House Price Recovery Just A Head Fake, Says Alpert, Especially In New York

In the second half of 2009, house prices staged a surprising recovery, leading many to conclude that the housing bust was done.
Keep dreaming, says Dan Alpert of Westwood Capital.
The rise in the second half of 2009 was mainly the result of pent-up demand combined with a tax-break, subsidized mortgage rates, and other incentives.  The housing market is still awash in excess inventory, and Alpert says this will eventually drive prices down to 8%-10% below the lows of early last year.
The good news?
House prices should bottom this year and then begin to recover.  Also, for the hardest hit areas, such as those in California or the sand states, the bust is probably over.  Prices have fallen so far in those areas that Alpert thinks they're bottoming now.
So where is the sky still falling?
Places where price-to-rent ratios are still well above historical norms, such as New York City.
A staggering amount of excess inventory means the housing crash in NYC is alive and well, Alpert says.

2011 SIBOR Rate

2011 SIBOR Rate
We review the latest 2011 SIBOR Rate of Singapore banks and financial institutions in the current interest rate environment.

Here are the latest 2011 SIBOR Rate for your interest.

Note that 2011 SIBOR Rate is for personal use only. Kindly do not use 2011 SIBOR rate to calculate your housing home loan payments.


14 Jan 2011 Latest 2011 SIBOR Rate:

3-month 7 Jan 2011 SIBOR =

Irda sounds out insurers on nuclear accident cover

|MUMBAI: A year after private nuclear plants became a possibility in India following the Indo-US nuclear deal, the insurance regulator is deliberating with companies to cover liabilities arising out of nuclear accidents, which is essential for such plants.

“Our discussions on insurance covers for nuclear risks are at a preliminary stage,” Irda chairman J Hari Narayan told ET. “We need to examine global practices of covering such a liability before taking a final view,” he said.

The nuclear treaty of last year allows India to carry out nuclear trade, have options for nuclear power and access to sensitive technology which are also used for nuclear weapons. But the absence of rules for insurance in the sector prevented progress in setting up new plants.

Currently, nuclear risks are not covered by any policy, as insurers do not have the wherewithal to estimate liabilities. All property insurance covers exclude losses due to nuclear reaction, nuclear radiation or radioactive contamination.

In most countries, operators of nuclear plants buy insurance cover as they are liable to pay compensation for any damage. Normally, the liability is limited by both international conventions and national legislation. The state has the responsibility to accept any liability more than insured. The absence of such covers here may make it difficult to fund relief, if an accident occurs.

The US, for instance, is not bound by any international nuclear liability convention. The liability from a nuclear accident is addressed by the Price Anderson Act of 1956, which provides $10 billion in cover without cost to the government. It covers power reactors, research reactors and all other nuclear facilities. More than $200 million has been paid by US insurance pools in claims and costs of litigation since the Price Anderson Act came into effect, all of it by the insurance pools.

The beginning of discussions itself may not lead to a set of rules soon, since the negotiations with global re-insurers are going to be hard. “There is now scope for private sector participation in nuclear power generation. We have been working with international re-insurers to form a pool to cover nuclear risks. But that will take some time to fructify,” said Yogesh Lohiya, chairman, GIC.

Incidentally, a partial cover for nuclear power plants was introduced by Oriental Insurance earlier under the chairmanship of Mr Lohiya. “At that time, providing a cover was difficult, as re-insurers wanted inspection of the site, which was not possible. Despite this, we managed to arrange cover for the cold zone of nuclear plants,” he said. A nuclear power plant has a “hot zone”, which is the critical area where the nuclear reactions take place and a “cold zone” where steam generated turbines are operated.

A pool mechanism, as in the case of terror insurance, may be a suitable one, said M Ramadoss, CMD at Oriental Insurance. Under a pool the premium collected by various insurers under terror cover are kept in a separate account. For any claim beyond a prescribed amount, the company dips into the pool resources to pay for claims. But that may not be enough, since claims from nuclear accidents could be huge and it may need government support.

Special Deposit Schemes: Pension puzzle persists

A week from now, India’s retirement funds will be again sizing up investment options which will yield them decent returns needed to meet the pay-out obligations of their members who are due to retire.

Every year, in the first week of January, retirement or provident funds receive interest payments aggregating Rs 10,000 crore or more on their investment in Special Deposit Schemes or SDS as it is popularly known. The scheme, which was first floated by the government in 1975, was later extended several times and until further notice a few years ago. The SDS has a corpus of over Rs 1,15,000 crore, which has not grown after the goverrnment stopped reinvestment of interest in the scheme. Instead, pension and provident funds have to park the interest which accrues every year in other instruments such as government or state government securities or bonds of state owned firms.

Over five years ago, the government had set in motion an exercise to restructure its liabilities on this count. There were a couple of options—one being to pay off the investors or the retirement funds by offering cash. The second one being to wind down the scheme by issuing marketable government securities in lieu or against the SDS. The first option was obviously ruled out given the cash strapped status of the government while the other proposal to issue G-Secs met with political resistance as it would have meant lower returns for subscribers.

The Employees Provident Fund Organisation, which says it is running the largest social security scheme in the world has a large chunk of its corpus in SDS (Rs 55,000 crore in the scheme) while several other retirement funds have over 20-30 % in this scheme. The challenge for these funds now is to plan ahead for meeting their liabilities considering that in 2012 many of them will see a lot of their members retiring. Clearly, engaging in asset -liability matching would be difficult with a substantial part of the coprus locked away in an open-ended scheme, which the uncharitable term as a ponzi scheme.

Not just that. Over the last few years, most funds had the comfort of high yielding securities issued by state-owned companies on their portfolio. Some of these investments are due to be redeemed in the next year or two and that is when maximising returns would prove to be tough. Fund managers who handle money for these retirement vehicles say that even if the SDS were to be wound up—it would still help as the redemption amount can be invested in a range of short term instruments which could then be switched to longer maturity instruments when rates move up.

In a high interest rate regime, it is tempting for fiscal policy mangers to maintain status quo on this as the SDS offers money to finance the deficit at a relatively lower rate. But as it moves towards fiscal consolidation, the government can surely think of working out a road map for restructuring these liabilities.Clarity on this is what counts for those dealing with long term funds.

J&K Bank ties up with Maruti Suzuki

SRINAGAR: Jammu and Kashmir Bank today said it has entered into an agreement with Maruti Suzuki

India Ltd (MSIL) to finance the latters' customers.

The MoU to this effect was signed by President of the Bank G A Regoo and MSIL Chief General Manager R S Kalsi in the presence of the bank's Executive Director A K Mehta here, according to a statement by the bank.

On the pact Mehta said:"such pacts provide companies like J&K Bank and Marauti opportunities to serve their customers better... This tie-up will open new vistas for both the companies".

"As per the scheme modalities, MSIL and its dealer network will collaborate with J&K Bank to facilitate vehicle business," Regoo said.

Bank of India to offer home loans at 8 per cent

MUMBAI: Public-sector lender, Bank of India (BoI) has joined the club of other banking majors like State Bank of India and ICICI Bank, to offer cheaper housing loans to borrowers.

The bank would offer 8 per cent fixed rate for home loans upto Rs 30 lakhs and 8.25 per cent for loans above Rs 30-lakh, for first two years, a BoI press release said here today.

The scheme--Star Own Your Home--is applicable for all new loans availed between January 1-February 28, 2010. After the two-year offer period, the lender will charge interest rate based on the prevailing floating rates.

BoI has also waived all processing charges to attract borrowers and has fixed the maximum amount that can be availed under the scheme as Rs 1.5 crore.

Other banks that have come with similar schemes include Kotak Mahindra Bank, IDBI Bank and home loan financier, Housing Development Finance Corporation.

IDBI Bank, which announced its special home loan scheme recently, is offering 8.25 per cent fixed rate for all its new loans till March 2012.

The bank had made this offer applicable for all new home-loan customers applying on or before March 31, 2010, and taking a part or full disbursement during the offer period.

IndusInd Bank sees consumer fin loanbook up 20 per cent

MUMBAI: Private sector lender IndusInd Bank expects its consumer finance loan book to rise 20 per cent in 2009/10 on robust growth in the vehicle finance segment, a top official said on Friday.

"Our vehicle finance is picking up and we are seeing growth in auto and two-wheeler segment," Romesh Sobti, managing director and chief executive officer, told reporters.

The bank also expects 25-30 per cent credit growth in FY10, he said.