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The USD/ZAR exchange rate has bounced back in the past few days, helped by the soaring US dollar index (DXY). After bottoming at 17.05 on September 30th, the pair bounced back to a high of 17.80.

US dollar index rally

The South African rand has been one of the best-performing currencies this year as it soared by over 10% from its lowest point in 2023.

Recently, however, the USD/ZAR pair has bounced back because of the ongoing US dollar index rally.

Data shows that the DXY index bottomed at $100.18 on September 27 to almost $107. This rally has coincided with the rising US bond yields as the ten-year Treasuries soared to 4.14% and the five-year jumped to 4.003%.

Other government yields have also continued rising as investors change their view about the next actions by the Federal Reserve.

A few weeks ago, the general view among market participants was that the Federal Reserve would continue cutting interest rates aggressively as the labor market worsened.

Recent economic data have pointed to a change of tune by the Fed. Data released earlier this month showed that the unemployment rate dropped slightly to 4.1% in September, while wage growth accelerated. The economy created over 254k jobs during the month.

More data showed that the US inflation has remained stronger than expected. Data released almost two weeks ago showed that the headline Consumer Price Index (CPI) retreated from 2.5% in August to 2.4% in September, higher than the median estimate of 2.3%.

Core inflation, which excludes the volatile food and energy prices, remained unchanged at 3.2%, which is much higher than the Fed’s target of 2.0%.

Another report released last week showed that the country’s retail sales remained steady in August. Therefore, analysts believe that the Federal Reserve will not be inclined to be as dovish as it was in the last meeting.

The US dollar index has also jumped as the US election nears. Polymarket traders believe that Donald Trump will win, while many mainstream polls show that the final result will be close.

Donald Trump has maintained that he needs the US dollar to weaken in a bid to improve manufacturing activity. However, analysts caution that his policies would strengthen the US dollar.

For example, he has made tariffs a major part of his economic proposals. Another trade war would push more people to seek refuge of the US dollar. In a note, analysts at ING Bank said:

“Unless markets regain some confidence in Fed cuts, the dollar will hardly face downward corrections in the near term. The risk now is that markets might actually price out one cut in either November or December.”

South Africa inflation ahead

The USD/ZAR exchange rate has bounced back because of the US dollar index’s strength. In its last monetary policy meeting, the South Africa Reserve Bank (SARB) decided to cut interest rates by 0.25% for the first time in over four years.

The bank slashed interest rates as inflation continued its downtrend, helped by the rand strength. Data by the country’s statistics agency showed that the headline Consumer Price Index (CPI) dropped to 4.4% in August from the previous 4.6%.

The CPI has been in a strong downtrend after peaking at 7.8% in 2022, and analysts expect the figure to keep falling. Analysts expect the CPI data, which comes out on Wednesday, to show that the headline CPI dropped to 4.2% in September. The SARB expects that inflation will be around 3% in the next three quarters.

The USD/ZAR pair has also retreated in the past few months as investors focus on the political arena where the deal between ANC and Democratic Alliance is holding well.

In the aftermath, various data points have shown that consumer and business confidence were improving. Also, there are rising hopes that the three credit rating agencies will start upgrading their ratings for the economy.

Most notably, the tourism sector in the country is doing well. The country welcomed over 8 million tourists in 2023, and the number has continued growing this year.

USD/ZAR technical analysis

USD/ZAR chart by TradingView

The daily chart shows that the USD to ZAR exchange rate has crawled back in the past few days. However, it remains below the key support level at 18.10, its lowest point in November and December 2023.

The pair has remained below the 50-day and 100-day Exponential Moving Averages (EMA), meaning that bears are control.

Also, the Relative Strength Index (RSI) and the MACD have continued rising in the past few days.

However, it has formed a rising wedge pattern, a popular reversal sign. Therefore, the pair will likely have a bearish breakout as sellers target the next point at 17, its lowest point this month.

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Stocks

IndiaMart shares down 19% on Jefferies downgrade: buy, sell, or hold?

Shares of IndiaMart Intermesh plunged by 19% to ₹2,447 during morning trading on October 21, despite reporting strong second-quarter earnings.

While the online B2B marketplace posted a significant year-on-year net profit increase of 94.7% to ₹135.1 crore for Q2 2024, concerns about slowing collections growth and weak subscriber additions led analysts to issue cautious recommendations.

Jefferies downgraded the stock from “buy” to “underperform,” pointing to a potential decline in future growth unless the company addresses its subscriber churn.

IndiaMart share price takes a hit despite strong Q2 results

The IndiaMart share price tumbled sharply, even after the company reported impressive earnings for the quarter ending September 30, 2024.

While net profit soared to ₹135.1 crore, up 94.7% year-on-year, subscriber growth lagged, with just 2,390 new paid subscribers added.

This slowdown led to a mere 5% rise in collections, a steep drop from 14% in the same quarter last year.

As a result, Jefferies slashed its price target for IndiaMart shares to ₹2,540, citing weak subscriber additions and stagnant collections growth as critical concerns.

Jefferies downgrades IndiaMart to ‘underperform’

Jefferies’ downgrade of IndiaMart from “buy” to “underperform” has raised red flags for investors.

The brokerage noted that without a significant improvement in subscriber additions, collections growth is likely to remain in the 10-15% range, which could weigh heavily on the stock’s performance.

Additionally, the firm reduced IndiaMart’s earnings estimates by 4-12%, signaling that subscriber churn remains a persistent issue despite management efforts to curb it.

IndiaMart share price faces further pressure

IndiaMart’s share price has been under pressure, currently trading at ₹2,585, down 14.2% from the previous close on the NSE.

Source: TradingView

The stock is significantly lower than its 52-week high of ₹3,198. While the company’s EBITDA margin improved to 38.7%, up from 27.2% in the same period last year, operational efficiencies have not been enough to offset concerns over growth sustainability.

Deferred revenue increased by 19% year-on-year to ₹1,483 crore, but weak subscriber growth continues to cloud the company’s near-term outlook.

Analysts split on IndiaMart stock

Opinions on IndiaMart’s future remain divided among analysts. Nomura maintained a “neutral” rating, with a price target of ₹3,150, pointing to the weak collections and sluggish subscriber additions as major headwinds.

The brokerage highlighted that low collection per customer, combined with consistently low net subscriber additions—averaging 2,000 per quarter over the last five periods—pose significant risks to the company’s growth trajectory.

Out of 21 analysts covering IndiaMart, eight have a “buy” rating, four recommend “hold,” and nine suggest “sell,” reflecting the mixed sentiment surrounding the stock’s prospects. Despite strong earnings, the company’s ability to accelerate subscriber growth will be key in determining whether its share price can recover.

IndiaMart News: what’s next for investors?

For investors tracking the IndiaMart share price and news, the focus will be on how the company addresses its growth challenges.

With analysts forecasting moderate growth in the near term, the stock’s performance will likely depend on improving subscriber additions and sustaining its collections growth.

As IndiaMart navigates these challenges, investors should weigh their options carefully, considering both short-term market movements and long-term growth potential.

By incorporating keywords like “IndiaMart share price,” “IndiaMart Intermesh,” “IndiaMart news,” and “IndiaMart stock,” this SEO-focused copy offers a unique and optimized version of the original content.

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Stocks

RBL Bank stock falls 14% to 52-week low after 24% Q2 profit drop: should you buy?

The RBL Bank stock price took a sharp hit, dropping 14% on October 21 to reach its 52-week low, following the bank’s disappointing Q2 results.

The private sector lender reported a significant 24% year-on-year decline in net profit, falling to ₹223 crore, mainly due to asset quality challenges in its credit card and microlending books.

With investors concerned about the bank’s future performance, the RBL Bank share price hit an intraday low of ₹176.5 on the NSE during the trading session.

RBL Bank Q2 results: net profit drops

RBL Bank’s Q2 results for the quarter ending September 30, 2024, revealed a post-tax net profit of ₹223 crore, down from ₹294 crore in the same period last year and ₹372 crore in the preceding June quarter.

The decline in profitability was largely attributed to challenges in the bank’s microfinance and credit card segments, which have impacted its asset quality.

The gross non-performing assets (NPA) ratio slightly improved, declining by 0.25% to 2.88%. However, this was not enough to offset concerns about the bank’s credit performance.

RBL Bank stock price hits 52-week low

The RBL Bank stock price opened with a loss of nearly 6% in early trading on October 21, before sliding further to a 14% decline, marking a 52-week low of ₹176.5 per share.

Despite a 15% growth in advances, the bank’s core net interest income saw only a modest 9% rise, reaching ₹1,615 crore.

This slower growth is tied to ongoing asset quality concerns in both the microfinance and credit card sectors.

Source: TradingView

The bank’s net interest margin (NIM) also contracted, dropping to 5.04% from 5.54% in the previous year.

RBL Bank’s management indicated that it may take up to nine months for the NIM to recover to its target range of 5.4-5.5%.

Slower growth in the credit card business

In the second quarter, RBL Bank saw a 32% surge in other income to ₹618 crore, which provided some relief amid slower interest income growth.

However, the bank’s provisions rose sharply to ₹618 crore, driven by increased stress on its asset quality. The management expects credit costs to follow a similar trend in the upcoming third quarter.

RBL Bank also reported a 20% increase in deposits, with a focus on attracting more non-bulk, granular liabilities. In the credit card segment, growth is expected to either match or trail overall asset growth as the bank shifts its strategy.

Rather than focusing on portfolio expansion, RBL Bank aims to improve the quality of its credit card portfolio by generating more business from existing customers.

Should you buy, sell, or hold RBL Bank shares?

The recent decline in the RBL Bank share price, coupled with its weak Q2 results, has raised questions about the bank’s near-term prospects.

Investors should weigh the risks associated with the ongoing asset quality issues, particularly in the credit card and microlending books, before making any decisions.

For those considering investing in RBL Bank shares, it may be wise to wait and see how the bank addresses these challenges in the coming quarters.

With provisions on the rise and net interest margins under pressure, caution is advised.

However, for long-term investors, the bank’s efforts to improve its deposit base and enhance portfolio quality may offer potential growth opportunities once the asset quality stabilizes.

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Stocks

American Express to become sole owner of Swisscard as UBS sells its 50% stake

UBS is divesting a portion of the Credit Suisse business it acquired last year by selling the fallen bank’s 50% stake in credit card provider Swisscard.

According to a statement from Swisscard, UBS will transfer its 50% ownership in the company to its joint venture partner, American Express.

While the financial details remain undisclosed, the transaction is part of UBS’s broader strategy to streamline operations after its emergency takeover of Credit Suisse in 2023.

What changes for cardholders?

American Express (Amex) will take full ownership of Swisscard after acquiring UBS’s 50% share.

This transition will make Amex the sole proprietor, allowing it to continue issuing American Express, Mastercard, and Visa cards in Switzerland.

Swisscard assured that the existing cardholders, merchants, and partners would not face immediate changes.

Credit Suisse cardholders will be moved to UBS’s platform in 2025, as UBS shifts its focus to align with its new operational setup.

UBS sells stake in Swisscard

The divestment of its 50% share in Swisscard is part of UBS’s ongoing effort to optimize its operations following the acquisition of Credit Suisse.

UBS highlighted that issuing credit cards through Swisscard no longer fits with its operational and strategic goals.

The shift allows UBS to concentrate on integrating Credit Suisse’s assets that complement its broader business model while divesting those that do not align with its long-term plans.

UBS has been selectively divesting parts of the Credit Suisse business acquired during last year’s emergency takeover. In June, UBS sold its stake in Credit Suisse Securities (China), and by July, it reached an agreement to sell an insurance-linked investment arm of Credit Suisse.

The sale of Swisscard’s 50% stake marks another strategic step as UBS refines its portfolio to ensure synergy between its new and existing operations.

Credit Suisse cardholders will transition to UBS’s credit card platform by mid-2025. UBS assured that no action is required from cardholders during this period, as they will receive information about new card issuance well in advance.

The bank emphasized that this transition would be seamless, ensuring minimal disruption for clients during the changeover. The shift aims to integrate Credit Suisse’s card business into UBS’s infrastructure smoothly.

Swisscard to maintain operations under Amex ownership

Despite the changes, Swisscard will continue its operations in Switzerland, issuing cards under the American Express, Mastercard, and Visa licenses. This move will allow Swisscard to maintain its existing business relationships while leveraging the backing of American Express as a sole owner.

This strategic adjustment by UBS and American Express seeks to ensure continuity for Swisscard’s operations and services within the Swiss market.

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Stocks

GMP for Hyundai shares experiences volatility ahead of India IPO listing: should you buy?

The much-anticipated Hyundai India IPO is set to debut on October 22, 2024, on the BSE and NSE, following its historic Rs 27,870 crore offer.

While the initial response from retail investors was lukewarm, strong demand from Qualified Institutional Buyers (QIBs) led to an overall subscription of 237%.

As the listing date approaches, the grey market premium (GMP) for Hyundai Motor India shares has experienced significant fluctuations, reflecting investor uncertainty about its market debut.

With Hyundai’s share price in the grey market rebounding to a positive premium just before the listing, all eyes are on its performance.

Hyundai India IPO overview

The Hyundai India IPO, the largest ever in India’s stock market history, saw a muted response from retail investors, with only 50% of the allotted shares being subscribed.

However, the QIB segment oversubscribed nearly seven times, demonstrating strong institutional confidence. Non-institutional investors (NII) showed lower interest, with their portion being subscribed to just 60%.

The company aims to raise Rs 27,870 crore through the offer, pricing shares between Rs 1,865 and Rs 1,960 each, with a minimum bid of 7 shares per lot.

Hyundai Motor India Ltd (HMIL), a subsidiary of South Korean automaker Hyundai Motor Company, plans to enhance its visibility and brand image through this listing.

The automaker has been a dominant player in India, consistently holding the second-largest market share in the passenger vehicle sector. The company’s portfolio boasts 13 models, including best-sellers like Creta and Verna, solidifying its position in the SUV and sedan segments.

Grey Market Premium (GMP) and market sentiment

One of the key factors influencing the IPO’s reception has been the volatility of the grey market premium (GMP).

After initially hitting a high of Rs 570 in September, the GMP for Hyundai shares nosedived into negative territory just days before the listing, causing concerns among investors.

As of October 21, the GMP rebounded to Rs 95, suggesting a possible listing gain of around 5%.

This recovery signals renewed optimism, but the GMP’s unpredictable swings reflect lingering doubts over Hyundai’s valuation and the overall weak demand in the auto sector.

The term “grey market premium” refers to the price investors are willing to pay above the IPO issue price, even though this market operates outside the official stock exchanges.

While the GMP often provides insight into listing day performance, it is not always a reliable indicator.

For Hyundai, the grey market’s fluctuating sentiment could lead to either a modest or muted debut, with the final listing price still uncertain.

Hyundai Motor India’s long-term outlook remains strong

Despite the pre-listing jitters, Hyundai Motor India’s long-term outlook remains strong.

The company continues to be a leader in the Indian auto industry, backed by solid demand for its models like Creta and Verna.

Its Chennai plant, which had an installed capacity of 770,000 units by FY 2023, is expected to play a critical role in meeting future demand as the automaker plans to expand its product lineup in India.

Hyundai Motor India’s IPO listing will be closely watched by investors, with the grey market premium offering mixed signals.

While institutional investors have shown strong support, retail investors remain cautious amid concerns over valuation and broader market conditions. Investors should keep an eye on Hyundai’s share price movement post-listing to assess the stock’s true potential.

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Stocks

JPMorgan predicts surge in South African IPOs amid rising economic confidence

South Africa is gearing up for a wave of initial public offerings (IPOs) and fundraising activities, set to begin as early as 2025, as the country’s economic outlook brightens after years of lackluster growth.

According to JPMorgan Chase & Co., investor optimism has surged, driven by the recent formation of a business-friendly coalition government following the African National Congress (ANC)’s loss of its parliamentary majority in the May election.

This shift in the political landscape has sparked renewed investor confidence, with multinational companies pouring in capital, a rally in the South African rand and bonds, and the benchmark stock index rising over 20% in dollar terms since June.

According to a report by Bloomberg, Edward Bell, managing director at JPMorgan in Johannesburg, noted,

We would expect primary activity to pick up. As equity market performance and valuations return to more appropriate levels, the incentive and the ability to issue equity or IPO a business becomes a viable option.

Johannesburg Stock Exchange prepares for key listings

Amid the positive sentiment, the Johannesburg Stock Exchange (JSE) is already preparing for several high-profile listings.

Pick n Pay Stores Ltd.’s Boxer unit is expected to list before the end of the year, drawing considerable interest from investors.

Similarly, Anglo American Plc is set to spin off its platinum and diamond businesses, both of which are highly anticipated by the market.

In addition to these upcoming listings, there is growing speculation about Coca-Cola’s potential IPO of its African bottling business, which could aim for an $8 billion valuation in 2025.

The JSE is also working to attract more inward and secondary listings from companies with African or sub-Saharan ties, offering more opportunities for growth in the region.

Investor confidence returns to South Africa

Despite foreign investors selling a net $5.5 billion worth of South African stocks this year, domestic stocks, particularly in the banking sector, have seen strong gains.

FirstRand Ltd., Standard Bank Group Ltd., and Capitec Bank Holdings Ltd. have all surged more than 25% since June, reflecting renewed confidence in South Africa’s economy.

JPMorgan predicts South Africa’s economy will grow by 1% in 2024 and by 1.4% in 2025, following years of average GDP growth below 1%.

Bell also highlighted the growing demand for sub-Saharan debt exposure, with investors seeking higher yields and stability from the region.

“Emerging market debt investors are looking for sub-Saharan exposure as it provides good yield and the region currently has a more stable economic outlook,” Bell added.

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World News

World Bank report on poverty: 700 million people are surviving on less than $1.90 a day

A recent report from the World Bank highlights a pressing global issue: 8.5% of the world’s population—approximately 700 million people—live in extreme poverty, defined as surviving on less than $1.90 a day.

Despite progress in reducing the proportion of those living in poverty since the 1990s, the actual number of people facing these harsh conditions has remained stable due to population growth, particularly in high-poverty regions such as Asia.

Asia plays a significant role in the global poverty landscape, with countries like India, Bangladesh, and Indonesia housing large populations struggling to access essential services, education, and healthcare.

Statista reports that the World Bank utilizes varying poverty thresholds, with $3.65 per person per day applicable to lower-middle-income countries and $6.85 for upper-middle-income populations.

It is estimated that in 2024, approximately 1.7 billion people (21.4%) and 3.5 billion people (43.6%) will be living under these respective poverty lines.

Source: Statista

Contributing factors to global poverty

Several interrelated factors contribute to the persistence of poverty in Asia.

Rapid population growth, income inequality, insufficient job opportunities, inadequate social safety nets, and environmental degradation are critical drivers of this ongoing crisis.

Rural communities are particularly vulnerable due to limited access to essential services and economic opportunities.

The consequences of poverty are severe, particularly for children who often lack access to education, making them more susceptible to hunger and preventable diseases.

Women and girls typically face the greatest challenges, encountering significant barriers to education, healthcare, and economic advancement.

The dire living conditions in urban slums, especially in countries like India and Bangladesh, vividly illustrate the plight of those trapped in extreme poverty.

To effectively combat global poverty in Asia, targeted policies and collaborative efforts among governments, non-governmental organizations (NGOs), and the private sector are essential.

Key initiatives include investing in education and vocational training, promoting sustainable agriculture and rural development, improving healthcare systems, and fostering equitable economic growth, with a particular focus on women, children, and ethnic minorities.

Achieving the Sustainable Development Goals (SDGs) and eradicating poverty by 2030 requires nations to tackle the unique challenges faced by regions like Asia.

By implementing targeted policies and promoting inclusive growth, countries can make substantial progress in reducing global poverty and fostering a more equitable society.

Collaboration and concerted efforts are crucial for driving sustainable development and ensuring a better future for generations to come.

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World News

Peloton stock more than doubles in 2 months: is the growth sustainable?

Peloton Interactive Inc (NASDAQ: PTON) has had a difficult time adjusting to the post-pandemic world – but it looks like things are finally starting to change for the better.

Shares of the connected fitness company have more than doubled over the past two months as financials improved on the back of its turnaround efforts.

Following such a surge, however, it makes sense to wonder if there is any upside left in Peloton stock. Let’s find out.

Return to sales growth could help Peloton’s stock

Peloton has already pushed its sales back into the growth trajectory.

In August, the exercise equipment company reported a 0.2% year-on-year growth in revenue for its fourth quarter – a marginal increase but an increase nonetheless.

Meanwhile, PTON has announced plans to cut its marketing costs by 19%.

Additionally, the Nasdaq-listed firm has lowered its global headcount by 15% and continues to trim its retail showroom footprint as well in pursuit of lowering its annual run-rate expenses by over $200 million by the end of fiscal 2025.

As evident, Peloton Interactive has found some religion in terms of cost structure – and moving further in that direction could help it command a higher price tag moving forward.

That’s why BMO analysts continue to rate Peloton stock at “market perform”.

Their $6.50 price target indicates potential for another 15% gain from here.

Still, PTON is not a suitable pick for income investors as it doesn’t pay a dividend at writing.

Peloton Interactive is fully committed to profitability

Investors should feel somewhat better about Peloton Interactive as its management has finally slammed the breaks on chasing growth at any cost and has committed to orchestrating a return to profitability first.

Other recent developments that make PTON a bit more attractive include the launch of a gear rental service in the United Kingdom and the recent refinancing of the balance sheet.

Lastly, despite the recent surge, Peloton stock remains priced for a disaster.

All in all, this New York-headquartered firm is a turnaround story that still adds a lot of risk to your portfolio, should you choose to invest in it.

On the other hand, though, it is now moving in the right direction and may offer lucrative long-term returns under the right management.

So, while we wouldn’t recommend going big when it comes to investing in Peloton shares due to their speculative nature, it may not be the worst decision to build a small position in Peloton stock at the current price if you do have the appropriate risk appetite.

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World News

LATAM crypto update: Colombia’s rise, Mercado Libre’s Meli Dólar, and Brazil’s stablecoin regulations

This week in LATAM’s cryptocurrency landscape, Colombia and Brazil are emerging as leaders with promising growth opportunities.

According to the recent Geography of Cryptocurrency Report 2024 by Chainalysis, the region has seen a remarkable 42.5% increase in cryptocurrency transactions year-over-year, solidifying its status as the second-fastest-growing market worldwide.

The report highlights that approximately 700 million people in Latin America engaged in crypto transactions, totaling a staggering 415 billion Pesos from July 2023 to June 2024.

In comparison, Sub-Saharan Africa leads globally with a 45% rise in crypto activity.

Colombia ranks fifth in cryptocurrency adoption, with an impressive influx of $25 billion in crypto transactions during the specified period.

The country is also the sixth-fastest-growing in this sector, showcasing a notable 25% increase in the value of its crypto transactions, according to Chainalysis.

Meli Dólar: Mercado Libre’s game-changing initiative

Mercado Libre’s introduction of Meli Dólar, a stablecoin linked to the US dollar, marks a significant shift in Latin America’s cryptocurrency environment for 2024.

This initiative enhances Mercado Libre’s loyalty program across Brazil and Mexico, offering users the stability of the US dollar amidst fluctuating markets.

In an interview with Forbes, Ignacio Estivariz, VP of Fintech Services at Mercado Libre, reported millions of users have already received Meli Dólar through loyalty rewards or direct purchases.

While the focus remains on Brazil for now, Estivariz mentioned that there are no immediate plans to extend Meli Dólar to other countries.

Brazil’s regulatory efforts in cryptocurrency

Brazil’s government is working closely with the central bank to address regulatory challenges related to cryptocurrency and meal vouchers.

With Gabriel Galipolo as the new central bank president, the government aims to unify its regulatory approach, which has been fragmented in the past.

Meanwhile, the stablecoin sector in Brazil is experiencing rapid growth and has begun to surpass Bitcoin in transaction volumes on local exchanges.

Stablecoins are appealing to users seeking less volatility, positioning Brazil as a hub for B2B cross-border payments.

Recent data from Chainalysis reveals Latin America as the second-fastest-growing region for stablecoin usage, with a growth rate exceeding 42%.

US elections impact on Latin American crypto markets

As the US presidential race heats up, financial markets are reacting. Polls indicate a tightening race between Republican candidate Donald Trump and Democratic Vice President Kamala Harris, influencing assets such as Bitcoin and the Mexican peso.

Trump has taken the lead in online prediction markets such as PredictIt and Polymarket. Polymarket last favored him 61% to 39% over Harris, Reuters reported.

According to a report from the Wall Street Journal on Friday, Trump’s gains on Polymarket could be attributed to a group of four accounts that have collectively wagered around $30 million in cryptocurrency on his potential victory.

Investors are cautious, noting that current market movements are also influenced by rising economic optimism following strong US job reports and recent Federal Reserve interest rate cuts.

Latin America’s cryptocurrency landscape is rapidly evolving, with countries like Colombia and Brazil leading the charge in digital asset adoption and blockchain technology integration.

This shift not only reflects changing consumer preferences but also signifies a broader transformation of financial frameworks.

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World News

Are you a tenant or landlord in India? Harish Fabiani explains how green leasing can benefit your finances

The Indian real estate market is booming.

With rising economic growth and rapid urbanization, the market is estimated to reach a size of $1.3 trillion by 2034 and $5.17 trillion by 2047, according to a report by realtors body CREDAI.

With a focus on sustainability fuelling a reimagination in the way buildings are constructed, the adoption of green leases is also seeing a rise.

Harish Fabiani, group chairman of Americorp Ventures and co-owner of India Land, a real estate development firm, breaks down the concept for Invezz.

What is green leasing?

Green leasing is a new approach to real estate contracts that incorporates sustainability objectives in the settlement between the landlord and the tenant.

It focuses on energy efficiency, water conservation, and lowering waste, encouraging each party to contribute towards achieving environmental goals.

Unlike conventional leases, green leases create a shared duty among stakeholders to reduce environmental impacts.

Why is it crucial for the Indian real estate sector?

This approach is crucial in the Indian real estate sector, as it singlehandedly contributes nearly 40% to the overall emissions.

In recent years, the significance of sustainability within the Indian real estate sector has grown notably.

This increase is prompted by the government’s push for green buildings and smart city initiatives, as India remains the third-biggest CO2 emitter globally, producing over 30% of the emissions.

What are the key elements of green leasing?

Today, the key elements of green leasing consist of energy audits and water efficiency measures, in contrast to traditional lease agreements that often ignore these environmental elements.

Multiple reports have highlighted LEED, GRIHA, and WELL building certification as the key rating systems adopted to build sustainable commercial real estate.

It also outlines India’s sustainability goals, which include attaining net zero greenhouse gas emissions by 2070 and drawing 50% of energy from renewables by 2030.

How does green leasing help stakeholders financially?

Sustainability in the real estate sector is crucial not just for the environment but also for the finances of the stakeholders.

This is because energy-efficient buildings can lower operational costs by up to 20%. Green buildings can cut down electricity consumption by 20-30% and water usage by 30-50%, aligning the interests of homeowners and renters.

Green leasing also supports Corporate Social Responsibility (CSR) targets by promoting electricity efficiency and environmental management.

Meanwhile, traditional leasing often focuses on short-term earnings rather than long-term sustainability.

What is the future outlook on green leasing?

Reports show that green leases are bound to reach up by 20% in the next 1-2 years, marking a notable shift towards sustainability.

This move will enable landlords and tenants to benefit from increased rental earnings, low utility costs, tax benefits, and regulatory advantages.

For the landlords, sustainability features including electricity efficiency systems and green certifications can strike property values and attract renters with low energy values.

Additionally, landlords can also take advantage of tax benefits and rebates.

Green-licensed buildings command a 12-14% rental premium rate over non-green buildings, reflecting the marketplace’s reward for sustainable development investments. On the other hand, tenants may benefit from lower energy values and better operating surroundings because of better lighting and air quality.

These factors contribute to higher employee productivity and help the employer’s sustainability desires in commercial setups.

Green leasing generally consists of clauses around energy utilization, waste management, and reducing emissions.

In India, government regulations, along with the Energy Conservation Building Code (ECBC), promote green building practices and incentives along with sustainable and green building programs.

These practices offer monetary support to landlords and tenants for implementing sustainability measures.

These systems are aligned with global environmental targets and promote the proper adoption of green leasing on a large scale.

Barriers to green leasing and how to overcome them

Green leasing can transform the real estate sector by aligning with the sustainability objectives of landowners and tenants.

However, certain barriers continue to hamper its extensive adoption.

One of the biggest barriers to green leasing is the initial value of enforcing greater sustainable measures. Installing a power-saving system, water treatment technology, and green infrastructure in a building requires a substantial amount of cash, which many landowners and renters do not wish to spend.

Additionally, there’s a lack of knowledge about the long-term monetary and environmental advantages, which hinders its massive adoption.

Many developers are still unaware that they can use a green lease template to standardize and simplify the system and become compliant with practices and requirements.

Joining a green lease network can also be beneficial because it provides access to assets, tools, training, recognition, and advocacy.

Proper education and collaboration could effectively help overcome those boundaries.

Similarly, innovative financing models such as Energy Performance Contracts (EPC) or green loans can reduce the initial charges by permitting tenants and landlords to share the financial burden.

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