Global Re­alty In­vestors will fo­cus on Met­ros says ex­perts

Accommodation Times - - Real Estate Investments -

Even though the gov­ern­ment's move to re­duce cap­i­tal­iza­tion limit to $5 mil­lion is likely to at­tract for­eign di­rect in­vest­ment (FDI) in real es­tate, in­dus­try ex­perts be­lieve global in­vestors may ini­tially fo­cus at ma­jor met­ros than in­vest­ing in high-risk Tier-2 and 3 cities. While the de­vel­op­ers' com­mu­nity is up­beat about for­eign in­vest­ments in smaller cities, in­ter­na­tional play­ers are re­luc­tant to en­ter mar­kets which are of high risk, es­pe­cially where in­fra­struc­ture has yet not been de­vel­oped. The new gov­ern­ment in its bud­get has an­nounced re­duc­tion in built-up area thresh­old from 50,000 square me­tres to 20,000 sq mt and drop the min­i­mum for­eign di­rect in­vest­ment limit to $5 mil­lion from $10 mil­lion.

"Al­ready there is a short­age of over 18 mil­lion houses and Tier 1 cities are burst­ing at their seams. Given the cur­rent sce­nario, the op­por­tu­nity pre­sented by tier 2 and 3 cities are ripe, await­ing to be tapped by de­vel­op­ers backed by for­eign in­vestors," Tata Hous­ing man­ag­ing direc­tor Brotin Ban­er­jee told in Mum­bai. He fur­ther said many pri­vate eq­uity in­vestors have ven­tured into In­dian re­alty since the sec­tor was opened to FDI in 2005."Given the fur­ther re­lax­ation in FDI norms, the par­tic­i­pa­tion is only ex­pected to im­prove in the near future," he

“Al­ready there is a short­age of over 18 mil­lion houses and Tier 1 cities are burst­ing at their seams. Given the cur­rent sce­nario, the op­por­tu­nity pre­sented by tier 2 and 3 cities are ripe, await­ing to be tapped by de­vel­op­ers backed by for­eign in­vestors,” Brotin Ban­er­jee, MD, Tata Hous­ing

said. Ac­cord­ing to ex­perts, FDI would flow in such tier 2 and 3 cities where the in­fra­struc­ture is in place and the in­vestors are as­sured of bet­ter re­turns.

" We may not see an im­me­di­ate flow of in­vest­ments in smaller cities where there is no proper in­fra­struc­ture in place.

Tier 2 and 3 cities may have land, but at the same time if ba­sic in­fra­struc­ture is not in place, they be­come high risk mar­kets for in­vestors.

There is a need to cre­ate smart and so­cial in­fra­struc­ture," PwC ex­ec­u­tive direc­tor Anish Sanghvi said. Among the tier 2 cities, Pune, Chandi­garh, Lud­hi­ana, Coim­bat­ore, Bhubaneswar and Kochi, and tier 3 cities like Madu­rai, Bar­oda, Nashik and Trichy are likely to at­tract in­vest­ments as they are "up­com­ing" in terms of so­cial in­fra­struc­ture and economic devel­op­ment, ex­perts said.

Ac­cord­ing to ex­perts, at least for the next 12-18 months, in­ter­na­tion­als in­vestors may look at ma­jor 6-7 met­ros.

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