The impact of FDI on real estate
During the past decade and a half, the government has gradually loosened Foreign Direct Investment (FDI) regulations, enabling more investment and economic expansion.
The government has made great strides in the liberalisation of FDI in real estate over the past sixteen years, and the time has come to take this a step further.
Real estate in India is the second largest employment producer, estimated to contribute to 13 per cent of the country’s GDP, and the third largest sector in FDI flow. It is poised to exceed Rs 65,000 crore by 2024 and 2025. The real estate market is constantly evolving with innovative solutions spanning residential, commercial, and retail projects in the main metros and across the country, even in tier 2 cities. According to a report by IBEF, Bengaluru is expected to be the most favoured property investment destination for NRIs, followed by Ahmedabad, Pune, Chennai, Goa, Delhi and Dehradun.
However, real estate has also been one of the most closely guarded industries to discourage speculation in the sector. FDI policy still prohibits speculative real estate activity. But, during the past decade and a half, the government has gradually loosened Foreign Direct Investment (FDI) regulations, enabling more investment and economic expansion. Currently, 100 per cent FDI is allowed under the automatic route in finished projects for the operation of townships, malls/shopping complexes, and business centres. However, there is still scope for relaxation in FDI in the sector to calm the real estate market chaos caused by the pandemic.
RERA and its impact
A significant concern for the industry was the watering down of the 2016 Real Estate (Regulation & Development) Act (RERA) by the states, which allowed some developers to circumvent the regulations. The Supreme Court has ordered the Centre to investigate if the rules created by various states under the Real Estate (Regulation and Development) Act, 2016 (RERA) are in accordance with the central legislation and serve the interests of homebuyers.
Moving towards corporatization
FDI in real estate would be a boon for all parties. The Securities and Exchange Board of India (SEBI) has given its approval for the Real Estate Investment Trust (REIT) platform, which will allow all kinds of investors to invest in the Indian real estate market. It would create an opportunity worth Rs. 1.25 trillion (US$ 19.65 billion) in the coming years.
Access to affordable and better-quality housing
Middle- and lower-middle-class citizens will be able to purchase their dream homes. Reductions in the built-up area would help attract foreign capital, resulting in more affordable and better-quality homes.
Liberalisation of FDI
The government has made great strides in the liberalisation of FDI in real estate over the past sixteen years, and the time has come to take this a step further. The easing and consolidation of regulatory requirements for completed assets would be advantageous for all parties—and time is of the essence.
(By Aditya Kushwaha, CEO and Director of Axis Ecorp)
Source: Financial Express ( https://bit.ly/3CmcqKZ )