Foreign Direct investment in Real Estate

Fast and steadily growing economy of India, has a huge real estate industry amounting to about US$ 12 billion. Meticulous studies reveal that this real estate industry of India has been constantly growing at a high rate of 30% for last several years. After the Agriculture sector, the Real Estate sector of India, is the second biggest employer in the country, and possesses immense potential for foreign direct investment for diverse purposes, especially after the liberalization of FDI norms recently by the Government of India in 2005. So far, it is found that majority of the real estate developments have been made in the fields of residential housing facilities, and the remaining in the IT/ITES offices, business enterprises, hotels, hospitals, shopping malls, and industrial establishments. Today, abundant opportunities are available for foreign direct investment in real estate business of India, in these and other fields.

Today, along with NRIs and PIOs, foreigners are also facilitated to invest in the real estate sector of India in residential housing and townships, commercial premises, infrastructural facilities (at regional and local levels), technological parks, hotels & resorts, hospitals, educational institutions, industries, special economic zones (SEZs), retail, leisure and recreational amenities, etc, under the confinement of certain conditions. For wholly-owned subsidiaries a minimum capitalization of $10 million is made compulsory, and for joint ventures, it is $5 million. Again, a minimum of 25 acres of land coverage is desirable for FDI projects in real estate. Global Jurix, one of the reputed legal organizations of the world, helps comprehensively and expertly regarding these all types of fdi in indian real estate.

FDI in Real Estate sector in India

Companies, industries, and multi-mational corporations of the Information Technology and Outsourcing sectors are major and leading investors in the real estate of India, at present. According to an estimate, over 65 million square feet of IT space are to be developed in the next five years. Other popular means of fdi in indian real estate are residential and commercial complexes, amenities of the hospitality sector, industries, healthcare facilities, leisure organizations, and infrastructure. Easy and cheap availability of talented and skilled work force, lower casts of logistics, constantly expanding Indian market, steady growth of Indian economy, etc. have been attracting and enticing factors for diverse foreign direct investment in real estate business in all across India.

Global Jurix helps well-rounded and offers discerning advice over all above categories of foreign direct investment in real estate business in India, through the Governmental and Automatic Routes. Our services for fdi in indian real estate, essentially deal with all Federal and State Laws governing the real estate transactions and investments in India, Property Taxation, and Stamp Duty applicable.

Top 10 Sectors Attracting Highest FDI Equity Inflows: Ranks Sector 2009-10 (AprilMarch) 2010-11 ( AprilMarch) 2011-12 (AprilJan.) Cumulative Inflows (April 00 - Jan. 12) % age to total Inflows (In terms of US$)

SERVICES SECTOR (financial & non-financial) TELECOMMUNICATIONS paging, cellular mobile, telephone services) COMPUTER HARDWARE SOFTWARE (radio basic

19,945 (4,176)

15,053 (3,296)

22,771 (4,836)

143,878 (31,971)

20.00%

12,270 (2,539)

7,542 (1,665)

8,984 (1,992)

57,050 (12,547)

8.00%

&

4,127 (872) 14,027 (2,935) 13,469 (2,852) 1,006 (213) 6,138 (1,272) 5,893 (1,236) 1,999 (420) 1,297 (266)

3,551 (780) 5,600 (1,227) 4,979 (1,103)

3,312 (698) 2,750 (591) 10,859 (2,230) 14,482 (3,208) 7,262 (1,569) 2,916 (635) 7,700 (1,655) 951 (202)

49,626 (11,107) 49,025 (10,973) 49,440 (10,867)

7.00%

HOUSING & REAL ESTATE

7.00%

CONSTRUCTION ACTIVITIES (including roads & highways)

7.00%

DRUGS & PHARMACEUTICALS

961 (209)

42,745 (9,170)

6.00%

POWER

5,796 (1,272) 5,864 (1,299) 5,023 (1,098) 2,543 (556)

32,798 (7,215)

5.00%

AUTOMOBILE INDUSTRY

29,354 (6,470)

4.00%

METALLURGICAL INDUSTRIES

26,287 (5,909)

4.00%

10

PETROLEUM & NATURAL GAS

14,612 (3,339)

2.00%

FDI: Indian real estate pulls in the big bucks!

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The Indian real estate market is ready for take off. The hibernation period is definitely over, with FDI (Foreign Direct Investments) in real estate estimated to reach $16 billion by 2012 from $600 million in 2006. Beginning with company listing, mutual fund investing in the real estate, India is racing with 9% annual growth of an $800 billion economy towards the rank of the third largest economy by 2050. The real estate boom, availability of cheaper housing loans and a booming economy are fueling the flow of FDI towards Indian real estate. FDI is being encouraged with a regulatory framework, simpler tax norms, public and private participation, managerial skill and technical expertise. Comparing the earlier norms to the present, one can note the major changes introduced. Changes made: 100% FDI in real estate is permitted. Investment by only NRI (non-resident Indians) and POI (persons of Indian origin) in housing and real estate criteria has been abolished. Regulations allowing only integrated township through wholly owned subsidiary or through a joint venture company with an Indian partner have been abolished. Requirement of a registered Indian company with minimum capitalization of $10 million for a wholly owned subsidiary and $5 million for joint ventures with Indian partners has been introduced. Theres a lock-in period of 3 years from date of capitalization for repatriation of the investment. Minimum area for development has been brought down from a hundred acres to twenty-five acres. 50% development is to be completed within five years of land possession.

Within 6 months of the SEZ Act 150 special economic zones approval gives rise to the possibility of attracting further $20 billion in total FDI. However, the changing norms are still in their infancy, with developers not enjoying complete freedom, requirement of reservation for economically weaker section, restrictions for use of various areas and areas to be handed over free for use, high level of corruption, red tape and bureaucracy. The 10th plan estimates a shortage of 22.4 million housing units in 2007, with requirement of housing touching 90 million in another fifteen years. Sixty million square meters of office space would be required in the next 5 years due to the advancing sectors of services and Information Technology. Cheaper foreign funds, advanced technology, better infrastructure and efficient project implementation are paving the path to greater heights in Indian real estate.

Real Estate in India

Sep 28, 2012

The Indian real estate sector is being recognised as an infrastructure service, helping in the economic growth of the country, according to industry experts. As per a report released by the McKinsey Global Institute (MGI)India's urban awakening: Building inclusive cities, sustaining economic growthon April 2010, the country's urban population will soar to 590 million by 2030, from 340 million in 2008. India's cities could generate 70 percent of the net new jobs created by 2030, produce more than 70 percent of the country's gross domestic product (GDP), and stimulate a near four-fold increase in per capita income. It also says that India needs to invest US$ 1.2 trillion over next 20 years to modernise urban infrastructure and keep pace with the growing urbanisation. Further, growth prospects and price stability of smaller cities are attracting large real-estate developers in such cities in the recent past, according to a report titled 'Real(i)ty Next: Beyond the Top 10 Cities of India', released by Crisil Research. The report estimates that the sale of new residential apartments in 10 such smaller cities at around US$ 4 billion in 2012. The Government of Indias recent decision to allow 51 per cent FDI in multi-brand retail is also expected to benefit the real estate business in the country, in terms of boosting development of new shopping malls. In fact, India is named among top 20 destinations in the world with the strongest retail real estate momentum, according to international property consultant Jones Lang LaSalle. SECTOR FACTS

FDI flows into construction development (including townships, housing, built-up infrastructure) in April-June 2012-13 stood at US$ 348 million, according to the Department of Industrial Policy and Promotion (DIPP) Construction development sector attracted a cumulative FDI worth US$ 21.1 billion from April 2000 to June 2012

Investment Opportunities
Non-resident Indians (NRIs) and foreign citizens who are Persons of Indian Origin (PIO) are allowed to purchase immoveable property in India. Residential property prices have stabilised now and are deemed attractive for the NRI home buyer. Industry experts feel that with attractive pricing and innovation in construction technology and variety of designs, NRIs are taking a fresh look at India as a unique market in which they can invest. NRIs are looking forward to investing in real estate in India with the dollar appreciating in value compared to the rupee in the recent times. "Generally, NRIs are looking at this period as an extremely advantageous one for realty investments. The Government has been making proactive policy changes clearly aimed at routing more NRI investments into India," says Om Ahuja, CEO - Residential Services, Jones Lang LaSalle India. Meanwhile, Indian realtors participated in an India Property show in Singapore. The show was organised to attract Indian diaspora living in Singapore to invest into Indias booming real estate market. The appreciation of the Singapore dollar, the Comprehensive Economic Cooperation Agreement and the RBIs liberalised policies are all progressive steps for expats, NRIs and Singaporeans to invest in Indias booming real estate market. The reputation of the realtors and the variety of properties available make it a reliable and convenient investment opportunity for the Indian expats and Singaporeans alike, said Mr R. Dhinakaran, nominated Member of Parliament and vice-president, Institute of Certified Public Accountants of Singapore.

Investment Policy Updates

The Government has proposed one per cent TDS (tax deduction at source) on transfer of immovable property if the sale value exceeds Rs 50 lakh in urban centres and Rs 20 lakh in other areas in the Union Budget 2012-13. The Reserve Bank of India (RBI) has granted permission to foreign citizens of Indian origin to purchase property in India for residential or commercial purposes. The purchase consideration should be met either out of inward remittances in foreign exchange through normal banking channels or out of funds from NRE/FCNR accounts maintained with a bank in India. According to the latest reforms,

FDI up to 100 per cent under the automatic route in townships, housing, built-up infrastructure and construction-development projects (which would include, but not be restricted to, housing, commercial premises, hotels, resorts, hospitals, educational institutions, recreational facilities, city and regional level infrastructure) is allowed subject to the following guidelines (also for investment by NRIs)

The project shall conform to the norms and standards, including land use requirements and provision of community amenities and common facilities, as laid down in the applicable building control regulations, byelaws, rules, and other regulations of the State Government/ Municipal/ Local Body concerned

The investor/ investee company shall be responsible for obtaining all necessary approvals, including those of the building/layout plans, developing internal and peripheral areas and other infrastructure facilities, payment of development, external development and other charges and complying with all other requirements as prescribed under applicable rules/ bye-laws/ regulations of the State Government/ Municipal/ Local Body concerned

The State Government/ Municipal/ Local Body concerned, which approves the building/ development plans, would monitor compliance of the above conditions by the developer