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Investing in Indian Real Estate
Indian Real Estate: "Undeniably tremendous!"
And, that is the undeniable verdict of a Price Waterhouse
Coopers study conducted on the investment environment in terms
of Indian real estate. Ever since the Government of India gave
its stamp of approval to 100% foreign direct investment (FDI) in
housing and real estate, NRIs, overseas real estate developers,
hoteliers, and others have been tracking a path to the
sub-continent. Sensing the business potential for developing
serviced plots, constructing residential / commercial complexes,
business centres / offices, mini-townships, investments in
infrastructure facilities e.g. roads, bridges, manufacture of
building materials, etc., FDI is flooding in to take advantage
of the tremendous real estate opportunities.
Indian Real Estate: Growing Potential
The increasing demand for Indian real estate has not only
generated employment, it has also been instrumental in the
growth of steel, cement, bricks and other related industries.
Estimated to be in the region of US $12-billion, real estate
development in India is growing by as much as 30% each year.
Already, eighty percent of Indian real estate has been developed
for residential space, and 20% comprises of shopping malls,
office space, hospitals and hotels. Fuelled largely due to
off-shoring / outsourcing of BPOs, call centres, high-end
technology consulting and software development and programming
firms, real estate growth in India has great investment
prospectives.
Indian Real Estate: Investment Opportunities
Tax reform measures in the last few years have ensured real
estate in India is one of the most productive investment
sectors, with money invested in real estate offering regular
returns on investment including appreciating in value. And, the
Government of India by opening up 100% foreign direct
investment, and fiscal reforms like stamp duty and property tax
reductions, setting up real estate mutual funds has turned real
estate into a promising investment option.
Already, it has approved the first Rs. 100-crore FDI project in
Gurgaon. With urban populations expected to grow from
290-million to 600-million by 2021, housing requirements are
expected to top 68-million by 2021, which means India's urban
housing sector could do with an investment of US $25-billion
over a 5-year period. Poised for rapid urbanisation, 3 out of 10
of the world's largest cities are in India. An influx of jobs
due to off-shoring / outsourcing has resulted in rising
disposable incomes, increased consumerism, factors responsible
for changing the face of residential and commercial real estate
in India.
Wishing to take advantage of real estate investment
opportunities, banks and housing finance companies are falling
over themselves to tie-up with developers or offer project loans
at competitive rates.
Indian Real Estate: Foreign Direct Investment (FDI)
Recent government policies have seen to it that inbound FDI for
housing, commercial premises, hotels, resorts, hospitals,
educational institutions, recreational facilities, city and
regional level infrastructure, no longer requires prior
government approval, with the exception of the Reserve Bank of
India (RBI). It is important that all inward remittances or
issues of shares to NRIs are reported to RBI within 30-days, and
all FDI in the above areas is subject to the following
conditions:
Minimum area for development under each project is as under:
Serviced housing plots, minimum requirement of 10 hectares.
Construction-development projects, minimum built-up area
requirement of 50,000 sq. metres. Combination project, either of
the above two conditions suffices. Investment is further subject
to the following conditions: Minimum capital investment = US$10
million for a wholly owned subsidiary, and US$5 million for
joint ventures with Indian partners. Further, the funds have to
be brought in within six months of commencing business.
It is not permissible to repatriate original investment before a
period of three years from the date of minimum capital
investment. However, if the investor gets prior approval from
the Government through FIPB, early exit is permitted.
Fifty percent of the project is to be completed within 5-years
from the date of obtaining all legal clearances. No undeveloped
plots can be sold where roads, street lighting, water supply,
drainage, sewerage and other conveniences are not available.
Serviced housing plots can only be sold if the investor has
provided infrastructure and obtained a completion certificate
from the concerned local body / service agency.
Development has to be in accordance with town master plans,
planning norms, standards, and local bye-laws.
The investor is responsible for obtaining all necessary
approvals, including building / layout plans, internal /
external / peripheral area development, infrastructure
facilities, payment for development and other charges. All
development has to be in compliance with State Government /
Municipal / Local Body requirements that are prescribed under
applicable rules / bye-laws / regulations. Further, Non Resident
Indians (NRIs) are allowed investment under the Automatic Route
of FDI in the following Housing and Real Estate Sector:
Services plot development and construction of built-up
residential premises.
Real estate investment covering construction of residential /
commercial premises including business centres, offices, etc.
Development of townships.
City / regional level urban infrastructure facilities, including
roads and bridges.
Investment in manufacture of building materials. Investment in
participatory ventures in (i) to (v) above
Investment in housing finance institutions.
Permissible FDI private / joint / state investment in
construction in the export processing zones (EPZS) / special
economic zones (SEZS) is as follows:
100% FDI real estate investment within Special Economic Zone
(SEZ). 100% FDI for developing a township within the SEZ i.e.
residential areas, markets, playgrounds, clubs, recreation
centres etc.
Standard Design Factory (SDF) building development in existing
Special Economic Zones. SEZ land may be leased or sub-leased to
developers as per relevant guidelines for this purpose.
Full freedom to allocate developed plots to approved SEZ units
on commercial basis including competent authorities for
provision of water, electricity, security, restaurants,
recreation centres etc. along commercial lines.
As you read this, a wide spectrum of changes are and have taken
place in Indian real estate. Various proposed reforms e.g.
removal of tenancy laws, computerization of land records,
correction in taxation structure etc., are ensuring India
emerges as a favoured and profitable destination for real estate
developers / investors, both domestic and international.
This article is sponsored by: www.indiarealestateblog
.com
About the author:
We are in real estate business also and wants to provide
information about hte India Real Estate.
Rajinder Dogra
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