India ranks as a favored destination for overseas investors with the opening up of foreign direct investment (FDI) in several sectors. The relaxation of norms by the government has also created a vast opportunity for foreign players, who are competing for a greater role in the Indian market. Realty sector is expected to surge ahead significantly. Due to rapid urbanization, positive demographics and rising income levels, the Indian real estate sector has attracted significant investment over the past few years.
Housing contributes to five to six percent of India’s gross domestic product (GDP) and the total realty market in the country is expected to touch US$ 180 billion by 2020. The role of the government is instrumental in the development of the sector. The outlook for the real estate sector in 2014 does look promising as the government has initiated developer and buyer-friendly policies.
According to a recent report by real estate consultancy, Cushman and Wakefield, India has received a total estimated investment of $1.2 billion in the real estate sector making it the 10th most invested location in Asia-Pacific region of which investment in land was the highest at $838 million.
Factors such as rising value of stock prices, fund portfolios, soaring gold holdings of individuals have given a boost to the income levels of consumers. This has resulted in a new lifestyle, leading to a spurt in residential housing from the affordable to the premium and luxury segment.
Where are investors focused?
A majority of the non-resident Indians (NRIs) are looking for investment in India as a second home and the cities that drive real estate demand overseas areDelhi-NCR, Bangalore, Chennai, Jaipur, Kochi, Mumbai and Pune. Along with these, some Tier II cities have also seen a rise in demand from NRIs when it comes to investment in their homeland. Most NRIs based in countries like Malaysia have shown their preference towards southern cities, from where a majority of them come, while in Canada, where the NRIs predominantly hail from cities like Delhi, Chandigarh is an interest area.
Global investors are optimistic about the Indian economy, which is expected to witness more than 100% increase in foreign investment. The new government’s agenda lay focus on ‘minimum government, maximum governance’ which will certainly encourage foreign investment into the country and, in turn, augment the country’s business environment and prospects.
The recent budget too, has introduced proposals that would help pump huge investments in the real estate sector. The government's move to provide much-needed incentives to REITs and giving a tax pass-through status is a positive move which will ease the pressure on the banking system, avail fresh equity and attract long-term finance from foreign as well as domestic industry. Secondly, the liberalization of FDI norms in smart cities is a smart move on part of the government which will act as a catalyst for the development of the economy and real estate sector will greatly benefit from this move.
Author’s Note: Amar Sinha is the Executive Director of Wave Infratech and spearheads the Corporate and Project Marketing of the group. He has had successful stints with Smithkilne Beecham, Shaw Wallace, Mr. Vijay Mallya’s-USL Radico Khaitan, Whyte & Mackay, Golden Tobacco & the Zee Group
