FDI Inflows to Script Real Estate Revival
The Foreign Direct Investment (FDI) started in India way back in the 2000 and in 2008 declined substantially. The recent government’s decision to offer 100% FDI under the automatic route to construction development has once again opened up the Indian market to global investors, Sapna Srivastava briefs.
As per the statistics by the Departmental of Industrial Policy & Promotion (DIPP), in just nine months of FY 2017-18, FDI equity inflows into construction development, rose by around 250% as compared to FY 2016-17. The figures speak for themselves and indicate the willingness of international players to invest in Indian realty market.
Till now global investors were reluctant, due to the unregulated nature of the market and lack of transparency. They were not sure of the returns and some even burnt their fingers. Recent regulatory changes, RERA and GST, have changed the business environment considerably. Such policy initiatives sustained over coming years will ensure the revival of Indian real estate.
As a positive move, the government hasrelaxed the FDI policies thisyear. FDI investors can now invest in projects less than 50,000 square meter of the built-up area, which makes it easy for such investors to target city-centric projects.the residential sector has certainly got a
filip with 100 percent foreign direct investment under automatic route in the construction development segment, which includes townships, real and housing. In fact, the residential segment has attracted sovereign funds sponsored by government such as CPPIB and GIC.
So, how does FDI relaxation impact the real estate sector?
After a prolonged period of slowdown, developers and investors are betting high on the sector. The entire real estate sector got investments worth Rs 30,000 crore, including from domestic and overseas investors.
We have already seen how approval of 100 per cent FDI under the automatic route for single-brand retail trading has prompted foreign retailer giants like Ikea and Walmart to set shop in India. In addition, organised and quality retail spaces are coming up across cities, to cater to the international retailers.
Most of the fresh investments are towards commercial real-estate and infrastructure. Office real estate, being a rent-yielding asset,is popular among foreign investors. Today, investment activity in the office space and malls have increased manifold. REITS give an option for large investors to exit their position once their returns are made. Blackstone, Brookfield, LOGOS are some of the investors in this segment among others. Affordable housing is another segment that has seen largest traction among the foreign and domestic investors. The infrastructure status, priority approval, tax holidays, interest rate subsidies for homebuyer’s loans are the pull factor for this segment. Hopefully, in next few years, real estate asset classes such as rental housing development, student housing and senior citizen living will also come within the parameters of FDI investments.
Investors and developers are also flocking to industrial real estate with the FDI relaxation announcement. Strong investor appetite is fuelled by e-commerce growth and demand for warehousing. Overseas investors have begun partnering with Indian real estate developers to create highend industrial parks,to cater to the global manufacturing firms entering India.
Indian real estate segments have much to cheer about, as the grant of 100% FDI (foreign direct investment) in retail and real estate will create more job opportunities, ease of doing business and funding avenues. On the other hand global investors too are keen to grab a pie of the realty space of one of the fastest growing economy of the world.
According to industry experts, 100 per cent FDI in construction development will bring in clean money and international trade practices into the indian real estate market.