FDI in real estate takes a dip by 60%
Ever since 2005 when FDI in real estate was allowed up to 100%, the Indian real estate Industry has been on a roller coaster ride.Consequent to the government’s nod, to give vent to FDI into the realty sector, development and investment activities in the country has hit an all time high. However, the recent FDI scenario in the country has cast a black shadow on the realtor’s community.
The recent decline of FDI into the service sector by a whopping 60% to USD 1.59 billion in the initial 9 months of the financial year 2014, has perhaps devoid the developer’s community from all the reasons to be happy. The service sector, which comprises of insurance, banking, Research and Development, courier and technology testing, outsourcing etc. received with open arms foreign direct investments worth USD 4.04 billion in the April-December 2012, as per the DIPP. This clearly indicates a steep fall in FDI in the nation.
Impact of the drop in FDI
Going by the market data, a dip in FDI in services has adversely affected the overall foreign inflow in India by 3% to USD 22 billion in the 9 month tenure. To make matters worse, the upcoming elections in the country have further stalled the potential foreign investors to enter the Indian market. Foreign investors intend to make a safe move after a new government is formed in the country.
Foreign investment is an important life support for the Indian economy,which is in dire need of USD 1 trillion to shape up infrastructure in the country like airports, ports, and highways to boost the growth and development program in the nation in the next 3 years. Hence, a decline, even a marginal one, will put the future growth plans of the country, along with balance of payments and rupee on thin ice.
How FDI impacts the real estate?
Numerous Indian market sectors have registered a significant boom and much of it can be attributed to the investment made on account of relaxation of rules and laws which have been implemented on the FDI in India by the government. Consistent endeavors by the Indian government and liberalization of policies are expected to open doors to the construction firms.
As per the proponents of the Indian Construction segment, the realty sector is one of the major contributors of the Indian economy. 100% FDI, the government initiative taken few years back, has lured foreign investments in bulk, to areas where there is possibility to offer employment opportunities, thereby adding to the built-up infrastructure and available housing stock. According to key consultants, the year 2014 is likely to evolve into a defining moment for the construction industry, provided measures are taken to revive the FDI inflow.
