Sebi’s investment cap on Temasek, GSIC upsets parent Singapore govt

City-State Says Ruling Limiting Combined Investment To 15% Violates Trade Pact

 THE Singapore government has told India's foreign ministry that a ruling by the Securities and Exchange Board of India (Sebi) restricting investments by two of its overseas investment arms — Temasek Holdings and the Government of Singapore Investment Corporation (GSIC) — to a combined 15% violates the Comprehensive Economic Co-operation Agreement (CECA) signed by the two nations.
    The Singapore government says that both Temasek and GSIC are two distinct entities and that the decision of India's securities market regulator Sebi to limit acquisitions by overseas entities in listed firms, to less than 15% should not apply to them. Sebi's foreign portfolio investment rules restrict investment by a single foreign fund to 10% in a listed Indian firm.
    The Indian regulator classifies different foreign institutional investors (FIIs) who have common ownership as one FII group and caps their investment at 10%. The Singapore government is the common owner of both companies but the Comprehensive Economic Co-operation Agreement treats them as different entities. The Singapore government, therefore, says that both firms are entitled to purchase up to 10% or the prevailing threshold under Sebi regulations of the issued capital of any company, according to the contents of a letter addressed to the government and seen by ET.
    The Singapore government's communication to the Indian government comes in the wake of a letter from Sebi to GSIC on the rules relating to investment by foreign portfolio investors or foreign funds. Sebi had told the two firms in July this year that they should not jointly exceed the trigger limit of 14.99% specified in the regulator's rules on takeovers. Both Temasek and GSIC were then advised by Sebi to appoint a single lead custodian to ensure reporting of investment data to Sebi and the RBI.
    The letter written by Singapore's ministry of foreign affairs to the Indian government says that both governments had agreed that GSIC and Temasek would be treated as independent and unrelated legal entities for the purposes of application of Sebi legislation. The Singapore government has also said that it has advised Temasek and GSIC that they can't jointly be subject to any limit under Sebi regulations, including the 15% limit and neither should the two entities be obliged to appoint a single lead custodian as advised by the Indian regulator.
    Manish Kejriwal, the head of Temasek's operations in India, declined to comment on the issue. The ministry of commerce and industry, the nodal agency for all bilateral agreements, has now sought comments on the matter from the finance ministry. According to a Sebi official, the Indian regulators' stand was that both the entities should not be treated as separate entities as they are related entities. "They should appoint a single custodian for reporting purpose."
    Singapore has also stated that shares acquired, or sought to be acquired, by GSIC and Temasek shall not be regarded as being under a common ownership and neither shall the two firms be deemed to be parties acting in concert. This is not the first time that Temasek and GSIC investments in Indian companies has become controversial.

40% of India’s $100-bn bldg pie in city

Mumbai: The total market value of under-construction projects in India—residential, commercial and retail space—has crossed $100 bn (Rs 4.5 lakh crore) for the first time in 2010, the latest Real Estate Intelligence Service (REIS) report by Jones Lang LaSalle Meghraj has shown. Of this, Mumbai, with some of the highest property prices in the world, has nearly a 40% chunk ($37 billion, or Rs 1.66 lakh crore).
    "Top 100 builders are setting up 8 lakh flats in Delhi, Mumbai, Chennai, Bangalore, Kolkata, Pune and Hyderabad,'' said REIS head Abhishek Kiran Gupta. TNN '2010 real estate mkt value equal to 7% of 2009 GDP'
    The market value of real estate under construction in India has increased from $69.4 billion in 2006-end to $101.3 billion in June 2010, which equals 8.2% of India's nominal GDP for 2009,'' the report said. The market value and costs of development have been estimated at prevalent property prices and costs of construction, considering the variance in asset classes and geographical locations, it added.
    The residential component contributes 66% ($66.5 billion) of this $ 101.3 billion, while the rest is contributed to by commercial office and retail space combined. The premium segment comprises only 4% of the saleable area being developed, but to 24% of the market value. "While NCR-Delhi leads in terms of volume of residential properties being developed, Mumbai contributes a larger share to the market value,'' it said.
    On the other hand, the market value of commercial office and retail under construction has remained range-bound during 2006-2010 due to the effect of an increase in construction activity offset by a fall in capital values. "However, the contribution of residential has amplified due to a confluence of increase in construction activity and rapid recovery of property prices,'' the report said. The market value of commercial (office and retail) real estate under construction is $34.8 billion and commercial office space under development contributes to 74% of the estimated market value being developed in the commercial sector.
    "As of 2Q10, Tier I cities of Mumbai, NCR-Delhi and Bangalore contribute to 70% of the market value of underconstruction commercial office space, while Tier II cities of Chennai, Pune, Hyderabad and Kolkata contribute to 21% of the pie. Other investment grade developments in Tier III cities contribute to a mere 9% of the pan-India market value being developed in India today.''
    According to the report, since 2007-08, a total foreign direct investment of $7.82 billion (over Rs 35,000 crore) has been put into housing and real estate in India.
BOOMING INDUSTRY
Market Value of Investment Grade Real Estate Under Construction as of 2010 COMMERCIAL: $ 34.8 USD billion OFFICE: $ 25.6 billion RETAIL: $ 9.2 billion RESIDENTIAL: $ 66.5 billion TOTAL: $ 101.3 billion PUTTING IT IN PERSPECTIVE
Aggregated Revenues of IT & BPO Sector (FY 2010) is $ 73.1 billion
Union Budget Central Plan Outlay (2009-10) is $ 99.5 billion
Vietnam's National GDP at current prices (2009) is $ 92.4 billion