Real estate developers, investors and consultants feel commercial & retail real estate would be the biggest beneficiary of the latest liberalization of foreign direct investment (FDI) norms, followed by residential segment, including affordable housing projects, shows a report.
Other segments that stand to gain in order of priority are township projects at the third spot, followed by hotels & tourist resorts and old age homes, hospitals and special economic zones (SEZs) and educational institutions, according to survey by industry body Federation of Indian Chambers of Commerce & Industry (FICCI).
Real estate stakeholders feel satisfied with the changes made in FDI policy for construction development sector, with about 22% being highly satisfied, 56% being satisfied while 22% respondents giving a neutral rating.
According to Department Of Industrial Policy & Promotion (DIPP), total FDI inflow in construction development sector (including townships, housing, built-up infrastructure) during April 2000 to September 2015 has been around $24.16 billion, which is about 9% of total FDI inflows into the country from April 2000 to September 2015.
However, FDI in construction development sector has been on a decline over the past few years, reducing to $0.08 billion in April-September 2015 from $1.33 billion in the same period of 2012.
To boost this cash-starved sector, the government last month removed all restrictions on size and minimum capitalisation restriction on foreign direct investments into the real estate and construction sector, except for a three-year lock-in period for select projects.
Respondents were optimistic and felt that FDI reform measures will certainly increase flow of FDI into realty sector in coming months. About 55% felt that there will be more than 15% annual increase in FDI flow into realty sector, 23% felt the increase to be in the range of 10-15% and 22% felt that increase will be less than 10% annually from hereon.
A major outcome of the survey is that industry feels there is further scope for improvements in the FDI regime of India vis-a-vis other countries and states will have to take an active role in attracting FDI, said the report.
Developers, investors and consultants also suggested both Centre and State must work together to ensure removal of bottlenecks for faster implementation of reform measures to attract foreign investments in real estate. Also, a reduced lock-in-period applicable for FDI investments from 3 years currently to 1-2 years could be considered to further enhance investor interests.