The relaxation of the FDI ceiling saw big names like Dubai-based EmmarProperties -- the largest listed real estate developer in the world -- joininghands with the Delhi-based MGF Developments to announce India's largestFDI in the realty sector amounting to over US$ 500 million in projects havingcapital outlay of US$ 4 billion.The other major event is the introduction of REIT (Real Estate InvestmentTrusts). Currently mutual funds are not allowed to have direct exposure inReal estate but they can make debt and equity investments in the company.The Indian version of REIT- REIS (Real Estate Investment Schemes) wouldenable investments by the small investor in the real estate sector and thusearn dividends on the rental income being paid.Housing loans have been a boon to this sector and the easing of norms in thehousing loans segment has been of great help. Infact, the Government hasmade it mandatory that 3% of the incremental deposits of the banks wouldbe deployed to the housing industry. The budget of 2003-04 allows for a taxdeduction exemption of 1.5 lakhs in the interest payable on housing loans.With many banks like IDBI Bank, CanFin Homes, HDFC and PNB Housinghaving slashed down- it is extremely beneficial for the consumers. This hasprovided a boost to residential sales. Again the easing up of bank finance fordevelopers has acted as important catalysts for the sector. The governmenthas also helped by permitting banks to advance home loans to NRIs.
Some critical news:
Real estate in india has a bright future. Some reports point out certain issueswhich need to be addressed by the government to ensure rapid growth. Someof the issues are: absence of large listed companies in the sector, which hasaffected fund flow; foreigners still cannot buy and sell undeveloped land; andreassessment of the legal aspects relating to stamp duty and rent control.There are some suggestions on the FDI guidelines which are enumerated asfollows:
FDI for existing companies and projects:
Presently FDI is allowed onlyin the case of greenfield projects. In this relation, the policy assumes settingup of a SPV by the foreign investor for undertaking real estate developmentactivities in India. FDI should be permitted in companies which are otherwiseengaged in real estate development companies and own properties, some of which may be developed, partly developed and/ or undeveloped.This would assist in providing the necessary finance to the companies whichface shortage of finance for funding their projects.
FDI for the Hotel and Tourism Industry:
A clarification is requiredstating that FDI in Hotel and Tourism Industry would continue to be governed