India: hot real estate investment despite falling economy

The real estate boom, availability of cheaper housing loans and relaxation in FDI have made India as the most attractive investment destination for foreign investors
The Indian construction industry has experienced tremendous growth. This growth can be associated to several factors, including multinational entrepreneurialism, buoyant local stock markets, robust economy-changing demographics and overall emergence of India on the global stage.
Then came a time when the need for sophisticated commercial space and demand for improved housing started increasing. This, in turn, attracted investments in the construction industry, and made it the most happening sector for domestic as well as foreign investors and developers.
With relaxation in FDI in real estate sector, foreign players saw investment in India as a golden opportunity and built partnership with Indian players. Indian equity markets, despite weak macros, successfully attracted more than $16 billion in foreign institutional flows so far.
Let’s take a look at the detail aspects, which make India attractive foreign investors.
India ranked as the most attractive investment destinationIndia has overtaken China as the most attractive investment destination, according to a survey conducted by Ernst & Young (EY). Due to the present macro-economic pressures and heavy debt pile, several Indian companies are looking to divest non-core businesses. With sharp currency depreciation and opening up of FDI in various sectors, India has become the destination for foreign investors.
Deep Kantawala, Chief financial Officer, ICS Group, says, “Even in difficult times, the Indian economy continues to grow at a consistent growth rate of 5-6 per cent per annum, and the currency has settled down to a relative stable level. It is not surprising that India has emerged as the most attractive investment destination, surpassing neighbouring China and the United States as per EY’s latest Capital Confidence Barometer report.”
India‘s growth story is sustainable. The foreign investors can get the best returns by participating in India, provided there is a political will and stability in the policies. These will make the foreign investors aware what they are actually entering into and how they will exit.
Huge potentialIndian real estate has huge potential. The foreign investors are zooming in on metro regions and cites like Pune, Hyderabad, the suburbs and the outgrowths of the metropolitan regions.
C Shekar Reddy, National President, CREDAI, said, “Real estate sector in India has given very good returns to the foreign investors in the past. The demand for the real estate in India is driven by the end user; therefore, it is not impacted by the slowdown in the economy. Moreover, there is a huge opportunity for growth in the real estate sector as there is a current shortfall of 18.7 million housing units. According to the estimate of MoHUPA, the country will require 60 million units by 2030, which requires an addition of 3.5 million units every year whereas the current supply is 2.5 million units per year, which needs to be scaled up. An investment of $1.2 trillion over the next 20 years will be required to fuel the growth and bridge the gap. This will surely offer a good growth opportunity for the investors in the Indian real estate, and they clearly see the prospect of better future returns on their investments.”
Stability in the policiesThe government has modified several policies to make foreign investment attractive. One such example is relaxing in expense ratios for mutual funds. Also, the prospects of higher FDI limits in insurance sectors could unlock huge opportunities. The government has already made a liberal and transparent policy for investment from NRIs.Commenting on Government policies, C Shekar Reddy said, “The government policies concerning the property investment and repatriation have been favourable to encourage NRI investments. NRIs can get residential or immovable property in the country, transfer or sell it. If required, they can even rent it out without any difficulty. HFCs (housing finance companies) and banks are permitted to fund up to 80 per cent of the property value as loan to NRIs at attractive interest rates. NRIs can avail tax deduction on the amount paid toward the interest on the home loan (no ceiling of Rs.150,000) from their taxable income in India. These policies and benefits make it lucrative for NRIs to invest in real estate in India.”
According to Deep Kantawala, “The Indian real estate market and the developer fraternity, at large,have matured as well as professionalised. They are working toward delivering to the expectation of all stakeholders. The lead here, of course, has been taken by the government, which has announced a string of measures to make the sector more transparent and attractive for foreign investment.”
As 100 per cent FDI is now being allowed in Indian real estate, big international investors are showing interest for property investment in India. The Indian real estate India is likely to enjoy great FDIs for at least few years which would hugely help for development of country’s economy.
Moving toward globalisation and liberalisationReal estate investing has become globalised. The Indian economy, especially real estate sector, is high on its ride to prosperity and continuingly moving toward liberalisation and globalisation. As a huge growth of Indian economy, Indian real estate market is accelerating toward maturity with increasing participation from prominent domestic as well as foreign investors, rising investor interest and a market-friendly approach. Indian real estate has high potential demand in almost every sector, especially residential, commercial, retail, industrial and healthcare.
The pace of globalisation of the real estate market continues to increase. Recent years have seen growth in the number and value of purchases of Indian real estate by investors from foreign countries.
The rupee’s devaluation and government’s policy changes on FDI are good news for the investors in India. The growth curve of the real estate sector owes some credit to a booming economy and liberalised FDI regime.

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