Could re­turn­ing FDI eq­uity script re­alty sec­tor’s re­vival?

HT Estates - - FRONT PAGE - Shob­hit Agar­wal let­ters@hin­dus­tan­times.com The au­thor is MD & CEO – ANAROCK Cap­i­tal

As In­dia rises to greater promi­nence on the world map, global cor­po­rates are more eager than ever to par­tic­i­pate in the coun­try’s growth­story. AGDP­growth rate of 7% plus, apop­u­la­tion base of over 1.2 bil­lion and an ur­ban­iza­tion rate north­wardof30% are irresistible in­vest­ment mag­nets, and real es­tate de­vel­op­ment re­mains a key fo­cus area.

In­dia opened its doors to FDI way back in the 2000s, and since then not only much-need­ed­cap­i­tal but also crit­i­cal ex­per­tise has flowedin. Nodoubt, the­sub­prime cri­sis of 2008 led to ade­cline­in­for­eign­fund­in­flows; how­ever, to­day the sit­u­a­tion has turned and­cer­tainly looks up­beat.

The real es­tate sec­tor was among the main ben­e­fi­cia­ries of the open­ing up of FDI into the coun­tryand­has­trans­formed­sig­nif­i­cantly as a re­sult. In the past few decades, it has meta­mor­phosed from an un­or­ga­nized, closely- held busi­ness to an in­creas­ingly or­ga­nizedan­da­cor­po­ra­tized one. The re­cent struc­tural chan­gesin­clud­ingde­mon­e­ti­za­tion, the crack­down of Be­na­mi­trans­ac­tions, RERAandGST may have had short-term neg­a­tive im­pacts, but they also en­cour­aged the in­flow of for­eign fund­ing which al­ways re­acts favourably to signs of in­creas­ing trans­parency, ac­count­abil­ityand fi­nan­cial discipline.

Global in­vestors cer­tainly ap­prove of the new regime, and their ap­plause for the Gov­ern­ment’s moves has taken the best pos­si­ble form– namelya­mas­sive in­crease in the FDI eq­uity in­flows, es­pe­cially into the de­vel­op­ment of self-suf­fi­cient town­ships, hous­ing and sup­port­ing in­fra­struc­ture. A quick look at the statis­tics by the Depart­men- The rise in FDI eq­uity in­flows in­di­cates that global play­ers are on­cea­gain­will­ing­to­back­the­sec­tor.

In the past few years, debt trans­ac­tions more or less ruled the­mar­ket, as­in­vestors werenot sure of whether eq­uity in­vest­ments would fetch the desired re­turns. In fact, not a few in­vestors got burnedinthep­re­vi­ously un­reg­u­lated mar­ket en­vi­ron­ment. There­turnofFDIe­quityis not only a big pos­i­tive to the sec­tor which will help to im­prove de­vel­op­ers’ lever­age ratios – it is also a re­sound­ing vote of con­fi­dence in the sec­tor.

Theri­sein FDIisaleadindi­ca­tor of a pos­i­tive fu­ture for the In­dian real es­tate sec­tor – which, as ev­ery­one knows, is a crit­i­cal com­po­nentofthe­coun­try’secon-

Tak­ingde­ci­sive puni­tive ac­tions against de­fault­ers to send a strong mes­sage to global in­vestors that the watch­dog is alive and­kick­ing. Pro­vid­ing­moreben­e­fits and in­cen­tives, and eas­ier pro­cesses to seek larger for­eign in­vest­ments. Whiletheim­prove­mentintheease­of­do­ing­busi­ness rank­ing from 130 to 100 is a big pos­i­tive, the Gov­ern­ment has to main­tain a con­sis­tent up­ward learn­ingcurve­and­com­mu­ni­cate new­evo­lu­tion­ary de­vel­op­ments to the­world. Wi­den­ingth­ein­vest­ment av­enues by bring­ing the ben­e­fits of or­ga­ni­za­tion to more real es­tate sub-as­set classes such as rental hous­ing de­vel­op­ment, stu­dent hous­ing and se­nior cit­i­zen­liv­ing. On­ly­timewil­l­tel­lifthe re­vival of FDIe­quity­in­flows into the con­struc­tion de­vel­op­ment sec­tor is sus­tain­able and­will cul­mi­nate in a full-fledged come­back. Themacroe­co­nomic­fun­da­men­tals are surely en­cour­ag­ing, and if the lat­est pol­icy ini­tia­tives stand strong and re­sult in even more reg­u­la­tory re­fine­ments in the fu­ture, we will cer­tainly see the next wave of de­vel­op­ment an­nounce the ar­rival of In­dia 2.0 to the world.

IN­DIA OPENED ITS DOORS TO FDI WAY BACK IN THE 2000S, AND SINCE THEN NOT ONLY MUCH­NEEDED CAP­I­TAL BUT ALSO CRIT­I­CAL EX­PER­TISE HAS FLOWED IN

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