Unstrapping FDI to Boost Indian Real Estate

Is it a slump? Is it a shift? Or is it a beginning of yet another phase of growth for Indian real estate. The present day situation holds uncertainty and speculative outlook in various domains of India economy. Factors like crunch of liquidity, rising inflation and the constantly depreciating rupee have had a prominent effect over the scope of commerce and trade in India. However, the real estate sector has remained more or so, insulated from the negative sentiments spurting out of the tough phase for business in the country.

Indian Real estate sector has witnessed a rejuvenated interest amongst the FDI and NRI investors in the recent past. The falling graph of rupee and boosted investments in the infrastructural assets in the metro regions have been few of the major reasons for this recuperated vigor. Moreover, the Reserve Bank of India (RBI) in accordance with the central government has proposed and sanctioned few policies which have proven to be enabling for realty sector. The RBI has reviewed the borrowing norms for the residential real estate sector and proposed to come up with a separate category. As compared to the external commercial borrowings, this new category is expected to attract lower rate of interest in the residential segment.

Latest of the enabling policies to be contemplated by the government is to do away the norms for specific developments in the residential realty segment. The realty firms with up to 50% of foreign share are to be exempted from various norms which act as a deterrent for investors abroad to come forward and invest in the Indian residential market. This ruling as proposed by the Urban Development ministry has been seen as a tremendous boost to augment sources of financing for the Indian real estate sector. Amidst the speculative climate in the business and clogged liquidity channels, this ruling if implemented, will significantly assist the developers to source funding from diverse sources on relatively cheaper rates of interest. The proposed relaxations to be facilitated for these foreign investments include lower minimum size of land for the plotted project, lesser minimum built-up area and the consent for FDI funded firms to purchase the farmland for construction purposes. 

Once the proposed ruling materializes, the realty sector along with its ancillary segments is envisioned to receive a substantial boost in terms of enlarged scope for its operations. This ruling brings with it, a huge potential of employment generation and a relief to the crammed banking sector of the nation. The real estate sector in India has been scaling heights of growth owing to hyper construction activities in the metro regions. This growth has sprawled into the outgrowths of metros and successfully reached to tier 2 and 3 cities. The envisioned changes in the foreign direct investment norms are expected to contribute in further growth and development of real estate in India

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