Oct focus

The Ecobizz Newsletter 1

2 November 2014 The Ecobizz Newsletter 3

IBS HYDERABAD

THE TEAM

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FROM THE EDITOR

Amidst the eventful schedules and vibrant happenings of IBS Hyderabad, Club Ecobizz is proud to come up with the October 2014 issue of its ever old, yet still young magazine, THE FO-CUS. Read on to find out the cover story on Feminism in African Economy. The story how the rational mindset and equidistribution of socio economic power to women can transform a sleeping economy to an emerging one. As always, we are open for feedback and suggestions. We also take the opportunity to thank our readers and cherish their continued association with FOCUS .Heres hoping that you have an augmented reading. Warm RegardsThe Editorial Team

WHERE ECONOMY MEETS BUSINESS

EditorsMessage

CONTENTPublished by Club Ecobizz, IBS Hyderabad Editor In Chief Ms. Anupriya Chaturvedi E-mail: [email protected]

Chief AdvisorMr. Ransingh Subhrajit RayExecutive member, Club EcobizzE-mail: [email protected]

Designed and conceived byMr. Siddharth PadhiaryE-mail: [email protected]

Proof Read byMr. Abhishek SharmaE-mail: [email protected]

Editorial teamMr. Joseph ChandyMr. Abhijeet NaiduMs. Arushi JotwaniMr. Dev Chandan

ContributionsTeam Ecobizz

04 Water Economics - Ransingh Subhrajit Ray 10 2014 A New India - Ramakrishna Iyer

14 Make In India - Sakshi Bhalla

COVER STORY18 Feminism In African Economy - Abhishek Sharma 24 Jan Dhan Yojna - Aditya Jathar

30 Real Estate Investment Funds - Dev Chandan


IBS HYDERABAD WATERECONOMICS

Extraction of ground water is not only an expensive task but also results in depletion of water table, causing imbalance in nature


IBS HYDERABAD

With increasing population and thereby the demand, fresh water available on earth is getting scarce.

WATERECONOMICSIn context of water suppy to indian cities

Water, an essential chemical which supports life, has immeasurable use value. It constitutes 70% of body and covers 70% of earths surface. Of the total water available only 2.5% is present as fresh water, 70% of which is frozen in polar region and less than 0.007% of all water available is available for human consumption. Civilizations originated and grew in and around places with abundant fresh water supply, and civilizations perished or relocated when scarcity struck. With increasing population and thereby the demand, fresh water available on earth is getting scarce. This scarcity is thereby creating the opportunity to think about the economic importance of Water as a product. Government, as part of Supply Side Economics, provides water to citizens at a negligible price, making it a sort of public good. But the economic importance of water is realized when a rupee is increased or charged extra on the packaged drinking water while travelling in train or travelling through the Thar. It might sound less logical, but it is high time to plan the strategies to reduce the wastage of fresh drinking water where resources are plenty

and increase supply where the availability in less, to balance the economics of water and increase the exchange value of water. What does Scarcity of water really mean? It is unavailability of water in required form, state, taste and amount, to be extracted economically when and where ever needed. As per Indian Governments report 22 of Indias 32 big cities are facing acute water crisis, even though many of these big cities like Delhi and Kanpur are placed on bank of big rivers like Yamuna and Ganges respectively.

The demand-supply gap is too high to be supplemented in many urban areas. The reasons are many. If we consider, the National Capital Delhi, the nearest possible and abundant source, Yamuna, is so much polluted that the extraction of potable water is quite expensive after Wazirabad Barrage. 62% of total sewerage generated in Delhi falls directly into Yamuna without any pretreatment. Though Wazirabad Barrage caters to 70% of Delhi water supplies, the 22km stretch between Wazirabad Barrage and Okhla Barrage gets polluted by untreated or less treated

The sources of Revenue for Delhi Jal Board are Water Charges, Scavenging Tax, Gas Charges and Development Charges.

Government provides water at subsidized rate, creating a dead weight loss.

INFORMATION, NE WS AND SUPPOR T

As per Indian Governments report 22 of Indias 32 big cities are facing acute water crisis

Water is life. It is precon-dition for human, animal and plant life as well as an indispensible resource for the economy.

IBS HYDERABAD WATER ECONOMY

Ransingh Subhrajit RayBatch of 2015


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sewage, so much so that it seems difficult to distinguish, Yamuna as a river. The other water source is ground water. 115 MGD of ground water is being explored through Ranney Wells and Tube Wells of Delhi Jal Board. Extraction of ground water is not only an expensive task but also results in depletion of water table, causing imbalance in natures, resulting in decreasing productivity of soil in areas adjacent to Delhi too. The worst water economics in this region is that, government itself is responsible of extraction and supply of water under Delhi Jal Board (DJB) at subsidized rate. The sources of Revenue for Delhi Jal Board are Water Charges, Scavenging Tax, Gas Charges and Development Charges. Government provides water at subsidized rate, creating a dead weight loss.

The monopoly also adds to the woes. As there are no competitors, the quality of service and the prices are

compromised. But Privatization of Water to solve the water crisis stays a big question. Indian constitution forbids privatization of water on humanitarian ground. If we consider the macro-economical aspect, as the government enjoys economies of scale, the net loss to the society is less in case of public holding of the water supply than privatization of the same. Moreover, segmentation of the supply and differential pricing is next to impossible taking into consideration the slum dwellers, floating population and safety and security of the water supply infrastructure. Another scenario tested was Public Private Partnership for drinking water supply, which was undertaken in Nagpur, but failed to give any positive result. This is due to insufficient regulatory power provided to private partner in controlling leakages, misuse and formulating new rules in water management in cities.

While we argue about privatization of water supply and waste water treatment in India, the UK had passed a Water Act long back in 1989, subsequently enabling parts of water industry in UK to be passed to private sector under purview of National Rivers Authority (Environment Agency). One of the major shares is being held by Thames Water Utilities Ltd., a private utility company, which carters to drinking water, sewerage treatment and other water services to around 27% of UK population and provides direct and indirect employment to more than 4700 individuals. The company earns money through selective taxation/rents for supplying water and sewerage treatment based on location and type of property, evaluation of properties on the banks of the Thames River, subsidies from government, establishing public and private infrastructures, selling bio-fertilizers and many more means. It recorded a net profit of

Tap water is, on average 500 times cheaper than bottled water. Boycott the bottle.

36.1m in the year ending March 2014 as against a loss of around 39.7m in the preceding year. One major concern of privatization which highlighted last year was when Thames Water was accused and heavily fined for over-reporting pollution risks in water industry to gain more earnings. Similar problems of net income fluctuation, frauds and sometimes natural calamities might impact the water industries to a larger extent. The Government of India, in June 2014, has evolved the Ministry of Water Resources, to add River Development and Ganga Rejuvenation on the lines of river development authorities around the world and aims at developing

strategies to manage potable water and sewerage management by public-private partnership or outsourcing to private companies. Though water facilities have been owned by public bodies around India, in many places such as in Chennai, a few private water companies exists which supplement drinking water supplies to local population. Hence, the question, What is the best alternate method for water supply to Indian cities?, remains unanswered and needs to be researched upon.

Pellentesque mollis et justo vitae rhoncus.

Vivamus magna ligula, pellentesque ut

accumsan eget, semper a tellus. In ac odio

mattis, tempus eros id, blandit nibh.

Success seems connected with action. Successful people keep moving. They make mistakes, but they dont quit.

WATER ECONOMY


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ECONOMICREFORMS

An economist is an expert who will kno w tomorrow why the things he predicted yesterday didnt happen today.


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ECONOMICREFORMSSince May 2014

India witnessed a historic election in the month of May 2014 with BJP winning adequate number of seats to govern without the support of other parties. 31% of voters in the country voted for BJP led by Narendra Modi to propel Indias development and improve employment opportunities in the country. Analysts and economists expected reforms across various sectors to put Indias growth on fast track. Since May 2014 Government of India was criticised for their snail paced development to revive Indias economy and improve unemployment problems. Government of India has announced a series of economic reforms in the previous week which will play a vital

role in facilitating industrial growth and create new job prospects.

LABOUR REFORMSThe much anticipated labour reforms announced on 16-Oct-14 reduced paperwork for companies which had to fill 50 forms. Companies only need to fill a single form online as per the new procedure. The Prime Minister has also streamlined the process of inspection of factories by increasing the transparency in the process.

DEREGULATION OF DIESELOn 18-Oct-14 Government of India deregulated diesel prices, thereby putting an end to one of Indias costliest subsidy. This will help in

reducing the borrowing of the Government and increasing economic productivity. As private firms did not receive the benefit of subsidies for diesel, deregulation of diesel prices will encourage private entrants in the market.

ENERGY SECTOROn 20-Oct-14 Government of India announced that commercial coal mining will be allowed for private sector firms. The decision to allow coal mining for private sector firms was taken into consideration for meeting the current power requirements. At present Coal India is the largest coal miner in the world.The Government is also planning to sell 5% stake in Oil and Natural Gas Corporation (A Fortune 500 Company). This will help the Government in raising INR 18,300 Crores facilitating reduction in this years Fiscal Deficit.

FOREIGN DIRECT INVESTMENT (FDI)FDI can be a strong stimulus to increase the business activities of a

country. Government of India has increased the cap on FDI in Insurance and Defence sector as a boost to the industries. The additional capital in the Defence sector will be beneficial to bridge the gap between demand and supply for Defence equipment. ROAD AHEADSo far Narendra Modis mantra of Maximum Governance, Minimum Government has caused Indias share market to reach record heights foreseeing a kick start to Indias growth which fell below 5% last year. Economists and analysts expect more reforms with respect to labour issues and introduction of the national goods and services tax which will attract more companies to operate in India.The Government of India is planning to scrap approximately 300 out dated laws in the upcoming parliamentary sessions. It might face challenges in getting clearance for tough changes in the Rajya Sabha as BJP does not have a majority in the upper house of the Parliament. The seats in Rajya Sabha are determined through

state elections. BJPs performance in the recently held state elections of Maharashtra and Haryana has been impressive. Narendra Modis goal of having a BJP government in as many states as possible will be pivotal in clearing tough reforms to facilitate economic growth and job creation.

Analysts and economists expected reforms across various sectors to put Indias growth on fast track.

You are determining the future you every day. Will the decisions you make today lead you closer to

the person you want to be tomorrow?

2014 A NEW INDIA

Ramakrishna IyerBatch of 2016


IBS HYDERABADThe growth and development of people is the highest calling of

leadership.-Harvery S Firestone

MAKE ININDIA


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The 3Ds of India- Democracy, Demographic Dividend and Demand is the driving force that will help our Country achieve greater heights, is what its Prime Minister has dreamt of.Aiming to feature India as the global manufacturing hub, Modi assured the potential investors of putting in place an effective and easy governance policy to facilitate the setting up of manufacturing plants throughout India. It is going to be the youngest country by 2020 with 60% of the population in the working age group. So, to use this resource in an optimally and prevent it from turning out to be a burden instead for the country, manufacturing is the main sector.The last but not the least, the ever increasing income levels leads to high demands. Manufacturing sector is linked with all the sectors of the economy .It is only this labor intensive manufacturing sector that has the ability to absorb excessive labor pool of India. This raise in employment levels in turn lead to increase in demand. There is an increase in per capita income.With a massive workforce and abundant natural resources needed in productionnotably, iron ore and aluminum for engineered goods, cotton for textiles, and coal for power

generation are available in India. The country can turn out to be a viable manufacturing alternative to China in industries ranging from apparel to auto components and might even dominate some skill-intensive manufacturing sectors.Export promotion is one of the main objectives behind this step as it will lead to excess exports correcting the balance of payments situation faced by the country.The initiative will create an environment of growth and development. But to make it a success its governments responsibility to instill confidence in the minds of investors that they will not lose their money.With hopes of reforms and economic stability in future, Mr. Modi is trying to attract foreign capital inflows and for the same on his maiden visit to the U.S. tried to woo Industrialists by assuring them of tax incentives, infrastructural reforms and friendlier business environment. Modi also tried to capitalize on his good relationship with the Japanese Prime Minister to strengthen business ties. Japanese investment in ambitious industrial corridor.

MAKE IN INDIA

Freedom from the poison of casteism and communal-ism. Liberating India from the curse of gender bias. Making India a manufactur-ing and export hub.

Sakshi BhallaBatch of 2016


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COVER S

TORY

FEMINISM INAFRICAN ECONOMY


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FEMINISM INAFRICAN ECONOMYSounds dramatic but yet true, more than 70% of the agriculture labour force in Africa is represented by women, hence they making the backbone of the African agriculture. Agriculture that makes up to one-third of the African GDP. Still the sector doesnt reach its optimum potential. Most of the work is done by the women but are denied their profits. Lack of innovation and a pay difference up to 50% to their male counterparts hits the morale of the vast and productive feminist work force. The potential woman labourers cannot owe their own land hence they are subjected to non-availability of loans hence cannot invest hence cannot maximise their profits.

The solution to the problem lies if the women are provided the rights to their land. This can be used as an asset to obtain term-loans to increase productivity. According to the Food and Agriculture Organisations providing females with the same opportunity with par to their male counterparts there will be a considerable increase of their yields on their farms up to 20-30% which would boost the agricultural output in developing countries by 2.5-4%, which in fact will decrease the number of hungry mouths by 12-17%.

The bottom line is to utilize the vast female work force in such a way as to minimize the waste due to poor governance and to

A Feminist is anyone who recognises the equality and full humanity of women and men.

optimize the productivity by giving equal rights to women. The conventional family caretaker face of the women needs uplift and they should be given authoritative roles so that innovation can be seen within the large feminist force of Africa.

When the women of Africa are treated no less than equals and given political powers their builds a harmonious platform for the socio-economic development of the continent. Being 6th out of 10 worlds fastest growing economy it is the home to some of the most mature feminist force of the world. Men in this region have always lead the countries into war, conflict and discord resulting in slower economic growth. Men fight leaving their women behind to take care of their family and household. Giving women more voice and authority discourages extremism and radical thoughts. Even Steven Arthur Pinker,

a Canadian-born U.S. experimental psychologist and cognitive scientist admitted to the fact that feminisation of politics is one of the cause of the decline in conflict in the sub-Saharan area. To mark his claims and my ideas I introduce you the Rwandas parliamentarians. 56% of Rwandas parliamentarians are women. The countrys economy is growing, evils like poverty rate has dropped from 59% to 45% in 2011 and economic growth is expected to reach up to 10% by 2018. Since Ellen Johnson Sirleaf took the presidency seat on January 2006 In Liberia, notable reforms have been implemented in the country to boost the economy, and with visible results. Hence Liberias GDP has grown from 4.6% in 2009 to 7.7% by the end of 2013 which is a commendable performance.

The African female community is one of its own kind. The physical and

mental toughness is at par with their male counterpart. The even outmatch their male counterpart when it comes to the intellectual level. It is noted that two out of three literate Africans are women. Hence the majority of the literate workforce is the women. Countries such as Burkina Faso have a high women literacy rate up to 90% and the situation is steadily improving. As always said an educated man enlightens an individual...but an educated women enlightens the whole family and an enlightened family builds a better society.

Every block of stone has a statue inside it and it is the task of the sculptor to discover it.

Abhishek SharmaBatch of 2016


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There is no tool for devel-opment more effective

than the empowerment of women.

A better educated feminist workforce will certainly reach their full potential in the economy hence reducing unemployment to a certain level. The educated women have a found themselves employed in the manufacturing and the service sectors thus improving the African economy. This kind of exposure has boosted the confidence of the feminist workforce and made the self reliant. They are now capable of setting as well as running their own businesses or organisations. As a more educated team of women enters the workforce they are having a greater effect on the economy than women have had in the past times.

But catering to the above views all I want to say that the basics of African geo-political crisis is not letting the woman workforce to work independently and innovatively. To let that happen people of Africa need to set a set up structures that will respect women and include them at the various political, social and economical levels. But only empowering women will not help the African economy. The

development of the infrastructure and the law and order issue are the other factors to deal with. Hence i end my article by stating that if the male and the female community works hand in hand, its not that far for the Africans to get ris of the socio-economic backwardness.

I grew up primarily surrounded by women and listened to conversations on womens issues. Ive heard many stories on the struggles of womanhood, and Ive been advised on the need for strength to face the world as a young woman. Learning to appreciate the culture of feminism was almost a choiceless choice to me.

In the early years of my life I was left in the care of my grandmother and aunt because my mom traveled for work. At such a young age I couldnt understand the time apart from my mother was a time she spent gathering women to be a force against war. All I knew was she had a lot of women friends who came to our house and slept on our floor or bed. My first lesson in feminism came from one of her friends. I was about seven or eight years old when my mom came home with a group of women, some of whom were Muslim women. I asked my mum what she was doing with the women and if the womens husbands were aware that their wives had left their homes. I thought the Muslim women in particular would be beaten up by their husbands for leaving their homes. I dont remember my mums exact response but I do remember her lecturing me on the evils of domestic violence and her saying, men are not the super power. At the time I didnt understand what I did wrong so listened to the lecture and carried on with my life.

- Pudu BlamohAfrican Feminist Writer

EXPERIENCE


Painting from Where is the Honour series by Ramel Jasir. The purpose it to try and bring to the forefront the plight of many women.

Women are leaders everywhere you look from CEO to housewife that holds together a home. Our country was built by women who stand

alone.

A better educated feminist workforce will certainly reach their full potential in the economy hence reducing unemployment to a certain level.


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JAN DHANYOJNA

Your time is limited, so dont waste it living someone elses life. Dont be trapped by dogma- which is living with the results of

other peoples thinking.


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The PMJDY is emphasiz-ing on the vision of Mr. Narendra Modi to lay the foundation of a cashless economy.

JAN DHANYOJNAImplications on Indian Economy

We want to integrate the poorest of the poor with bank accounts by introducing Pradhan Mantri Jan Dhan Yojana(PMJDY). Today, there are thousands of families which have mobile phones but no bank accounts. We have to change this. The economic development must benefit poor and it should start from here. These were the words of Mr. Narendra Modi on his first Independence Day speech as a Prime Minister of India on 15 August 2014. His ambitious financial inclusion plan was kick started on 28th August 2014 to provide a host of benefits that includes a bank account, and an insurance which is bundled with debit card.

Major Banks were nationalized in 1969 in India. Main aim of this was to bring about financial inclusion and regulate and control monetary and financial policies of India. Banks were nationalized to bring about development, and develop banking habits.

However, 45 years later, we are nowhere near the goal! The banking system is out of reach for over 60% of the population (according to CRISIL 50% of Indians dont have a savings

account) and they depend on moneylenders for loans. This means, a rich person gets a loan at a cheaper rate while a poor person living in the village pays double the interest rate for the money he gets from the local moneylender. This leads to the debt trap, i.e incremental interest and eventually paying interest till you die. This leads to de-motivation, fear and thus result in suicides. There were questions in the mind of our prime minister that; if the lowest rung of society cannot get loans at an affordable rate, how will the country develop? So he came up with a solution of introducing PMJDY.

At present the benefits of subsidies are not reaching deserved people. These are filtered by the middle men. With all people having the bank account, the cash can be directly transferred to the beneficiaries of government policies. This will also help in reducing the black money by aggrandizing cashless transactions. More over the money will be circulated in the economy from ones savings to anothers investment which will indirectly control the inflation.


1Under this scheme, account holders will be provided a zero-balance bank account with RuPay debit card, in addition to which there will be an accidental insurance cover of Rs 1 lakh.

2People who open the accounts by January 26, 2015 will be given a Rs1 lakh accident insurance cover, also they will be given Rs 30000 life insurance cover.

3Account holders can avail Rs 5,000 loan from the bank after six months of opening of the bank account.

4The new technology inclusion by National Payments Corporation of India (NPCI), will allow the account holder to transfer money, check account balance through a basic phone which was earlier limited to smart phones.

5 Mobile banking for the poor would be available through National Unified USSD Platform (NUUP) for which all banks and mobile companies have come together.

6The scheme targeted to bring 7.5 crore unbanked families into the banking fold, by opening 15 crore banking accounts (2 per family).

760,000 enrolment camps will be held to spread the awareness regarding the importance of bank accounts in rural areas.

FEATURES


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The PMJDY is emphasizing on the vision of Mr. Narendra Modi to lay the foundation of a cashless economy. It is also complementary to the PMs Digital India scheme. This will also help the poor families to deal with any unforeseen eventuality. Mr. Narendra Modi aims at improving the lives of millions of Indias poor by bringing them into the financial mainstream and freeing them from the clutches of moneylenders.

On the inauguration day, 1.5 Crore Bank accounts were opened due to the proper preparation steps taken by the government. The Prime Minister said on this occasion- Let us celebrate today as the day of financial freedom. At the end of September 2014, 3.02 Crore accounts were opened under

PMJDY. Amongst Public sector banks, SBI had opened 30 Lakh accounts, followed by Punjab National Bank with 20.24 Lakh accounts.

Critics, however ask, How this scheme different from previous schemes in providing access to credit to the poor people of the country?, Who will fund for the crores of insurance premium? And, At this point of time when banks are slowly drifting towards the concept of privileged access and priority services, will banks care about providing services to zero-balance account customers? Already many similar schemes like Aadhar linkage and DBT etc were formulated and questions were asked on the proper implementation of these projects.

This PMJDY is no way different from these except for the insurance cover. There were incidents of having multiple Aadhar cards by the same individual. These people may use that to create multiple accounts and also misuse the credit facility. Banking facility and Banks are still unavailable in several villages and now we are expecting the villagers to use ATM cards, who have been preferring the moneylenders over banks for credit or cash, not only because of the ease of getting cash but also due to the emotional touch. Claim verification for insurance can also be a headache for Bank employees and auditors as the poor can gather sufficient evidence just to avail insurance which he should have got only after true loss. Another case might be that, the poor may claim insurance to pay back moneylenders money instead of actually using it for personal benefit. We might assume that poor in rural

India gets literate due to social activities and missions taken up by Governments and private or corporate anthropologist but what about the education needed to manage a bank account, loan and insurance? Who will impart this education amongst poor and how? Wont this increase the expenses due to multiple frauds in insurance claims? Another major question Whether the government or banks or the taxpaying middle class will have to share the burden of one more government scheme? remains unanswered.

On the inauguration day, 1.5 Crore Bank accounts were opened due to the proper preparation steps taken by the government.

Aditya JatharBatch of 2016


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REAL ESTATEINVESTMENT TRUSTS


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REAL ESTATEINVESTMENT TRUSTSChanging modern economics

REITs or Real Estate Investment Trusts are a special type of investments which are managed like mutual funds but investments are made into real estate properties for returns. The properties which are taken into consideration are usually those which have capacity to generate income, such as commercial or residential properties, and the investors in these REITs reap the profits or returns from these investments. Usually REITs units, issued by fund houses, are traded on the Stock Exchange and investors can buy and sell those units like stocks. REITs will help investors channelize their investments into Indias realty sector through a regulated mechanism.

Traditional route of investment into housing and real estate sector had been through direct investment by buying properties or leasing it. These posed greater risk to the investors as the option for diversification was unavailable. This method also demanded cumbersome paperworks and property verification process for authentication check. Moreover this was a dream away from reality for small investors. Investments in REITSs are asset-backed, which is

helpful for investors in investing into real estate sector, reducing risk by diversification and also improving upon formal or regulatory procedures required for investing in real estates.

There are three types of REITs accepted and regulated internationally. India however, made a beginning with the hybrid type of REITs.

Equity REITs: Equity REITs either own properties or directly invest in properties, therefore value of these REITs depend on the values of the shares or values of their real estate assets. Their revenues principally come from the rents received from these properties.

Mortgage REITs: These REITs are similar to Debts securities or Bonds which deals in investment and ownership of property mortgages. These REITs generate revenues primarily from the interests that they earn on the mortgage loans to owners of real estate, or purchase existing mortgages or mortgage-backed securities.


Success seems connected with action. Successful people keep moving. They make mistakes, but they dont quit.

Great investment opportu-nities come around when excellent companies are

surrounded by unusual cir-cumstances that cause the stock to be misappraised.

Dev ChandanBatch of 2016


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Hybrid REITs: Hybrid REITs combine the investment strategies of equity REITs and mortgage REITs by investing in both properties and mortgages. India will predominantly allow the Hybrid type REITs in introductory phase.

Indias capital markets regulator, SEBI (Securities and Exchange Board of India) on 10th August 2014 approved rules for the creation of real-estate investment trusts and infrastructure-investment trusts in the country.

Finance Minister Sri Arun Jaitley, in his budget speech, declared that these trusts would be given a tax pass-through status, which means that, they wouldnt have to pay any federal taxes as long as they pass most of their income to shareholders in the form of a dividend. Only the investor will be taxed when he gets the income or sells the unit. After a month of this declaration, SEBI approved the REITs creation.Industry experts welcomed the rules issued on 10th August 2014 by the SEBI, who see REITs as a new source

of funding for developers and investors in infrastructure projects. According to finalized rules put forth by SEBI on 10th August 2014, only commercial properties, such as office buildings can be part of a REIT, and all REITs have to be listed on a stock exchange providing more authenticity to the properties.The value of the assets owned or proposed to be owned by a REIT should be worth at least 5 billion rupees, to be eligible for listing.To maintain sufficient liquidity, REITs will be required to distribute not less than 90% of their net distributable cash flows to investors at least every six months.

To address security concern of investors, SEBI set the rule that, at least 80% of the value of the REITs assets must be in properties that are completed and generating revenue thus leaving only 10% or less of the net value of its assets in properties that are under construction for investment. REITs can also invest a small portion in other securities like mortgage-backed securities and money market funds.

1Minimum amount of money required for direct investment is 25 to 30 lakh where as minimum amount required to operate in REIT is 2 lakh and it can be reduced to 1 lakh.

2Investment in singly property in the case of Direct market is risky and returns are volatile where as REIT invests in several properties generating a diversified portfolio which reduces risk for investors.

3In case of direct marketing the investor has to check the back ground of the builder and property details on his own where as in case of REIT it is managed by the manager of REIT or trustee before investing.

4The buyer has to maintain the property and collect the rent in case of Direct investment where as in case of REIT the headache of directly managing the real estate is done by the professionals.

5Searching for buyer can sometimes take considerable time if the investor intends to quit in case of Direct investment where as incase of REIT the investor can simply quit by redeeming the units..

6In case of Direct investments the investor cannot get immediate return if the project is not completed where as in the case of REIT, it is possible to earn regular return as 80% of projects where REIT invests are finished projects.

7In case of Direct investment, the investor has to fight his battle alone against well connected builder where as in the case of REIT, by pooling investments; investors can increase the bargaining power.

ADVANTAGES


The PMJDY is emphasiz-ing on the vision of Mr. Narendra Modi to lay the foundation of a cashless economy.

36 November 2014

IBS HYDERABAD

Dear Readers, We believe you appreciate the transformation of The Focus. Your praise and encouragement has always been a source of motivation for us. Therefore, in case you have any comments or suggestions for improvement please leave them in the COMMENTS section our website www.ecobizz.weebly.com. We at EcoBizz will be more than happy to incorporate your suggestions. For keeping in pace with latest developments, discussion forums and online eventsfollow us on Facebook at https://www.facebook.com/eb.focus.

Regards,Team Ecobizz

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