Realty sector to gain from reforms
Commercial, retail and residential realty segments to benefit the most from recent FDI reforms, says a survey
The commercial, retail and residential real estate segments are likely to significantly gain from the foreign direct investment reforms recently introduced by the department of industrial policy and promotion (DIPP), says a survey conducted by FICCI titled Impact of FDI Reforms on Indian Real Estate Sector.
Commercial and retail sectors will receive the maximum foreign capital followed by the residential sector, including affordable housing projects. Hotels will take the third sport while tourist resorts and old-age homes are ranked at number 4, hospitals at number 5 and special economic zones (SEZs) and educational institutions at number 6.
According to DIPP, Indian real estate has attracted about $24.16 billion FDI in construction development sector during April 2000 to September 2015. However, FDI in construction development sector has been declining over the past few years due to regulatory issues and slowdown in the realty sector.
The FDI reforms announced by the DIPP for the construction development sector are expected to provide a new direction to the foreign investment regime for the realty sector, help the real estate industry tide over the financial crunch and help the industry and the government achieve the mission of Housing for All by 2022, the survey says.
According to the FICCI Survey, industry is happy and satisfied with current FDI reforms in construction development sector and has shown high level of confidence and optimism towards future flow of foreign capital into realty sector. A majority of (about 78%) respondents are satisfied with the changes made in FDI policy while 22% respondents have given it a neutral rating.
Respondents were optimistic and felt that FDI reform measures will certainly increase flow of FDI into the realty sector in the coming months.
About 55% felt that there will be more than 15% annual increase in FDI flow into the sector, 23% felt the increase will be in the range of 10-15% and 22% felt that increase will be less than 10% annually.
Almost all (100%) respondents felt that government’s decision to allow exit and repatriate foreign investments before the completion of projects under the automatic route, but with a lock-in-period of three years for each tranche of investment and transfer of stake from one non- resident to another nonresident, without repatriation of investment and without any lock-in period or any government approval, is a path breaking step. “It will cheer foreign investor community and will have a major impact on attractiveness of Indian real estate going forward,” the survey reveals.
The REITs market will get a boost as government has allowed 100% FDI under automatic route in completed projects for operation and management of townships malls/shopping complexes and business centres.