SRI LANKA PROPERTY FIRM HIT BY FALLING PRICES Mon. June 01, 2009; Posted: 02:30 AM

COLOMBO, Jun 01, 2009 (AsiaPulse via COMTEX) -- EQY | Quote | Chart | News | PowerRating -- The real estate arm of Sri Lanka's Carsons Cumberbatch group said it was writing down the values of properties by 450.3 million rupees (US$3.9 million) as the prices slumped in the wake of tight monetary policy.

"This year has been a challenging year where we saw a significant market correction on the property prices as a result of tighter credit conditions and a change in investor and customer attitude on real estate," Equity One Ltd, a Carsons property firm said in a statement.

"The property values have reflected changes in interest rates and risk.

"Unrest in the financial markets and uncertainty in the wider economy have added to the crisis of the property market."

Under 'fair value' accounting rules - which permit asset values to be brought into a firm's profit and loss account whether or not they are actually sold and cash received - many companies have reported high profits in boom years.

But when central bank monetary policy tightens (money printing slows) and interest rates go, up asset-price inflation can reverse.

The 'fair value' concept goes against a time honoured accounting convention, based on historical cost.

Critics have said that fair value accounting is excessively 'pro-cyclical' and helped worsen the recent asset-price bubble in the world by bloating profits of banks and other firms when the Federal Reserve cut rates to one percent and fired the worst global 'boom' since the 1970s.

When central bank loose monetary policy fires asset-price bubbles, managers who wake the next day find that the asset values of their companies have gone up. After monetary policy reverses, the opposite happens.

"Having evaluated the current market conditions the company decided to defer in the interim, all of our property development activities and convert project lands which were earlier held for development, into land bank status," Equity One said.

"This resulted in bringing these lands to current market values in accordance with the accounting standards."

Equity one said it had cut the values land held by the unit Equity Property Developers (Private) Ltd by 258.6 million rupees, Equity Nine (Private) Ltd by 177.6 million and Equity Developers (Private) Ltd by 14.1 million rupees.

But the firm said other investment properties had seen an 82.5 million increase in value.

Equity One reported a loss of 365.9 million rupees for March quarter against a 382,000 rupee profit last year.

Equity Two, another Carsons firm reported a loss of 89.3 million rupees with a 90.0 million rupee write-down in investment properties.

Inflation Accounting

Inflation accounting, or current cost accounting, was widely discussed during the last century, as major central banks undermined gold-based money to help governments fight wars by printing money.

Historical cost accounting re-gained relevance again during the great depression in the 1930s, as prices fell in a deflationary collapse, like now.

In the 1970s after the US dollar broke its final link with gold and inflation raged around the world, accountants came up with formal inflation accounting standards including Britain's SSAP 16 and the USA's, FAS 33.

But the practice lost favour especially after inflation moderated in the 1980s with tight monetary policy by then US Federal Reserve chairman Paul Volcker.

There is currently an international standard on hyperinflation (IAS29) to be used in countries when central banks fail completely to issue a stable form of money and prices rocket in an uncontrolled fashion.

Critics say 'fair value' accounting is a back-door re-emergence of inflation accounting triggered by a bubble fired during the Greenspan-Bernanke years, which ended with the collapse of global markets last year.

Under a pure gold standard - before the emergence of 'fiat paper money central banking' - there was no significant long-term inflation in the world but only periods of slight inflation followed by periods of deflation.

When central banks issue stable money, wage earners manage to preserve the purchasing power of their salaries and the homeless are able to buy houses at affordable prices. Speculators make money during bubbles.

(LBO)
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Property Project -Sri Lanka property eyed by Indian developer after war: report

Aug 19, 2009 (LBO) - India's Puravankara Projects, a Bangalore-based developer is looking to start an upmarket housing project after a civil war ended, an Indian media report said, though the property market in the island is in the doldrums.

India's Economic Times newspaper said three year ago Puravankara had picked up some land in Sri Lanka "for a song" and was now seeking planning permission from authorities.Puravanka was planning a 400,000 square feet serviced apartment and office complex and an up market "villa project" on the road to Colombo airport on a 26-acre site.

A 30-year war with Tamil Tiger separatists ended in March."With the civil war over, we are seeing huge demand for affordable housing in Colombo," Puravankara chairman Ravi Puravankara was quoted as saying in the report."We have already initiated the land acquisition process."

Sri Lanka's property bubble burst nearly two years ago and a few unfinished apartment blocks dot a few of the capital's plushest locations.A large property and finance focused business group in the island also ran into trouble in the downturn and many of its directors have been jailed pending repayments of deposits.

The report said Puravankara's Sri Lanka move comes at a time when Bangalore itself is seeing a slow recovery after three quarters of depressed buying sentiment.After a two year break it had launched an affordable housing scheme in Chennai.

Sri Lanka government to build an administrative complex in the South

Sun, Aug 30, 2009, 11:30 pm SL Time, ColomboPage News Desk, Sri Lanka.

Sri Lankan government is planning to construct an administrative complex for government institutions in the South. 

The complex, expected to be completed by November will house a large number of government organizations that will come under the Hambantota harbor, government media unit said.

The complex, built at a cost of 2.9 billion rupees on a 72-acre land in Siribopura, Gonnoruwa in Hambantota will also house the offices that ate to be demolished for the construction of the port.
Media Minister Laksman Yapa Abeywardena said the complex will be convenient to the people as they can get all their needs met at one location. The government plans to provide transport and other facilities for the people who come to this complex. Accordingly, 42 Government institutions will be housed in this administrative complex including banks, post offices, Local Government institutions, libraries, electricity depots, telecommunication offices and others.

A special committee to resolve land problems in Eastern Sri Lanka

Mon, Aug 31, 2009, 08:20 pm SL Time, ColomboPage News Desk, Sri Lanka.

Sri Lanka Government has appointed a special committee to resolve the long standing dispute between Eastern Muslims and Tamils over the 1,000 of acres of paddy fields in Vakarai.

The Government Information Department announced that the special committee will be headed by the Minister for Disaster Relief Services Amir Ali Sahabdeen and Eastern Provincial Council Chief Minister Sivanesathurai Chandrakanthan.The committee comprising 14 members is to submit its initial report within two weeks.