World Bank Cancels Bangladesh Loan After Allegations

By Sandrine Rastello and Arun Devnath - Jun 30, 2012

The World Bank canceled a $1.2 billion loan for a bridge in Bangladesh, saying the country’s government failed to take action against “a high-level corruption conspiracy.”
“It’s like a bolt from the blue,” Bangladesh’s Communication Minister Obaidul Quader told reporters in Dhaka today. Quader said the bank’s decision is “unfortunate and mysterious.”
Two former employees of SNC-Lavalin Group Inc. (SNC), Canada’s largest engineering company, were arrested on corruption charges in connection with the bridge project, the Royal Canadian Mounted Police said last week. The World Bank yesterday said the case also involves Bangladeshi government officials and private individuals.
“The World Bank cannot, should not, and will not turn a blind eye to evidence of corruption,” the Washington-based bank said in an e-mailed statement yesterday. “We have both an ethical obligation and a fiduciary responsibility to our shareholders and” the member states contributing to the fund that lends to poor countries, according to the statement.
The proposed 6.15-kilometer long bridge on Padma river will connect the remote southwest region with the rest of the country including the nation’s capital, Dhaka. It will cut travel time to 3 hours from 12 hours and eliminate dependence on ferry services for transport.
Finance Minister Abul Maal Abdul Muhith said he was suprised by the “language and tone” of the World Bank’s statement.

‘Extraordinary Steps’

The bank said it looked for ways to continue the project because of its importance to the country’s development and was ready to continue financing through a contractor outside of government control in exchange for action from Bangladesh authorities, including putting the suspected public officials on leave until the end of the investigation.
“It’s not true that we didn’t take any action,” Muhith said in a statement today. “We have taken extraordinary steps to clear the doubts of the World Bank,” he said without elaborating.
The bank’s conditions also included appointment of a special team for the case within the country’s own anti- corruption body and to let a World Bank-appointed panel have access to information on the investigation.
“We proposed that when the first bids would be launched, the Bank and the co-financiers would decide to go ahead with project financing if they had determined, based on the panel’s assessment, that a full and fair investigation was under way and progressing appropriately,” the bank said. The government’s “response has been unsatisfactory.”
The World Bank had pledged $1.2 billion for the $2.93 billion project. The bridge was supposed to be completed by the end of 2014.
To contact the reporters on this story: Sandrine Rastello in Washington at srastello@bloomberg.net; Arun Devnath in Dhaka at adevnath@bloomberg.net
To contact the editor responsible for this story: Chris Wellisz at cwellisz@bloomberg.net

®2012 BLOOMBERG L.P. ALL RIGHTS RESERVED.

Reserve Bank Says India Is Facing Inflation, Growth Risk

By Anoop Agrawal and Kartik Goyal - Jun 28, 2012

India is likely to face elevated inflation risks from supply bottlenecks and lingering threats to economic expansion, the Reserve Bank of India said.

“Threats to stability are posed by the global sovereign debt problem and risk aversion, domestic fiscal position, widening current-account deficit and structural aspects of food inflation,” the central bank said in its Financial Stability Report released in Mumbai yesterday. While India’s financial system “remains robust,” challenges to stability have increased since the last assessment in December 2011.

Growth in Asia’s third-largest economy slowed to a near- decade low last quarter, hurt by a faltering global recovery, political gridlock that has deterred investment and price pressures. Prime Minister Manmohan Singh, who took charge of the finance ministry three days ago, faces a budget deficit requiring record borrowing as well as a trade shortfall as he tries to revitalize his development agenda.

“Sovereign default concerns and the need for substantial bank recapitalization in the euro zone have escalated fears of contagion and recession,” central bank Governor Duvvuri Subbarao said in the report. In India, an “already high fiscal deficit leaves little room for the government to stimulate the economy,” he said.

Currency, Stocks

The rupee, which has slumped 21 percent against the dollar in the past 12 months, strengthened 0.6 percent to 56.8075 per dollar in Mumbai yesterday. Its tumble threatens to stoke the cost of imports. The BSE India Sensitive Index rose 0.1 percent.

The yield on the 9.15 percent government bonds due November 2024 increased one basis point, or 0.01 percentage point, to 8.42 percent, according to the central bank’s trading system. The rate was the highest since June 20.

Subbarao unexpectedly left the Reserve Bank’s benchmark repurchase rate unchanged at 8 percent on June 18, saying the following day that Indian inflation exceeds acceptable levels and that restraining it may require sacrificing economic growth.

Gross domestic product climbed 5.3 percent last quarter from a year earlier, the slowest pace since 2003. The trade deficit widened to a record $184.9 billion in the fiscal year ended March. The government projects unprecedented borrowing of 5.69 trillion rupees ($100 billion) in 2012-2013 to fund its budget shortfall.

‘Significantly Skeptical’

“The RBI seems to be significantly skeptical about all the macroeconomic parameters,” said Madan Sabnavis, the Mumbai- based chief economist at Credit Analysis & Research Ltd. “It may not lower interest rates anytime soon.”

The nation’s wholesale prices rose 7.55 percent in May from a year earlier, compared with 7.23 percent in April, stoked in part by food costs.

“Inflation risks are likely to remain high, given the persistence of overall inflation, even in the face of significant growth slowdown which points to serious supply bottlenecks and sticky inflation expectations,” the central bank said in the report.

Singh pledged to restore confidence in India after resuming control of the finance ministry. He has urged senior officials to revive investor sentiment.

Subbarao said a recent oil-price drop, if sustained, could help the economy, adding “the projected normal monsoon and the inherent resilience of the Indian economy could provide the needed momentum to growth, provided appropriate policy actions are initiated to contain the deficits and improve the investment climate.”

Downgrade Threat

Fitch Ratings and Standard & Poor’s have said they may strip India of its investment-grade rating, citing risks ranging from the fiscal shortfall to a current-account deficit that reached $19.6 billion in the three months through December, the most in at least six decades.

A potential “downgrade by rating agencies and a depreciating exchange rate may affect capital inflows,” posing “challenges” for funding the current-account gap, the Reserve Bank said. “Going forward into 2012-2013, downside risks to growth are likely to persist.”

A change in ratings could affect the availability and cost of foreign-currency borrowings for Indian banks and companies, the central bank said.

To contact the reporters on this story: Anoop Agrawal in Mumbai at aagrawal8@bloomberg.net; Kartik Goyal in New Delhi at kgoyal@bloomberg.net

To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net

®2012 BLOOMBERG L.P. ALL RIGHTS RESERVED.

Reserve Bank Says India Is Facing Inflation, Growth Risk

By Anoop Agrawal and Kartik Goyal - Jun 28, 2012

India is likely to face elevated inflation risks from supply bottlenecks and lingering threats to economic expansion, the Reserve Bank of India said.

“Threats to stability are posed by the global sovereign debt problem and risk aversion, domestic fiscal position, widening current-account deficit and structural aspects of food inflation,” the central bank said in its Financial Stability Report released in Mumbai yesterday. While India’s financial system “remains robust,” challenges to stability have increased since the last assessment in December 2011.

Growth in Asia’s third-largest economy slowed to a near- decade low last quarter, hurt by a faltering global recovery, political gridlock that has deterred investment and price pressures. Prime Minister Manmohan Singh, who took charge of the finance ministry three days ago, faces a budget deficit requiring record borrowing as well as a trade shortfall as he tries to revitalize his development agenda.

“Sovereign default concerns and the need for substantial bank recapitalization in the euro zone have escalated fears of contagion and recession,” central bank Governor Duvvuri Subbarao said in the report. In India, an “already high fiscal deficit leaves little room for the government to stimulate the economy,” he said.

Currency, Stocks

The rupee, which has slumped 21 percent against the dollar in the past 12 months, strengthened 0.6 percent to 56.8075 per dollar in Mumbai yesterday. Its tumble threatens to stoke the cost of imports. The BSE India Sensitive Index rose 0.1 percent.

The yield on the 9.15 percent government bonds due November 2024 increased one basis point, or 0.01 percentage point, to 8.42 percent, according to the central bank’s trading system. The rate was the highest since June 20.

Subbarao unexpectedly left the Reserve Bank’s benchmark repurchase rate unchanged at 8 percent on June 18, saying the following day that Indian inflation exceeds acceptable levels and that restraining it may require sacrificing economic growth.

Gross domestic product climbed 5.3 percent last quarter from a year earlier, the slowest pace since 2003. The trade deficit widened to a record $184.9 billion in the fiscal year ended March. The government projects unprecedented borrowing of 5.69 trillion rupees ($100 billion) in 2012-2013 to fund its budget shortfall.

‘Significantly Skeptical’

“The RBI seems to be significantly skeptical about all the macroeconomic parameters,” said Madan Sabnavis, the Mumbai- based chief economist at Credit Analysis & Research Ltd. “It may not lower interest rates anytime soon.”

The nation’s wholesale prices rose 7.55 percent in May from a year earlier, compared with 7.23 percent in April, stoked in part by food costs.

“Inflation risks are likely to remain high, given the persistence of overall inflation, even in the face of significant growth slowdown which points to serious supply bottlenecks and sticky inflation expectations,” the central bank said in the report.

Singh pledged to restore confidence in India after resuming control of the finance ministry. He has urged senior officials to revive investor sentiment.

Subbarao said a recent oil-price drop, if sustained, could help the economy, adding “the projected normal monsoon and the inherent resilience of the Indian economy could provide the needed momentum to growth, provided appropriate policy actions are initiated to contain the deficits and improve the investment climate.”

Downgrade Threat

Fitch Ratings and Standard & Poor’s have said they may strip India of its investment-grade rating, citing risks ranging from the fiscal shortfall to a current-account deficit that reached $19.6 billion in the three months through December, the most in at least six decades.

A potential “downgrade by rating agencies and a depreciating exchange rate may affect capital inflows,” posing “challenges” for funding the current-account gap, the Reserve Bank said. “Going forward into 2012-2013, downside risks to growth are likely to persist.”

A change in ratings could affect the availability and cost of foreign-currency borrowings for Indian banks and companies, the central bank said.

To contact the reporters on this story: Anoop Agrawal in Mumbai at aagrawal8@bloomberg.net; Kartik Goyal in New Delhi at kgoyal@bloomberg.net

To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net

®2012 BLOOMBERG L.P. ALL RIGHTS RESERVED.

India Plans $5.3 Billion of Highways as Jams Sap Growth By Karthikeyan Sundaram - Jun 27, 2012

India may spend 300 billion rupees ($5.3 billion) tripling the length of its expressway network to ease traffic jams that are slowing trade, wasting fuel and sapping economic growth.

The country intends to add about 1,600 kilometers (1,000 miles) of roads with at least six lanes, Raghav Chandra, joint secretary at the Ministry of Road Transport and Highways, said in an interview on June 14. He didn’t give a timeframe for awarding construction contracts or for completing the projects.

The new highways, linking major cities, will have higher tolls than existing roads and fewer access points so trucks won’t get stuck at toll gates or behind queues of motorcycles, auto-rickshaws and tractors making local trips. India plans to build the network as it contends with congestion that costs $5.5 billion a year, according to a study by Transport Corp. (TRPC) of India and the Indian Institute of Management, Calcutta.

“This is the first step towards really improving traffic movement,” said Vishwas Udgirkar, a Gurgaon, India-based senior director for transport at Deloitte Touche Tohmatsu India Pvt. “India is way behind other countries in creating such infrastructure.”

India’s 6 million trucks now average 19.8 kilometers per hour because of jams, according to the study backed by trucking company Transport Corp. Washington D.C. has the slowest traffic in the U.S., with an average speed of 74 kilometers per hour, based on a 2010 study by TomTom NV. Faster trips could save Indian truckers as much 600 billion rupees of fuel a year, the Transport Corp. study said.

‘Many Disruptions’

“There are too many disruptions by road,” said Mayank Pareek, head of sales and marketing at Maruti Suzuki India Ltd. (MSIL), which uses 400 trucks a day. “Everywhere you get slowed down.”

The automaker, which has about 20,000 cars in transit at any one time, is considering moving 30 percent of new vehicles by rail within three years, up from 5 percent now, to avoid the jams, he said.

Among the new expressways will be three connecting New Delhi with the northern cities of Meerut, Jaipur and Chandigarh, said J. N. Singh, finance director at road-building agency National Highways Authority of India. Others will link Chennai and Bangalore in the south, Mumbai and Vadodara in the west, and Kolkata and Dhanbad in the east. The roads will be designed for speeds as fast as 120 kilometers an hour, Chandra said.

China’s Highways

About 65 percent of India’s freight and 80 percent of passenger traffic moves on the highway network, which mainly comprises two-lane roads. The nation has 700 kilometers of expressways, mainly reserved for cars, trucks and buses. These roads, which have at least four lanes, run between Mumbai and Pune, and between Ahmedabad and Vadodara. China has 74,000 kilometers of expressways, according to the Transport Corp.-IIM study. In 1989, China had 147 kilometers of such roads.

In August 2009, Indian Prime Minister Manmohan Singh set a goal of building 20 kilometers of new roads a day as part of efforts to improve infrastructure ranked below Guatemala’s and Kazakhstan’s by the World Economic Forum. The daily average was 4.5 kilometers in 2011, according to PricewaterhouseCoopers LLP. India aims to spend as much as $1 trillion in five years on roads, ports and power plants.

Delays in acquiring land are the biggest challenge for Indian infrastructure projects, Deloitte’s Udgirkar said, as farmers refuse to leave their farms fearing they will lose their livelihoods. A quarter of the 226 roads commissioned by NHAI are behind schedule for reasons including delays in acquiring land, C.P. Joshi, road transport and highways minister, said in December.

Freight Corridors

“What we need to focus on is completing these projects on time,” said Manish Saigal, a partner at KPMG in India. “NHAI has awarded a lot of projects, but on the big freight corridors they are still lagging behind.”

An elevated road to Chennai’s port in Tamil Nadu state is among the projects held up because of land delays. In September, farmers also protested against the acquisition of plots for widening a highway in the western state of Rajasthan, according to Minister Joshi.

NHAI, which oversees road building, has already begun buying land for one of the new expressways, running from Mumbai to Vadodara, Singh said. The state agency intends to complete land acquisitions before issuing construction tenders, he said.

The proposed roads will have only about six entry and exit points, Singh said. Tolls will also be as much as 1.5 times more than a six-lane highway, he said. On the 28-kilometer Delhi- Gurgaon expressway, trucks pay as much as 82 rupees per trip.

G.R. Shanmugappa, who operates 80 trucks from southern Karnataka state, said he’d be happy to pay higher tolls for better roads. Highway improvements could help cut costs as much as 12 percent on a 4,200-kilometer New Delhi-Bangalore round trip, he said. Trucks could also cover as much as 700 kilometers a day, compared with the 300 kilometers they run now, he said.

“I wish there were roads that allow us to drive faster,” he said. “Then we could return home sooner.”

To contact the reporter on this story: Karthikeyan Sundaram in New Delhi at kmeenakshisu@bloomberg.net

To contact the editor responsible for this story: Neil Denslow at ndenslow@bloomberg.net

Yen Gains, South Korean Stocks Drop Before Europe Summit By Jason Clenfield - Jun 26, 2012

Asian stocks rose for the first time in five days and the yen strengthened for a third day before a European summit on the region’s debt crisis. Corn snapped a three-day advance that drove prices up 13 percent.

The MSCI Asia Pacific Index advanced 0.4 percent as of 11:39 a.m. in Tokyo. The yen rose 0.1 percent versus the dollar and gained against 14 of its 16 major peers. South Korea’s Kospi Index (KOSPI) dropped 0.3 percent. Standard and Poor’s 500 Index futures slipped less than 0.1 percent. Corn slid 0.8 percent after surging the previous three days amid dry weather that devastated U.S. crops. Natural gas advanced for a fifth day.

Trading volume on benchmark indexes in Japan and Hong Kong were more than 20 percent below the 30-day intraday average, on the eve of Europe’s 19th summit to tackle the debt crisis. Data showed confidence among South Korean manufacturers fell to the lowest level in four months, while the China Securities Journal said the country may introduce “more proactive” policies to ensure stable growth in the world’s second-largest economy.

“We’ve seen numerous summits come and go -- they usually deliver something but it’s often no more than the bare minimum,” said Shane Oliver, Sydney-based head of investment strategy at AMP Capital Investors Ltd., which manages almost $100 billion. “In China, there’s no doubt their economy has slowed and the authorities have been slower to respond than they were in 2008 because they don’t want to set off another inflationary boom.”

Kospi Slides

Nine stocks gained for every seven that dropped in the MSCI Asia Pacific Index (MXAP), which lost 3 percent in the past four days. The gauge has tumbled 12 percent from its peak this year on Feb. 29 amid concern U.S. and Chinese economic growth is slowing as Europe’s debt crisis worsens.

South Korea’s Kospi dropped for a fifth day, headed for its longest losing streak in more than a month. Australia’s S&P/ASX 200 gained 0.6 percent, led by consumer staples. The Hang Seng Index rose 0.7 percent.

Japan Tobacco Inc. (2914), Asia’s largest cigarette maker by market value, climbed 3.4 percent in Tokyo as investors sought shares of companies with earnings less tied to economic growth. Hyundai Motor Co. dropped 2.5 percent in Seoul.

The yield on Japan’s 10-year bond fell 1 basis point and the cost of insuring Japanese bonds against default dropped after Prime Minister Yoshihiko Noda yesterday pushed a bill to double a sales tax through parliament’s lower house. The Markit iTraxx Japan index eased 1.5 basis points to 186.5 basis points, Deutsche Bank AG prices show. The benchmark rose 34.4 basis points this quarter through yesterday, according to CMA.

To contact the reporters on this story: Jason Clenfield in Tokyo at jclenfield@bloomberg.net

To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net

Tossed-Out $20 Tenants Turn Millionaires in Mumbai By Pooja Thakur - Jun 25, 2012

Thousands of rent-controlled tenants in Mumbai paying $20 a month, and often less, are being turned into millionaires by developers tearing down crumbling colonial mansions to build luxury towers for the rich.

South Mumbai, including a stretch of prime land hugging the Arabian Sea, has about 500 dilapidated stone structures dating back to the early 1900s with a potential redeveloped value of about $40 billion, according to Pujit Agarwal, managing director at Orbit Corp. (ORB), a Mumbai-based developer that derives about 80 percent of its revenue from redeveloping old buildings.

“For generations, most tenants were living a hand-to-mouth existence, barely making two ends meet,” said Agarwal, whose firm is one of around 75 vying to oust Mumbai’s rent-controlled residents. “Now, with redevelopment, these tenants have become multimillionaires overnight as capital values of the properties they occupied soared.”

Home prices in Mumbai have climbed to a record 10,833 rupees ($200) per square foot, doubling in three years, according to Liases Foras Real Estate Rating & Research Pvt, a research company based in the city.

Sticking it out for the money comes at a price. Mea Kadwani, 78, survived a roof crashing in on his head when part of the three-story building in the upscale Nepeansea Road area, where he has lived since he was a toddler, collapsed. He wasn’t hurt beyond needing a tetanus shot, he said. Still, he and his wife pocketed $2.5 million after three years of negotiations and decades of paying rent that remained below $20 and peaked at $23 a month in a neighborhood where rents typically top $2,000.

Highest Compensation

“Unlike in the U.S., where people change houses an average eight times, here we are very emotionally attached to our homes,” the bespectacled, white-mustachioed Kadwani said while sipping tea in his relocated residence a few blocks from an Aston-Martin dealership. “Very often, we won’t change residence for three generations or more.”

Only 37 percent of Americans have lived in their homes for more than 10 years, with a median duration of 5.9 years, according to U.S. Census Bureau data.

Kadwani received among the highest compensation given by Orbit to nine tenants in Mukund Mansion, built in 1923, which it plans to turn into a garage to accommodate cars for residents of its adjoining 29-story Villa Orb Annex tower currently under construction. Villa Orb’s 7,700-square-foot (715-square-meter), five-bedroom units are selling for about $12 million, Agarwal said, netting the developer around four times the value of the investment after paying 1 billion rupees to the landlords, 750 million rupees to the tenants, and paying for development.

While half of Mumbai’s 18 million residents live in slums, they don’t get comparable payouts when developers come in. Under a government plan, they are instead able to obtain free housing. Developers must provide slum dwellers at least 269 square feet on plots on which they erect buildings.

Nightmare Tenants

The nine-decade-old mansion is one of many such structures in disrepair, as landlords can’t afford to maintain them on the rock-bottom rents they receive and often shell out more than what they collect on property taxes and repairs. Unable to evict tenants because of Mumbai’s rent-control laws, they are left to watch as market prices soar and their asset values sink -- and sometimes their tenants profit from the spread on subletting to others.

“It’s been a nightmare dealing with tenants,” said Kiran Bhammer, a 59-year-old diamond jewelry designer who with his family collected rents at Mukund Mansion ranging from $10 to $25 from nine tenants for decades after their parents bought it in 1963. “I’ve had cases where a tenant would illegally sublet the apartment, and the person would refuse to leave until I took him to court to evict him.”

Bodily Harm

Bhammer recalls threats of bodily harm when he’s tried to get those subletting to move out.

“Despite all the problems we faced and the threats we received, I couldn’t leave an asset like that,” Bhammer said. “I even suggested to my wife and kids to move to another apartment until this was resolved, but they refused and decided to stick it out with me.”

Kadwani, the tenant, sympathizes with his rent collector and doesn’t blame him for letting the roof fall in.

“The landlord was in a pitiable condition,” he said. “We didn’t expect him to do much for the building given the rents we were paying him.”

The Bombay Rent Control Act of 1947 was introduced to provide relief to the city’s migrants after the partition of colonial India. Rents were set at 1940 levels to prevent owners from charging excessive rates during a time of distress.

In Mumbai, the measures have been amended and the act rechristened the Maharashtra Rent Control Bill, which allows for a 5 percent annual rent increase. The controls have proved so politically popular that they’ve been extended several times, Orbit’s Agarwal said.

N.Y. Lawsuit

The sagas of rent-control are familiar in New York City, where a post-World War I housing shortage prompted temporary rules that were later upheld and extended after World War II, through the 1960s and into the present day.

A lawsuit by landlord James Harmon against the city was rejected in April by the U.S. Supreme Court, which refused to hear the challenge and left intact rules capping prices on almost a million units in a city where rents averaged $3,418 in March. Harmon, who lives in his brownstone home on Manhattan’s Upper West Side along with six tenants, said half of his renters pay $1,000 a month for one-bedroom apartments.

Seinfeld, Friends

Rent control is so legendary that American TV sitcoms and serials have featured it. On “Law & Order,” it appeared as an occasional motive for murder. On “Friends,” Monica inherited her grandmother’s rent-controlled apartment, allowing her and a roommate to pursue low-paying careers without being beholden to Manhattan’s high rents. In a “Seinfeld” episode, a rent- controlled apartment in Jerry’s building became available for $400 a month after his 94-year-old neighbor died, and Jerry’s friend Elaine was told to bribe the superintendent to get it.

The success of Mumbai’s redevelopment model is spurring others to follow. A religious trust is attempting the city’s largest redevelopment project in the 16.5-acre Bhendi Bazaar area. Among the most dense and congested in the city, the locality will be rebuilt by the trust, which plans to move 20,000 residents living in crammed shanties to 350-square-foot units in new towers, according to the trust’s website. The project, estimated to cost at least 15 billion rupees, aims to turn 250 old buildings into multi-story towers over five years.

Cashing Out

The residents of Mukund Mansion were given a choice of either an apartment in the new tower or compensation to move. About 70 percent of tenants usually cash out instead of opting for a redeveloped apartment, Agarwal said.

Kadwani, who had lived in 2,600 square feet, could have bought two such sized units with the money he got had he opted to move 15 kilometers (9 miles) north to the upscale neighborhood of Bandra. Instead he bought an apartment of about the same size on the first floor of a seven-story building in South Mumbai’s Peddar Road area, about five minutes’ drive from his former home.

“I refused an apartment in the redeveloped building, as the idea of staying in these tall towers didn’t appeal to me,” Kadwani said, instead opting for a quiet by-lane with a view of sunlit trees from his living room. “We wanted a similar-sized apartment in the same area as my grandchildren go to schools here, and we have been living here for so many years.”

All tenants haven’t had an easy ride. Mitul Bhatia, a 33- year-old recruitment consultant, and his parents were forced to vacate their 972-square-foot, three-bedroom apartment in South Mumbai after the landlord turned off the water and electricity. Blocked drainpipes caused leaks and a short circuit in the building, he said, adding that they stuck it out until he fell ill with malaria in 2009.

Harassing Tenants

“Whatever he could do to harass us, he did,” Bhatia said. “We would have to climb three floors every day to fill eight to 10 buckets of water since there was no electricity to pump water into the flats.”

With an 81-year-old father, a 72-year-old mother and a battle to recover his health, Bhatia said he accepted an offer for a fifth of the market price and had to move to the suburbs.

“We got very little in the end, way below market rate,” he said. “Prices to buy were too high in the same area, and what we got from the landlord was too little. I feel bad, but my parents feel worse because they had stayed there for decades.”

Some tenants in Bhatia’s building who remained through water and power outages received higher compensation. One of them, who asked not to be identified because he signed a confidentiality clause with the landlord, says he fought in court with the landlord for four years before getting a settlement. The tenant, who had paid a monthly rent of 150 rupees for a 1,600-square-foot unit, received 60 million rupees this month and bought a house nearby.

Faster Development

Mumbai has 19,642 old buildings that need to be redeveloped, Orbit estimates. The city amended development rules earlier this year, defining earlier gray areas that had held up construction and making it easier to negotiate with landlords, Agarwal said.

The new rules allow homeowners to expand their apartments by enclosing spaces such as balconies, flowerbeds and terraces. The definition crystallized the square footage that can be redeveloped, removing earlier discretionary powers that allowed competing developers bidding for the same plot to get different rights based on their construction plans.

That’s helped speed up the changing of Mumbai’s skyline.

“We tried to sell our tenancy rights several times, but the landlord refused to transfer the property to the new tenant,” said Kadwani. “In hindsight, it was a blessing that he didn’t agree, or we would have sold out for a fraction of what we got in the end.”

To contact the reporter on this story: Pooja Thakur in Singapore at pthakur@bloomberg.net

To contact the editor responsible for this story: Andreea Papuc at apapuc1@bloomberg.net

India Prepares to Counter Rupee’s Slide By Rajhkumar K. Shaaw

India plans to unveil measures today to support the rupee as its slump to a record low against the dollar threatens to intensify price pressures and boost the cost to companies of repaying foreign debt.

The government and central bank will make the announcement, Finance Minister Pranab Mukherjee told reporters in Kolkata on June 24. The ruling Congress party’s nominee for president, Mukherjee told the Press Trust of India he will resign from his current post tomorrow. A group of federal and state legislators elects the next president July 19.

India’s currency is Asia’s worst performer of the past year, having tumbled 21 percent versus the dollar, and its decline has contributed to an inflation rate that the central bank deemed last week too high to allow an interest-rate cut. Chakravarthy Rangarajan, the prime minister’s top economic adviser, said last month one option to shore up the rupee was a deposit program to lure funds from citizens based overseas.

“The situation is quite worrisome,” Dharmakirti Joshi, Mumbai-based chief economist at Crisil Ltd., the local unit of Standard & Poor’s, said in an interview. “You have to increase the supply of dollars. A lot of foreign-currency convertible bonds and other payments are due and it does create stress on those who have borrowed abroad.”

Indian companies face a record $5.3 billion of maturing foreign-currency debt this year, data compiled by Bloomberg show. At the sovereign level, Fitch Ratings cut its outlook for India to negative on June 18, joining S&P in signaling the country is at risk of losing its investment-grade status.

Rupee’s Slide

The rupee reached an all-time low on June 22 of 57.3275 per dollar. While most emerging-market currencies have retreated in recent months as Europe’s crisis prompted investors to flee riskier assets, the rupee has underperformed as India’s government failed to rein in its budget deficit and economic reforms stalled. The currency slumped 2.9 percent last week, its biggest loss since September.

Joshi said that besides the deposit program, relaxing limits on foreign investment could be considered to halt the rupee’s slide. A variety of dollar-denominated products, including bonds, could be looked at, HSBC Holdings Plc analysts wrote in a June 22 research note.

“This would only slow rupee weakness and not change the overall direction,” HSBC currency analysts led by Paul Mackel in Hong Kong wrote in the note. “For the rupee to strengthen more meaningfully and sustainably against the dollar, the government needs to do more than short-term patch work. It needs to undergo the necessary structural reforms.”

Faster Inflation

India’s benchmark inflation rate has remained elevated even as that of other Asian nations retreats. Wholesale prices rose 7.55 percent in May from a year before, compared with 7.23 percent in April. Singapore today may report its rate fell to 5.1 percent, from 5.4 percent in April, according to the median estimate of 13 economists before a government report today.

Among other economic data scheduled for today, German consumer confidence will probably retreat in July, according to the median of 22 estimates before a report by market research company GfK SE. The Nuremberg-based firm may forecast today that its consumer-sentiment index, based on a survey of about 2,000 people, will drop to 5.6 from 5.7.

In the U.S., new home sales are projected to accelerate to 346,000 at an annualized pace for May, a three-month high. Even so, a separate report tomorrow may show property values remain still under pressure. The S&P/Case-Shiller index of prices in 20 cities fell 2.7 percent in the 12 months ending in April, little changed from the 2.6 percent decline in the year through March, economists in a Bloomberg survey predicted.

Agenda Stymied

Prime Minister Manmohan Singh’s administration has seen its agenda stymied by opposition from its own coalition allies, and last year suspended a plan to allow Wal-Mart Stores Inc. and other foreign companies to buy majority stakes in Indian multi- brand retailers. An anti-corruption bill and proposals to allow foreign direct investment in pensions have also been shelved.

The approaching personnel shift in India’s leadership offers an opportunity to reinvigorate the government’s agenda. A successor for Mukherjee, who told parliament May 16 that the administration will keep up its campaign for greater economic opening, has yet to be named.

While mostly a ceremonial post, India’s president is the supreme commander of the armed forces and oversees the creation of a government in the event of a hung parliament. The leader is chosen by an electoral college that consists of elected legislators from the states and both houses of parliament. The winner will succeed President Pratibha Devisingh Patil, whose five-year term ends July 24.

IKEA Coming

Even with the foreign-investment measure stalled, India did get a commitment from IKEA, the Swedish retailer known for its self-assembled furniture, last week. The company will boost the amount of products it sources from India significantly, according to an e-mailed statement from India’s commerce ministry. It also plans to set up 25 stores in the country and may invest 600 million euros ($754 million), the ministry said.

The rupee’s slump has contributed to inflation because India buys 80 percent of its oil from overseas and pays for supplies in dollars. Every one-rupee drop in the domestic currency against the dollar boosts annual revenue losses for the three government-owned refiners by 80 billion rupees ($1.4 billion), the oil ministry said in November.

The Reserve Bank of India on Nov. 17 increased the caps on overseas investors’ holdings of India’s local-currency government debt and corporate bonds by $5 billion each to boost inflows and arrest the currency’s decline.

The central bank has asked oil refiners to obtain 50 percent of their dollar requirements from a single state-owned bank, Oil Secretary G.C. Chaturvedi told reporters in New Delhi on June 22.

To contact the reporter on this story: Rajhkumar K Shaaw in Mumbai at rshaaw@bloomberg.net

To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net