Asia-Pacific team leader and global business attorney Vinita Bahri-Mehra was invited to give opening remarks at “Emerging India: How India Will Play a Major Role in 2016 and Beyond,” a joint presentation of the Indian Consulate and the New York City chapter of the Association for Corporate Growth. The presentation, which aimed to discuss the subcontinent’s viability as a destination for increased U.S. investment in 2016, featured a review of the country’s demographic profile, an evaluation of its recent economic activity, its competitive positioning relative to opportunities in China and Brazil, and a panel of technology experts.
Vinita’s presentation covered the specific inflow of foreign direct investment in India, an overview of investable industry sectors and Indian pillars of growth, and an overview of the government’s focus on driving investment in India through the “Make in India” initiative, which is focused particularly on manufacturing.
Asia-Pacific team leader and global business attorney Vinita Bahri-Mehra was invited to give opening remarks at “Emerging India: How India Will Play a Major Role in 2016 and Beyond,” a joint presentation of the Indian Consulate and the New York City chapter of the Association for Corporate Growth. The presentation, which aimed to discuss the subcontinent’s viability as a destination for increased U.S. investment in 2016, featured a review of the country’s demographic profile, an evaluation of its recent economic activity, its competitive positioning relative to opportunities in China and Brazil, and a panel of technology experts.
Vinita’s presentation covered the specific inflow of foreign direct investment in India, an overview of investable industry sectors and Indian pillars of growth, and an overview of the government’s focus on driving investment in India through the “Make in India” initiative, which is focused particularly on manufacturing.
foreign direct investment in india. the beginning, how it started.current status of fdi in india. advantages & disadvantages of fdi.wallmart example. final conclusion
Real estate is one of the fastest growing sectors of the Indian economy and contributes about 5 per cent to India's gross domestic product (GDP).
The country's economic growth is driving the demand for real estate in India. Demand for residential space is expected to grow at a compound annual growth rate (CAGR) of 19 per cent between 2010 and 2014 - Tier 1 metropolitan cities are expected to account for about 40 per cent of this. The top three cities - Mumbai, the NCR and Bengaluru account for 46 per cent of total office space demand in India.
Indian real estate sector is the fourth largest sector in terms of foreign direct investment (FDI) in the country. During April 2012-January 2013, the sector accounted for 8.8 per cent of total FDI inflows into India. FDI in the sector is estimated to grow to US$ 25 billion in the next 10 years.
Growing requirements of space from sectors such as education and healthcare provide opportunities in the real estate sector. Growth in the number of tourists has resulted in demand for service apartments.
Challenges of Doing Business in india - Corruption, Efficiency and the Way Fo...IPPAI
Mr. Dhanendra Kumar
Former Chairman CCI, & Principal Advisor
Indian Institute of Corporate Affairs
Ministry of Corporate Affairs, Govt. of India
at RPR 2012, 23-26 August, Goa, India
foreign direct investment in india. the beginning, how it started.current status of fdi in india. advantages & disadvantages of fdi.wallmart example. final conclusion
Real estate is one of the fastest growing sectors of the Indian economy and contributes about 5 per cent to India's gross domestic product (GDP).
The country's economic growth is driving the demand for real estate in India. Demand for residential space is expected to grow at a compound annual growth rate (CAGR) of 19 per cent between 2010 and 2014 - Tier 1 metropolitan cities are expected to account for about 40 per cent of this. The top three cities - Mumbai, the NCR and Bengaluru account for 46 per cent of total office space demand in India.
Indian real estate sector is the fourth largest sector in terms of foreign direct investment (FDI) in the country. During April 2012-January 2013, the sector accounted for 8.8 per cent of total FDI inflows into India. FDI in the sector is estimated to grow to US$ 25 billion in the next 10 years.
Growing requirements of space from sectors such as education and healthcare provide opportunities in the real estate sector. Growth in the number of tourists has resulted in demand for service apartments.
Challenges of Doing Business in india - Corruption, Efficiency and the Way Fo...IPPAI
Mr. Dhanendra Kumar
Former Chairman CCI, & Principal Advisor
Indian Institute of Corporate Affairs
Ministry of Corporate Affairs, Govt. of India
at RPR 2012, 23-26 August, Goa, India
An outlook on indian realty sector;Indian Reality Sector;By TheEquicomTheEquicom Advisory
The Planning Commission of India defines ‘ Real estate’ as land, including the air
above it and the ground below it, and any buildings or structures on it. It is also referred to
as realty. It covers residential housing, commercial offices, trading spaces such as theatres,
hotels and restaurants, retail outlets, industrial buildings such as factories and government
buildings. The activities of the real estate sector encompass the housing and construction
sectors also.
National Real Estate Development Council (NAREDCO) speech building a New Ind...Manoj Benjamin
Building a New India
National Real Estate Development Council NAREDCO
Under the Aegis of Ministry of Housing & Urban Poverty Alleviation
Government of India
By Manoj C. Benjamin, Chairman Royal Indian Raj International Corporation*
2000,New Delhi, India
“ According to Government of India Estimates Approximately US200Billion will be required over the next 7-10 Years for Basic Infrastructure Projects”
Industry Review on Real Estate Sector in India.pptxkanhaa5587
The real estate sector in India is a dynamic and rapidly growing industry driven by various factors. With a population of around 1.38 billion and expected to surpass China by 2030, India's economic transformation has positioned it as a promising business environment, particularly in the services sector. The sector has witnessed significant growth, with real GDP averaging 6% per annum since 1992, making India an attractive destination for property investors due to its favorable demographics and strong economic growth.
Historically, the real estate sector in India was unorganized, characterized by challenges like lack of transparency, absence of centralized title registry, and financing issues. However, recent years have seen a shift towards greater organization and transparency, driven by regulatory reforms and government support for repealing outdated acts like the Urban Land Ceiling Act.
Key drivers of demand in the Indian real estate market include rising disposable incomes, increased urbanization, and the growth of the IT and ITES sectors, which have led to a surge in demand for residential and commercial properties. The residential sector is expected to continue demonstrating robust growth, supported by factors like housing finance penetration and tax incentives. Additionally, the commercial real estate sector has seen growth fueled by increased revenues in sectors like IT and ITES, leading to a demand for commercial spaces.
The industry is witnessing a gradual shift in financing methods, with private debt and bank lending emerging as significant sources of real estate finance. Moreover, the sector has attracted substantial private equity investments, with FDI inflows contributing significantly to the growth of the real estate market in India. The government's policy support, including allowing up to 100% FDI for townships and settlements development projects, has further boosted private investment in the sector.
Overall, the real estate industry in India presents a mix of challenges and opportunities, with the sector evolving towards a more regulated and transparent environment. The market is expected to continue its growth trajectory, with increasing investments, policy support, and changing consumer trends shaping the future landscape of real estate in India.
Real Estate is the Best Investment- Gilco Greens PhagwaraGilco Greens
Real estate investment is one of the fastest-growing industries not only in India but also all over the world. It's profits and revenues attracting investors from all over the world to invest in this money-making industry. Let's see it's future in India and the advantages of real estate investment
Similar to Foreign direct investment in real estate (20)
Real Estate is the Best Investment- Gilco Greens Phagwara
Foreign direct investment in real estate
1. FOREIGN DIRECT INVESTMENTS IN REAL ESTATE
Sandesh Savant, Executive Director, Indiaproperties
Foreign Direct Investment (FDI) basically is the revenue brought into the country by
foreign agencies for the purpose of business or investments, through the official
Foreign Investment Promotion Board (FIPB) channels. The Indian Government has
allowed FDIs for several industries in the recent past. FDI in Real estate is being
permitted since January 2002. Despite the fact that it is almost a year, since the FDI
was allowed in Real Estate, the response is not encouraging. Let’s look at the FDIs
norms in real estate, their positive and negative aspects and what needs to be done to
encourage FDI, in this paper. Table I gives the policy guidelines for FDI in Real Estate.
TABLE I - EXISTING POLICY GUIDELINES FOR FDIs IN REAL ESTATE
1. The minimum capitalization norm will be $10 million for a wholly owned
subsidiary and $5 million for joint ventures with Indian partners.
2. The minimum area to be developed by a company will have to be 100 acres.
3. A minimum lock-in period of 3 years from completion of minimum
capitalization shall apply before repatriation of original investment is
permitted.
4. A minimum of 50% of the integrated project development must be completed
within a period of 5 years from the date of possession of the land.
5. The company must be registered as an Indian company under the
Companies Act 1956 and will be allowed to take up land aggregation and
development.
6. FIPB under the Ministry of Urban Development & Poverty Alleviation will
process all FDI cases and set guidelines for the companies.
Research@Indiaproperties
Benefits of FDI in Real Estate
FDI in real estate can create major inflows of funds that can enhance domestic
investment to achieve a higher level of real estate development. FDI can certainly bring
in the funds at reasonably cheaper rates, besides new ideas and technologies, which
would enhance the efficiency of the Indian construction industry. A major part of the
cumbersome procedures of the government and RBI are simplified with the FDI policy.
So, the impact on the real estate industry can be significant, leading to increased
competition levels among the local developers, in terms of price, quality and timing.
The potential of growth and contribution of the real estate industry to the GDP is
tremendous in India, as compared to other countries; see Figures I and II. Figure III
indicates the breakdown of the cost of construction in India versus the United States.
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2. To realize this potential, FDI is a must. All the benefits we mentioned above can
happen only when a congenial environment is created for FDIs.
FIGURE I – Comparison of Construction Sector Growth (94-98)
Source: McKinsey Report Research@Indiaproperties
FIGURE II – Construction’s Contribution to the GDP (1999)
Source: McKinsey Report Research@Indiaproperties
FIGURE III – Breakdown of Cost of Construction in India Vs US (1999)
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Construction Sector Growth (94-98) - Comparisons
15.5% 15.1% 15.0%
10.6%
9.2%
4.2%
China Brazil Taiwan Korea Thailand India
Land Cost Profits Labour Cost Material Cost
Breakdown of Cost of Construction in India Vs US (1999)
India
18%
5%
28%
49%
US
9%
37%
30%
24%
Construction's Contribution to the GDP( 1999)
17.0%
12.5% 12.0%
8.0% 7.8%
7.0%
6.0%
5.2%
18.0%
Portugal
Ireland
Canada
Poland
UK
USA
Japan
Slovak
Republic
India
3. Source: McKinsey Report Research@Indiaproperties
Discouraging Aspects of the FDI Policy in Real Estate
The current FDI norms have receive only lukewarm response from foreign investors. In
the past eleven months, the FDI in Real Estate Investment is not encouraging. Only
one project has been approved. Why so? Here is a glance at the key issues.
1. Minimum Area of Development
The guidelines say that the minimum area to be developed by a company will have to
be 100 acres. For a foreign player, finding 100 acres of land around Indian cities will
not be too easy. Most local developers have already cornered this market, so the
present market conditions are not very attractive to the foreign developers. It will be
less restrictive, if this minimum area is reduced from 100 acres to 25 acres.
2. Restriction on Development
Plus the FDI policy does not allow developers to have a free say on the type of
development. Restrictions include areas to be reserved and handed over free for
various uses. Plus there are reservations for no-profit-no-loss (NPNL) categories and
economically weaker section (EWS) housing. These restrictions must be relaxed for all
developers, both local and foreign.
3. Minimum Capitalisation
Plus the minimum capitalisation norm is USD 10 million for a wholly owned subsidiary
and USD 5 million for joint ventures with Indian partners. This may not be much of an
issue. The biggest hurdle is that the housing/township sector does not qualify for the
infrastructure sector (Section 80IA) benefits under the Income Tax (IT) Act and unlike
other infrastructure projects, it does not get a tax holiday.
4. Other Issues
Other issues like high tax rates, weak exchange status, restrictive clauses and high
levels of corruption, red tape and bureaucracy make India a less attractive destination
for FDIs in real estate. Foreign investors are also worried that essential infrastructure
like electricity, water and roads, which are the government’s responsibility, may not
come through on schedule. India’s real estate markets are far less structured and
developed compared to the western countries. Hence, some major changes like
repealing the ULCRA and rationalizing the stamp duties during registration are required
to be implemented fast. These changes will most likely be in the form of easier
financing for development and encouragement of institutional investment in commercial
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4. real estate development. Figure IV shows the low levels of labour productivity in India
with respect to other nations.
FIGURE IV – Comparison of Labour Productivity in Residential Construction
Source: McKinsey Report Research@Indiaproperties
India and China – A Comparison
India’s FDI has always been compared with China and this is where the differences
stand out. For 2000, FDIs for China and India stand at USD 40 billion and USD 2
billion, respectively, showing India in poor light. But, India considers only cash inflows
of equity when counting its FDI, but China reflects cash, reinvested earnings and
round-tripping routing through Hong Kong in its FDI calculations. Based on the
standard IMF methodology, India’s FDI inflows stand at $8 billion while China stands at
$22 billion. There is still a wide gap, but one that can be bridged. Of course, about half
of China’s FDIs are in the real estate sector, while India has minimal FDI in this sector.
One must understand that there is no private ownership of land in China. Plus
differences in the political environment between the two countries may also have an
impact on FDIs. The political structure in China still binds politicians strongly to
entrepreneurs and infrastructure is able to keep pace with the growth in real estate. But
one must keep in mind that India and China are not competing for FDIs from the same
sources, but totally different sectors. Though China appears to be outperforming India
in FDIs, India is better placed than China in the democratic, financial and business
sectors. Table II compares the two giants from the economic point of view.
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International Comparison of Labour Productivity in Residential Construction
100
80
70
60
35
25
10 8
US (1995) F rance(1994) G erm any(1994) Ko re a(1995) B razil(1995) P o land (1997) R us s ia(1997) Ind ia(2000)
Ind exed o f o utp ut p er lab o ur ho ur* : U S average=100
5. TABLE II - COMPARATIVE STATISTICS OF CHINA AND INDIA (2000)
NO DESCRIPTION CHINA INDIA
1 Population (billion) 1.276 1.029
2 Urban Population (%) 37 33
3 GDP (Billion $) 1121 440
4 Per capita income ($) 990 440
5 Exports (billion $) 250 44.1
6 Inflation (%) 1.3 4.0
7 Savings (% of GDP) 39 22
8 Labour Laws More flexible Less flexible
9 Corporate Tax (%) 15 36.75
10 Double Taxation No Yes
11 Value Added Tax (VAT) Yes No
12 Power Generation (billion KW) 1,166 417
13 Electricity Tariff ($/100KW) 4.3 (Rs 1.97/unit) 7.53 (Rs 3.80/unit)
14 Sea Freight (million tonnes) 922.37 (17 ports) 251.73 (12 ports)
15 Roads (million km) 1.7 3.0
16 Railways (thousand km) 68.0 81.5
17 People per telephone 12 46
18 Percent FDIs from non residents 65 10
19 Forex Reserves (billion $) 312 67
20 Internet Connections (millions) 35 3
Research@Indiaproperties
What needs to be done? Our wish list:
Presently, most foreign companies have a wait and watch approach to this FDI policy.
Pressures from the real estate industry lobbies and potential investors will move the
government to ease many restrictions, such as minimum acreage and lock-in period.
And the authorities must act accordingly and fast, if a large amount of FDI needs to
flow into India and boost the real estate industry. Foreign companies will want to
minimise risks and maximise the learning process; hence they would prefer smaller
schemes. India must offer reasonable returns and flexibility to balance perceived risks
to international investors. The government must also allow FDIs in the commercial
sector. With 100% FDI, real estate will see increased liquidity and developers will have
to deliver in time and as per global standards. Finally, the infrastructure must be in
place for foreign investments to flow into the development of new cities and townships
in India. Indian real estate developers are of the opinion that these restrictions in the
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6. existing guidelines must be relaxed for all developers, both local and foreign, if the
government wants to boost the real estate sector in the country. It is also clear that the
construction and housing industry should be declared a key infrastructure sector
considering its growth would have a direct positive impact on the overall sluggish
economy of India.
First FDI success
Almost a year after opening up the real estate sector to FDI, the FIPB has approved the
first FDI project for a 100-acre residential township in Gurgaon. An Indian infrastructure
and property consultancy company, Feedback Ventures Ltd. has tied up with Malaysia-
based real estate companies, Kontur Bintang and Westport, for the project costing Rs.
800 crore.
Related Developments
REITs or REMFs
This new concept of Real Estate Investment Trusts (REIT) will be introduced in India.
This is one good way of raising funds in the money starved real estate sector.
FDIs in Retail Sector:
The Industry Ministry has recommended to the government to allow FDI in the retail
sector with minimum capitalization conditions for foreign retail companies interested in
setting up 100% subsidiaries as well as joint ventures with Indian partners. This will
boost the disorganized retail sector as well as the commercial real estate markets.
Further Reading:
1. McKinsey Report on India 2000
2. World Investment Report 2000/2001 – UNCTAD
3. Srinivas, B. (1996) Foreign Direct Investment and Foreign Debt: Experience of
India and China, Economia Internationale, Vol.XLIX No. 2.
4. UNCTAD (1992) The determinants of Foreign Direct Investment – A Survey of
the Evidence
5. World Bank (1997) Private Capital flows to Developing Countries - The Road to
Financial Integration, World Bank Policy Research Report, Washington DC
Research@indiaproperties
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