FDI in real estate, a welcomed decision

The real estate sector in Gurgaon has welcomed the move with the Center relaxing rules for permitting FDI in the development sector, including accommodation, by reducing the minimum built-up area and capital requisite for foreign investment in such ventures. According to Navin Raheja, the chairman of National Real Estate Development Council (NAREDCO), the move has the potential to more than double FDI inflows into housing, commercial real estate, hotels and townships in the next one year. “Private equity investors have been showing interest in investing, and liberalization of investment norms in construction and higher return on capital are expected to strengthen the growth of the Indian economy in the coming years on a sustainable basis,” Raheja said. Foreign direct investment (FDI) in the real estate sector could jump over two-fold in the next one year with easing of FDI rules in the construction sector, realtors’ body NAREDCO said. Real estate developers and consultants were of the view that this move would stimulate the cash-starved realty sector, which is reeling under a hold-up since the last 2–3 years. It will help developers in raising finances to finish ventures. “Reduction in minimum built-up area to 20,000 sq meters from 50,000 sq meters and reduction in capital investment to USD 5 million from USD 10 million has the potential to more than double FDI inflows into housing, commercial real estate, hotels and townships in the next one year,” NAREDCO Chairman Navin Raheja said in a statement. In 2013–14 fiscal, the FDI in construction development, which include housing and township, was USD 1.22 billion. During April-August period of this fiscal, the sector has attracted USD 446 million worth FDI. Parsvnath Developers Chairman Pradeep Jain said: “We are thankful to government for this move. The sector is reeling under acute funding pressure. The foreign investment in real estate has also gone down in last few years. Hence, this move has sent a positive signal for the real estate sector”.