New norms to pump Rs 10,000 cr into realty industry

New norms to pump Rs 10,000 cr into realty industry
Financial Express, February 13, 2009, Page 4

fe Bureau, Mumbai

The Rs 65,000 crore Indian real estate sector is expected to attract investments to the tune of Rs 10,000 crore, if according to the new foreign direct investment (FDI) rule, companies having FDI will be able to invest in non-FDI compliant projects, which are smaller than 10 hectare/50,000 sq mt, opines real estate companies, international property consultants and lawyers. Rohan Shah, managing partner, Economic Laws Practice told FE, “As per the new FDI rule change, real estate sector will foresee a big change only if investments are allowed below 5 lakh sq ft real estate project apart from pre-trading of real estate, then more new investment opportunities will come up.”

According to Nayan Shah, CEO, Mayfair Housing Private Ltd, “With the new FDI rule, we expect investments to the tune of Rs 10,000 crore to come up in the real estate sector by this calendar year-end.”

Aasheish Agarwaal, real estate analyst, Edelweiss Capital Ltd opines, “As per the new FDI rule change, companies having FDI will be able to invest in non-FDI compliant projects, which are smaller than 10 hectare/50,000 sq mt. These projects have a quicker turnaround time and have lesser risks associated with them. Further, these developers will also be eligible to acquire ready properties.”

Prior the announcement, foreigners were allowed to invest only in greenfield properties spread over 25 acres area (for services housing plots) or 50,000 sq mt built up area for construction—development projects with minimum investment norms, repatriation clauses and development clauses. “Thus, the new FDI rule will have a positive impact on the real estate sector by affording developers with foreign money a greater degree of strategic freedom, enabling them to offer a larger range of projects, which will ultimately benefit the end-consumers,”Agarwaal added.

However, Pranay Vakil, chairman, Knight Frank India said, “What I feel is that the impact of the new FDI rule is meant for the future FDIs, but not the existing FDIs. For instance, if a foreign company investing to the tune of 49% in an Indian company that invests the remaining 51% forms a new company, this new company would now be free to launch subsidiary that will not be governed by FDI limitations. If government announces new FDI rule, it should be done directly rather than forcing companies to create a new subsidiary. Currently, existing FDI is coming through the Mauritius route.”

Companies having FDI will be able to invest in non-FDI compliant projects, which are smaller than 10 hectare/50,000 sq mt

Prior the announcement, foreigners were allowed to invest only in greenfield properties spread over 25 acre