FDI in real estate: how it influence Indian Economy

India in current time known as the one of the quickest growing economy in the world and during this current economic standing, real estate has emerged as one of the foremost appealing investment areas for Indian as well as foreign investors. This high growth bends in the real estate sector is influence nicely to the Indian economy and Foreign Direct Investments regime in the real estate sector. In March 2005, the govt. of India amended existing norms to permit 100% FDI in the construction business. This relief act cleared the path for foreign investment to fulfill the demand into the development of the residential and commercial real estate sectors. It's additionally inspired many massive financial firms and personal equity funds to launch exclusive funds targeting the Indian real estate sector. 

FDI in Real Estate 

Until now, only Non Resident Indians and Persons of Indian Origin were allowed to speculate in the housing and also the real estate sectors. Foreign investors aside from NRIs were permitted to speculate only in the development of integrated townships and settlements either through a completely in hand subsidiary or through a venture company in India along with a neighborhood partner. In 2008-09, India received total FDI inflows of US$ 2.70 billion, of that only 4.5% were committed to the realty sector. The Study, yet comes that in 2010-11, total FDIs can bit regarding US$ 8 billion in the important estate share is calculable to be about 26.5%.  Thus, it is clear that how FDI influence Indian Economy. It gives a good source to boost the economy of country.

With this alteration in the government policy on FDI, all realty sectors, residential, business and retail are presently witnessing huge growth in demand. India, throughout the first half 2010-11 financial has attracted quite 3 times foreign investment at US$ 7.96 billion throughout creating it amongst the "dominant host countries" for FDI in Asia and also the Pacific India in the next five-year is calculable to want investments value worth US $ 25 billion with the urban residential sector. This once more has opened up opportunities FDI in the property sector. The Central government allowed up to 100 percent FDI for fitting townships in 2012. But, the stream of FDI has been disappointed by the 100 acre criterion; since obtaining such an oversized amount of land was not possible in metropolitan cities and even satellite cities and state capitals.

 But a landmark assessment taken by the Union government in 2005, wherever the minimum surface area for development by foreign investors was down from the sooner floor of 100 acres to 25 acres has thrown open the profitable components of the Indian economy. Another perceptible production of the easing of FDI policies is going to be the impact on quality and inevitable acceleration in construction activities. FDI in the real estate sector in India would additionally contribute towards creating the sector a lot of organized. FDI in real estate profitably influence Indian Economy. 

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Tags : FDI in real estate market, impact of FDI on real estate,Cosmic Structures,Cosmic Group.

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What is in store for Real Estate in 2013?

Anyone who has had a look into this sector over the past decade will predict almost the same as what we say here because real estate has grown in leaps and bounds when comes to costs, purchases, sales and prices. The trend has not withered over time and has in fact become stronger.

Real Estate Business

For the coming year 2013, we expect mostly the same. There are hopes of growth in the real estate sector, mainly due to the government’s positive approach towards reforms and moderation of interest rates, experts say.

Land acquisition and real estate regulation bills are expected to be passed during the year, while there is a likelihood of the Reserve Bank of India (RBI) bringing down the interest rates.  The passage of FDI in multi-brand retail by the government shows its seriousness on introducing reforms. RBI can be expected to lower interest rates in the coming months which will benefit developers as well as consumers.

 Residential prices, which have been increasing over the past few years, are likely to witness subdued growth in most markets in a short to medium term till the pressures of unsold inventory are eased out.

 Finance minister P Chidambaram had recently asked the developers to sell their unsold inventory at a lower price.  Besides, infrastructure initiatives such as Greater Noida metro rail network and proposed metro link in north-west Bangalore are likely to have a positive impact on the residential market of these cities.

 FDI in multi-brand retail will also boost the demand for commercial real estate.  Apart from the international brands, several domestic brands are also exploring opportunities to increase their foot prints across the country.  According to Jones Lang LaSalle (JLL), major cities like Mumbai, NCR-Delhi, Bangalore, Chennai, Pune, Hyderabad and Kolkata, will see the addition of close to 9.5 million sq ft of mall space in 2013.

 The primary reason is that a sizable amount of supply that was expected to reach completion in 2012 has been being pushed to 2013. While Mumbai, NCR-Delhi, Bangalore and Chennai will together contribute 70 per cent of the total retail space absorption, cities like Pune, Hyderabad and Kolkata will account for the remaining 30 per cent.

 Further, the ongoing policy reforms are expected to provide some cushion to corporates who are likely to execute their expansion plans in near future.  Demand for officespace is expected to be broad-based and not restricted to IT-ITeS and banking sectors. However, even as leasing activity performs relatively well, rentals are expected to remain stable.

 According to JLL, cities including Mumbai, Bangalore, Delhi NCR, Chennai, Hyderabad and Pune will witness commercial corporate property transactions focused on their own occupancy needs.

On the whole, we can expect 2013 to bring a larger-than-usual number of NRI investors into the commercial space arena. This is because NRIs are currently enthused by the prevailing exchange rate benefits and the fact that commercial real estate capital values are still 15-25 per cent under their 2007-08 peak levels.

So, if you are to make some investments this year then get real estate on your list cause this is better than gold, it’s a gold mine. Prices are set to rise and so are the benefits to the early birds.

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Current Trends in Indian Real Estate

The past few years have witnessed the emergence of the Indian real-estate industry as one the biggest sectors for investments. The continuous growth can be attributed to the liberalization of direct investment norms, the introduction of SEZ Act in India and low prices that continue to attract investors from both India and abroad.

Indian Real Estate Market

A recent survey indicates that India has the fourth ranking among the top Asian destinations for direct foreign investment. Being the largest democracy with transparent property laws, India attracts more investors than any other country in the region.

Some of the major factors that have contributed largely in the growth of this sector are:

Ø  Strong and continuous economic growth – Being the fourth largest economy in the world while maintaining a growth rate of over 7% for the past few years, India has also witnessed a steady growth in its real-estate industry. Various economic reforms coupled with increased globalization and demand has propelled its progress. The steady economic growth has led to the rise of areas like Delhi NCR, Hyderabad, Chennai, Pune, Kolkata and Bangalore. Moreover, the economic rise is no longer centered on the bigger cities with states like Bihar and Gujarat leading the charts. This has further enhanced real-estate market in these states.

Ø  Introduction of FDI in the real-estate sector - The introduction of Foreign Direct Investment (FDI) in the real estate sector has enhanced the Indian real-estate industry’s position as one of the most rewarding avenues for investment. This policy has allowed foreign investment in the market and has kindled the interest of the some of the world’s most renowned builders. Their entry into the Indian real-estate market will bring along efficient management, advanced technology along with effective regulatory policies.

Ø  The rise of the middle class – With a population of over 300 billion people falling in the middle class with higher incomes and better education, the workforce is shifting base beyond the four metropolitan cities. High aspirations together with more disposable income at hand motivate people to invest in real estate.

Ø  Continuous growth and development of the IT sector – TheIndian IT sector has shown the upward trend for past few years with many Multinational Companies and corporate increasing the demand for commercial property. This has also led to the increase in employment opportunities, consequently helping in the overall economic growth and increase in disposable income at the hand of prospected real-estate investors. This growth has not only had a positive impact on commercial property, but residential and industrial property as well.

Ø  Accessibility to bank loans – With the incoming of various multinational banks in the Indian market, loans for property are easily accessible now. It is no longer a tough job to seek and get a bank loan with easier norms and regulations and various loan repayment options available.

Ø  The demographic factor – India is the second largest populated countries in the world with over 75% of its population well below the age of 50.

According to ENAM securities research, the Indian real-estate market will grow at a CAGR of 33% over the next five years. The upward trend is also witnessing a huge gap in demand and supply. However, with more foreign investments set to enter the real-estate market in the near future, this development and growth is here to stay.

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Why do Non Resident Indians give preference to investments in Indian Real Estate?

NRI 

Approximately 30 million NRI's or Non resident Indians have been spread in 140 countries. The estimated wealth that they possess is 1.2 trillion USD.  These non resident Indians were considered to be the greatest contributors of foreign exchange in the years 2010 and 2011. There are around 7 lakh residents who have left the country searching for greener pastures. One lakh NRIs are expected to come back home each year. 

From the various investment options that are found these days, a key role has been played by the real estate due to the periodic investment returns as well as a good rate of appreciation. Moreover, there are many NRIs living in West Asia who aren’t able to stay there due to various domicile restrictions. This is the main reason why they are always seeking different options of investment including real estate for permanent settlement.

3 types of real investors are found and these include low, middle as well as high income groups. Within the given categories, there are investors as well as end-users. In the Association of Gulf Cooperation Council Countries that comprises of Qatar, Saudi Arabia, UAE, Kuwait, Bahrain and Oman, there are around fifty five to sixty lakh NRIs who work today. This includes unskilled as well as semiskilled labor.

Similarly, out of the one million NRIs in Malaysia, more preference is given to the southern cities here. In Canada, one will find a majority of NRIs who hail from Chandigarh, Delhi as well as other regions. In United States, out of the 2.5 million NRIs, the real estate requirements are dominated by various southern cities such as Chennai, Hyderabad and Bangalore. There is variation of specific needs of real estate depending on the savings potential, region as well as other factors. In India, affordable housing is found in the price range of twenty five lakhs to thirty lakhs. Here, there are various expatriates who are either very skilled or CEO’s of the companies. The salaries which they get are very high. Ten percent of the NRI population consists of technically qualified professionals as well as individuals. There are many people who look out for apartments ranging between seventy lakhs and one crore. The price range of villas is more than 2.5 crores. There are many people who have the keenness for making an investment in commercial property as many NRI’s have came back to India and have set up their offices. Most of these NRI’s are looking to setup their offices in Noida and Gurgaon and there are many good options available one of the leaders in Commercial property is ‘Cosmic Structures Limited’. They are coming up with a unique commercial property Cosmic Corporate Park where one could get all the commercial facilities under one roof. Cosmic Corporate Park is considered to be a Seven Star Luxury Corporate Space with area ranging from 150 sq.feet to 2000 sq.feet.

According to banks in India, the approximate size of home loan is thirty to seventy lakhs. There is a great demand for apartments as well as commercial property in India. Even the business of home loans in India ranges from 720 to 800 crores. The demand for real estate is driven in cities such as Jaipur, Chennai, Bangalore, Mumbai, Kochi, Pune and NCR. There is a great demand for the tier II cities as well. More and more skilled professionals and businessmen are being relocated to different Indian cities such as Noida, Gurgaon, Pune, Chandigarh and Indore and due to this; the requirement for apartments in the price range of 70 lakhs and commercial properties in different ranges is growing. This has in turn leaded to construction of many new commercial properties. Many people seek commercial property on rent and as a result the rents of commercial properties have gone up many folds.

Tag: NRI, Indian Real Estate Market, Commercial Property, Noida Real Estate Market,  

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