Government’s relaxed rule for foreign direct investment (FDI) is heave of relief not only for developers but also for the people who are investing. The new move has clearly defined ‘developed plots’, ‘Floor area’ and ‘real estate business’ so as to remove any kind of obscurity. The reduction of built up area from 50,000 to 20,000 sq m and the capital requirement from 10 million to $5 million would surely attract FDI.
Investors will now be allowed to exit on completion of the project or after three years from the date of final investment. As it is said better late than never, the government has acted on it by developing policies like these to attract foreign investors who think of easy exits as a prerequisite for finalizing an investment venture. It would help the foreign direct investment in the construction development sector. I believe that it would result in enhancing the inflows into the construction industry. The relaxation was necessary as now the foreign investors would not hesitate to come to India. It is a major attraction for the foreign investors as India is an upcoming hub for the construction and real estate market. This also comes as a breath of fresh air for prospective investors!
The urban center has experienced a space crunch. Due to the shortage of land and its high cost, the sector is anticipated to attract investments in new areas and encourage development of plots for serviced housing. It is expected that the recent move will boost affordable housing projects and smart cities across the country which will lead to the development of our country. Since 2012, FDI inflow into the sector has been sluggish. In 2012-13, it fell to $1.3 billion from $3.1 billion the previous year. During the first four months of the financial year, only $167 million has flowed into this sector.
With relaxed FDI norms that encourage affordable housing, Excellence Shelter is sure to gear up to make the most by banking on our strengths while being ethical and transparent. We have been seeing that since 2005, 100 per cent FDI through the automatic route is allowed in this sector, which includes townships, housing, commercial premises, hotels, resorts and hospitals, all of which is leading to liquidity crunch and huge delays in completion of housing as well as commercial projects. As investing in real estate is considered the safest bet in India, relaxed FDI norms, and lower borrowing rates would be ideal for developers and investors. While the dream of every Indian of owning their own home would come true, the country would swiftly progress as well. Having said that, I feel the recent decision of the RBI of maintaining the current repo rate at 8% has not been fully satisfying. The high loan rates will continue to influence consumer’s decision on buying houses. However, with the recent announcement of FDI in real estate sector, there has been a positive sentiment and talks about the revival of the entire market. The optimism displayed by RBI governor of tentative reduction in rates by early 2015 makes us hopeful yet again. Since the common man today aspires for a home of his own and all real estate players are constantly trying to turn their dream into reality, with the assistance of the government we will be able to deliver more efficiently.