Gov­ern­ment should rec­tify its mis­takes

It should bring in trans­parency and clar­ity in pol­icy mat­ters to en­cour­age for­eign in­vest­ment in In­dia

HT Estates - - FRONT PAGE - Jee­van Prakash Sharma

The gov­ern­ment in its ef­fort to en­tice for­eign in­vestors an­nounced in its 2014-15 Bud­get two cru­cial mea­sures to in­crease flow of for­eign funds in real es­tate – re­duc­tions in the min­i­mum size of projects from 50,000 square me­tres to 20,000 square me­tres, and in­vest­ment amount in a pro­ject from US$ 10 mil­lion to US$ 5 mil­lion. Will such ini­tia­tives be enough?

C Shekar Reddy, na­tional pres­i­dent, CREDAI, says, “The biggest en­emy of real es­tate is the so-called con­cept of noob­jec­tion cer­tifi­cates from dif­fer­ent au­thor­i­ties. It amounts to de­lay and cor­rup­tion. Once the master plan is no­ti­fied, ar­eas to be de­vel­oped ear­marked and guide­lines in place, state gov­ern­ments should come up with up­front ap­provals. The lo­cal bod­ies should take care of the guide­lines. Why will an in­vestor come to In­dia when reg­u­la­tory mea­sures are so un­cer­tain and there is com­plete lack of trans- parency in grant of var­i­ous ap­provals?”

“If the de­vel­op­ment author­ity sells a wrong ti­tle to any­one, be it a developer or a home­buyer, it should in­dem­nify the loss. Only then will the cred­i­bil­ity of the gov­ern­ment agen­cies count,” he adds.

For­eign com­pa­nies in­vested in the In­dian realty mar­ket are of the view that if some realty dis­putes were han­dled ef­fi­ciently, the FDI re­sponse would have been favourable in In­dia. Ac­cord­ing to them, the in­vest­ment sen­ti­ments of for­eign in­vestors are ex­tremely neg­a­tive for Delhi NCR, es­pe­cially ar­eas like Noida.

“Gov­ern­ment has not taken any sig­nif­i­cant mea­sure to boost for­eign in­vest­ment in In­dia since 2005 when 100% FDI was al­lowed. When an in­vestor de­cides to risk his money, he takes into con­sid­er­a­tion pol­icy ini­tia­tives, mar­ket con­di­tions, reg­u­la­tory frame­work etc of var­i­ous coun­tries. After all, if he takes a call to in­vest in In­dia, there are business op­por­tu­ni­ties in var­i­ous sec­tors. So, why will he choose real es­tate when the sec­tor is rife with neg­a­tive sen­ti­ments and pol­icy am­bi­gu­ity?” says a for­eign in­vestor.

Ex­perts also say that the gov­ern­ment and au­thor­i­ties in In­dia need to un­der­stand that if for­eign com­pa­nies en­ter In­dia, they will bring in the funds and em­ploy­ment op­por­tu­ni­ties that will ben­e­fit the en­tire econ­omy.

“Sev­eral coun­tries around the world such as UAE, China, South Africa, Poland, Malaysia etc have a con­ducive and in­vest­ment-friendly en­vi­ron­ment to work in. As a re­sult, do­ing business there be­comes eas­ier. Though th­ese coun­tries are bet- ter with re­spect to reg­u­la­tions, In­dia has an edge over them with re­spect to po­ten­tial,” says Mush­taq Ah­mad Mir, director, Wizkid Con­sul­tancy and Fi­nan­cial Ser­vices Private Lim­ited, an ac­coun­tancy firm.

Then there are prob­lems which lead to sour­ing of builder-buyer re­la­tion­ships. “I had to do a lot to con­vince for­eign play­ers to in­vest in my com­pany be­cause they know how things hap­pen in the In­dian real es­tate mar­ket. They are wary of the un­pro­fes­sional stan­dards of real es­tate com­pa­nies in In­dia,” says Sa­mar­jit Singh, managing director, In­di­a­homes, who raised funds from Sil­i­con Val­ley- based ven­ture capit al f i r ms, New En­ter prise As­so­ciates, He­lion Ven­ture and Foun­da­tion Capita.

Ac­cord­ing to Gau­rav Karnik, part­ner, tax and reg­u­la­tory ser­vices, Ernst & Young, what­ever be the reg­u­la­tory in­con­sis­ten­cies, a for­eign in­vestor can’t af­ford to ig­nore an emerg­ing econ­omy like In­dia. “Ev­ery com­pany does its own duedili­gence be­fore mak­ing an in­vest­ment and is aware of the risks in­volved in in­vest­ing in emerg­ing economies like In­dia. Such risks and lit­i­ga­tions are fac­tored into the coun­try risk pre­mium while de­cid­ing on in­vest­ments. How­ever, I agree that mak­ing favourable con­di­tions for in­vest­ment and re­duc­ing lit­i­ga­tion will al­ways help at­tract more in­vestors.”

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