Government should rectify its mistakes
It should bring in transparency and clarity in policy matters to encourage foreign investment in India
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.”