FDI In­flows to Script Real Es­tate Re­vival

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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.

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