It appears that ‘achhe din’ have finally arrived at the doorstep of
the Indian real estate industry. The central government’s decision to
ease FDI for the construction sector is considerably
one of the most important decisions that have kept this Industry waiting
for a long time now. This decision has met with an unmatched enthusiasm
from the industry, confirming their approval for syncing their efforts
with the centre to cater to the segment, and also showing their
apprehension for meeting the demands despite the enticing proposition.
And the developers, along with the money-constrained potential buyers, have every reason to be ecstatic of the centre’s decision. So how possibly can it evoke such a strong and optimistic reaction from the real estate industry, and to what extent do the benefits reach the potential buyers from the related segment?
The realty sector experts view this decision not less than the knock of ‘achhe din’ at their doors and have hailed the promptness of the government to arrive on the long awaited critical decision to boost the industry efforts. The move is expected to inject the much needed investment in the sector that was declining consistently along with the losing interest of potential investors.
Neeraj Bansal, partner and head, real estate and construction sector, KPMG in India, expresses his satisfaction over the centre’s consistent efforts to improve the current scenario, and says “The new government has taken several steps in the recent past to tackle the issues hampering the development of housing and urban infrastructure in the country. The sector has witnessed a marginal growth in new investments over the last couple of years and FDI, in particular, has almost dried up from a high of USD 3 billion (or 10 per cent of total FDI Inflow) witnessed in 2009-10.”
The developers have lauded the policy and see it as a breather for the financial institutions. Also, expectations are high to improve the development efforts, especially in the affordable segment that is expected to be a game changer if the government is to take development beyond prominent regions of the country Prashant Tiwari, chairman, Prateek Group and vice-president, Credal NCR, Western UP Division, is of the view, “This welcome outcome was worth waiting for and will further boost the affordable housing segment in the country. The much needed breather for the sector will further entice developers to be more aggressive in the segment and would take development beyond metro cities. Developers will now be able to expedite the construction of delayed projects along with intensifying their efforts to meet the requirements.”
“Also, it will ease the burden of lending for banking and non banking institutions, which till date have been bearing the load of capital needs for the real estate sector,” adds Tiwari.
The sector has been reeling through an acute funding pressure. The foreign investment in real estate has also gone down over the last few years. Investors were shying away due to ambiguity in rules and regulations. Also they were not keen on locking their funds for longer period. With these reforms in place, they would now be able to manage their fund quite well. “We believe affordable housing would be the biggest beneficiary of this step as funding is now allowed in projects sizing 20,000 square meters as well. It is evident that government intends to fulfill its dream of housing for all by 2022 and these steps are aligned to that,” puts in Rohit Raj Modi, director, Ashlana Group and secretary, CREDAI-NCR.
Vikas Sahani, CMD, Property Guru, also updates that not only the size of projects has been reduced from 50,000 square metres to 20,000 square metres, but the cap on FDI has been raised from $5 million to $10 million till the period of ten years from the commencement of the project or before the completion of the project, whichever expires earlier. “This step will encourage developers to complete their projects on time and help to fulfill the shortage of around 25 million houses in the country of which 96 per cent are in the economically weaker and low income segment,” adds Sahani.
R K Arora, CMD, Supertech and vice president, CREDAI-Yamuna Expressway agrees, “A 100 per cent FDI approval means more capital can be invested in towns and cities for the development of both residential and commercial spaces. It’s a positive move as government’s aim to provide home for every citizen by the year 2022. With this positive announcement by the government and REITs (Real Estate Investment Trusts) coming soon, we believe foreign players will not hesitate in investing in India.”
But the experts also lay emphasis on the responsibility that the decision brings in and suggest setting specific deadlines, for not just the projects, but also for the state authorities in order to achieve the desired momentum through the push that the industry expects with the improved cash flow and investor sentiments.
“Now onwards, the realty industry shall Endeavour to invite FDI in developed areas for housing, commercial and retail projects particularly in the metropolitan centres and their satellite towns. In this connection the responsibility of state development authorities and state governments to develop trunk infrastructure of roads, water supply, drainage and sewage requires to be given special thrust for developing serviced land. Fixed time schedules are desirable for translating government policy intentions into action in the states for implementation of relaxed FDI policy,” emphasises Navin Raheja, CMD, Raheja Developers and Chairman, NAREDCO.
As David Walkner, managing director, SARE Homes, informs that in terms of direct support to the residential sector, availability of finance is a critical area with mortgage debt in India only circa 9 per cent of GDP versus China with circa 35 per cent and UK with over 70 per cent. “Buying a home is the best investments available and so incentivising families to buy via finance offering is a good policy,” says Walkner.
So this step will revive the overall economy and the realty market, and also hoping for the infra status in near future.
And the developers, along with the money-constrained potential buyers, have every reason to be ecstatic of the centre’s decision. So how possibly can it evoke such a strong and optimistic reaction from the real estate industry, and to what extent do the benefits reach the potential buyers from the related segment?
The realty sector experts view this decision not less than the knock of ‘achhe din’ at their doors and have hailed the promptness of the government to arrive on the long awaited critical decision to boost the industry efforts. The move is expected to inject the much needed investment in the sector that was declining consistently along with the losing interest of potential investors.
Neeraj Bansal, partner and head, real estate and construction sector, KPMG in India, expresses his satisfaction over the centre’s consistent efforts to improve the current scenario, and says “The new government has taken several steps in the recent past to tackle the issues hampering the development of housing and urban infrastructure in the country. The sector has witnessed a marginal growth in new investments over the last couple of years and FDI, in particular, has almost dried up from a high of USD 3 billion (or 10 per cent of total FDI Inflow) witnessed in 2009-10.”
The developers have lauded the policy and see it as a breather for the financial institutions. Also, expectations are high to improve the development efforts, especially in the affordable segment that is expected to be a game changer if the government is to take development beyond prominent regions of the country Prashant Tiwari, chairman, Prateek Group and vice-president, Credal NCR, Western UP Division, is of the view, “This welcome outcome was worth waiting for and will further boost the affordable housing segment in the country. The much needed breather for the sector will further entice developers to be more aggressive in the segment and would take development beyond metro cities. Developers will now be able to expedite the construction of delayed projects along with intensifying their efforts to meet the requirements.”
“Also, it will ease the burden of lending for banking and non banking institutions, which till date have been bearing the load of capital needs for the real estate sector,” adds Tiwari.
The sector has been reeling through an acute funding pressure. The foreign investment in real estate has also gone down over the last few years. Investors were shying away due to ambiguity in rules and regulations. Also they were not keen on locking their funds for longer period. With these reforms in place, they would now be able to manage their fund quite well. “We believe affordable housing would be the biggest beneficiary of this step as funding is now allowed in projects sizing 20,000 square meters as well. It is evident that government intends to fulfill its dream of housing for all by 2022 and these steps are aligned to that,” puts in Rohit Raj Modi, director, Ashlana Group and secretary, CREDAI-NCR.
Vikas Sahani, CMD, Property Guru, also updates that not only the size of projects has been reduced from 50,000 square metres to 20,000 square metres, but the cap on FDI has been raised from $5 million to $10 million till the period of ten years from the commencement of the project or before the completion of the project, whichever expires earlier. “This step will encourage developers to complete their projects on time and help to fulfill the shortage of around 25 million houses in the country of which 96 per cent are in the economically weaker and low income segment,” adds Sahani.
R K Arora, CMD, Supertech and vice president, CREDAI-Yamuna Expressway agrees, “A 100 per cent FDI approval means more capital can be invested in towns and cities for the development of both residential and commercial spaces. It’s a positive move as government’s aim to provide home for every citizen by the year 2022. With this positive announcement by the government and REITs (Real Estate Investment Trusts) coming soon, we believe foreign players will not hesitate in investing in India.”
But the experts also lay emphasis on the responsibility that the decision brings in and suggest setting specific deadlines, for not just the projects, but also for the state authorities in order to achieve the desired momentum through the push that the industry expects with the improved cash flow and investor sentiments.
“Now onwards, the realty industry shall Endeavour to invite FDI in developed areas for housing, commercial and retail projects particularly in the metropolitan centres and their satellite towns. In this connection the responsibility of state development authorities and state governments to develop trunk infrastructure of roads, water supply, drainage and sewage requires to be given special thrust for developing serviced land. Fixed time schedules are desirable for translating government policy intentions into action in the states for implementation of relaxed FDI policy,” emphasises Navin Raheja, CMD, Raheja Developers and Chairman, NAREDCO.
As David Walkner, managing director, SARE Homes, informs that in terms of direct support to the residential sector, availability of finance is a critical area with mortgage debt in India only circa 9 per cent of GDP versus China with circa 35 per cent and UK with over 70 per cent. “Buying a home is the best investments available and so incentivising families to buy via finance offering is a good policy,” says Walkner.
So this step will revive the overall economy and the realty market, and also hoping for the infra status in near future.
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