Recent real estate issues involving the Okhla Bird Sanctuary, Campa Cola Society and Supertech Emerald Court are likely to make foreign investors wary of exploring the Indian market
There are things that make India a very difficult place to invest i n and do t hings.” This was the response from American real estate tycoon Donald Trump to this correspondent who, at a recent event in Dubai, enquired about his investment preferences.
What made Trump react this way? Is this how India is perceived by foreign investors? Before seeking answers to these questions, it’s quite important to take a look at some of the recent cases that can make foreign investors and even Indians think twice about investing in the market.
Such cases highlight the inability of development authorities in India to act in the interests of the common man. This is particularly true of authorities in Delhi NCR, such as Noida, Greater Noida, the Ghaziabad Development Authority, and the Department of Town and Country Planning of Haryana etc.
Green rules ignored
Take the case of Okhla Bird Sanctuary i n Noida. The Supreme Court’s 2006 order to earmark a buffer zone of all national parks and bird sanctuaries was largely ignored by the Uttar Pradesh government and its nodal agencies as they permitted dozens of developers to set up projects close to the sanctuary. The developers as well as thousands of homebuyers who have invested their life’s savings in the projects face an uncertain future as the National Green Tribunal (NGT) has imposed a ban on all construction activities within a 10km radius of the sanctuary.
The Noida Extension land acquisition case, too, highlights Noida Authority’s lack of concern for buyers and other stakeholders. The Authority acquired land for public purpose but allotted it to developers to construct flats. The ensuing litigation delayed hundreds of projects and impacted thousands of homebuyers. In the recent Supertech twin towers litigation, the Allahabad High Court had pointed to a nexus between developers and the development authority in the matter, which is still under litigation in the Supreme Court.
In the Campa Cola Society case in Mumbai, the competent authority turned a blind eye to blatant building rule violations because of which residents lost their homes. The Commonwealth Games Village in New Delhi, despite the regu- latory supervision of the Delhi Development Authority, saw violation of FAR (floor area ration) norms and building of illegal towers. Besides, several matters involving land-title fraud in various parts of the country, open violations of layout plans and illegal constructions etc, paint a very dismal picture of the realty business in India.
Ambiguity, delay in policy decisions
Ambiguous policies on foreign investment, too, can damage India’s reputation. Last year, the Enforcement Directorate issued notices to foreign investment companies alleging violation of foreign exchange rules through use of foreign funds to buy farmland in India. One such company, Emaar, defended its position saying that its 2010 draft IPO prospectus - filed with the Securities and Exchange Board of India - stated that the company had received the necessary clarifications from the Ministry of Commerce and Industry regarding the acquisition of agricultural land.
“This latest development in India is a reminder of the risks and uncertainties of investing in emerging markets, even those with positive fundamentals, attractive growth prospects and a rising middle class. India’s allegation against Emaar is also the latest action in a string of investorunfriendly moves there that have negatively affected foreign companies,” says Moody’s Credit Outlook report of 2013.
The World Bank’s ‘Ease Of Doing Business Index’ of 2014 does not help. India is ranked 134 ( down three ranks from 2013), much below many of its Asian counterparts such as Malaysia, Japan, Nepal, China, Pakistan, Indonesia and Bangladesh. A high rank on the ease of doing business index means the regulatory environment is more conducive to the starting and operation of a local firm.
So coming back to Trump’s observations, it seems that it’s not only the global recession which is responsible for constant decline in foreign investment from US$2.94 billion in 2009-2010 to US$ 0.13billion in 2012-2013, but there are an array of regulatory inconsistencies, land acquisition issues and real estate litigations which have created negative sentiments against India in the foreign markets. Singapore United States Malaysia United Kingdom Australia Taiwan, China Thailand Canada Germany United Arab Emirates Saudi Arabia Japan
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(Top and below) Projects in Delhi NCR and Mumbai that are in the news for violation of building norms