:

Understanding the full implications of the way in which a country achieves economic expansion is an essential part of working towards maximising that country’s growth potential, while also making sure all the ingredients required to continue growing and innovating remain available. While the 11 states experiencing a decline in their nature capital account for fewer than half of India’s regions, its not something that should be ignored.

With Eco Hotels, Red Ribbon is putting both India’s economy and nature capital at the heart of its investment strategy. Combatting climate change, promoting sustainable industry and creating profitable carbon neutral businesses, is the right way to create an investment that will remain popular and relevant for years to come.

India Economic Evolution - Republic Day - Red Ribbon Asset Management Plc

India’s economic fortunes in the 70 years since gaining independence

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India’s economic fortunes in the 70 years since gaining independence

This year’s Republic Day in India marks the 70th anniversary since it truly became an independent country, with its first elected President after the withdrawal of British rule in 1947. Since then, every year on January 26th, the nation celebrates its hard-won achievement.

India’s first elected President was Dr. Rajendra Prasad, who took his oath at the Durbar Hall in Government House. Since that time, India has proudly voted for its own President during elections and celebrates that independence with joy and jubilation.

Of course, the year is now 2019 and many things have changed since 1950. Ram Nath Kovind is the country’s 14th President, with Narendra Modi serving as Prime Minister. The economic landscape is very different from 70 years ago and it continues to transform further as a combination of financial, digital and ecological developments demand.

Economic output

It’s never easy to gain a true comparison of economic performance between years gone by and any given year in today’s era. However, the available data does give an idea of the make up of economic growth and also the rate at which a country expands – or contracts.

Given India’s size, population, agricultural performance and the more recent growth of eCommerce and finance, you likely won’t be surprised to find that the current pace of GDP growth is superior compared to the rates of growth achieved in 1950.

Data from India’s Central Statistics Office shows that GDP growth in the 1951-52 financial year was 2.3%, with the main contributor to that growth, being the agricultural sector.

Until recently, academics have placed India’s average rate of GDP growth at somewhere between the 3.5% to 4.5% level. But that average is well below the 7.5% rate of GDP growth anticipated for 2018 and also that masks many peaks and changes in the country’s fortunes and chosen paths.

The official data show that after some notable peaks and troughs, GDP has been broadly positive and even prosperous since the 1980s. India’s economic landscape, however, has shown a consistent picture of agriculture losing its place as the major part of the economy, being replaced by the services sector.

Where agriculture made up over half of activity and profits in the 1950s, it now accounts for around 18% of GDP growth, despite employing close to 50% of its population. The services sector, meanwhile, has doubled from a proportion of around 30% of GDP in the 1950’s to the 60% mark, today.

This switch between the dominance of two key industries across India highlights the way technology and digitisation have evolved and been embraced across the country and indeed, the world. While some pain has been felt along the way during that transformation, it also shows that even though it is a huge country with an impressive population, it is able to recognise when change is required and crucially, to implement that change.

Modern economic drivers

Republic Day is a wonderful to day to remember that after 20 years of struggling to gain independence, it was finally achieved. It is also a day to reflect on how, as an independent country, India has chosen to adapt to and even welcome wide-reaching changes, today.

Technology and digitization is something that has affected every industry and by embracing that, the future for India’s economy has become brighter.

Manufacturing has changed thanks to the way technology has enhanced its capabilities and made it a safer environment for its workers. Meanwhile, tourism and eco-hospitality are also examples of where the abilities of technology, combined with the wants of a modern society, can be incorporated to produce something that not only services the needs of consumers, but also the needs of the environment in the name of sustainability.

Red Ribbon CEO, Suchit Punnose said:

Republic Day is a special day, not only because of the celebrations that mark its passing, but also because it underscores that as a country, India is always moving forward, developing and achieving thanks to its own population and ability to embrace change.

Red Ribbon embodies that sentiment and our investment in industries such as modular construction, through Modulex and the eco-hospitality sector, with Eco-Hotels, show that we’re always looking towards supporting a prosperous future for India’s economy and vast population.

We look forward to continuing to play our part in India’s future, participating to the utmost in the opportunities the subcontinent’s explosive growth has to offer and at the same time providing above market rate returns from our investors in what I am convinced will continue to be one of the world’s most exciting markets for many years to come.

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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