New investor-friendly rules that pursue foreign funds

Q: Foreign investments in Indian real estate fell 38% to $758 million in the year ended March 31.

Kunal,

5th January 2016

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Replies (4)

But the early foreign beginner took that risk even though the DIPP never clarified the definition. That meant their investments could be questioned after they were committed. Last year, the DIPP finally came out with a definition for ''greenfield'' by saying that it was any project that had secured ''initial approvals.''

Praveen Modi, Mumbai

5th January 2016

Comment

I hope that the increase in foreign direct investment is likely to bring more transparency, and also resulting in timely possession of projects and improved construction quality with access to better technologies. I expect investments will pick up over the next 2-3 yrs along with the expected improvement in demand.

Ravindra Singh,

5th January 2016

Comment

You are right Ravindra,
And this new rule changes included another friendly clause i.e. the lock-in period for investors was reduced to 3 yrs or upon project completion if it happened earlier. This allows investors to exit even if the project is stuck and encourages efficiency by rewarding those that finish projects early.

Suresh,

5th January 2016

Yes, and the minimum risks associated with fully completed prime-area buildings should inspire the interest of investors, as private equity funds that have invested money into the sector in the past have earned a post-tax Indian rupee return of as much as 15%. This compares with 2.25% that a 10-year U.S. government bond brings currently.

Ravindra Singh,

5th January 2016

And the previous rule were non-transparent too. When the Department of Industrial Policy and Promotion, or DIPP, which plans the regulations for foreign investments, first came out with the ''greenfield'' condition, it never defined which projects could fall under that category.

Suresh,

5th January 2016

Today India is getting a big platform as every role so every NRI want to invest here and also want to start their business here.

vj,

5th January 2016

Comment

Hi VJ,
It is a good news that foreign investors are planning to invest in India. Foreign Direct Investment in India is expected to be 3488.08 USD Million by the end of this quarter, according to Trading Economics global macro models and analysts expectations.

Rakshit, Mumbai

27th January 2016

Yes, and the Indian government's favourable policy system and strong business environment have ensured that foreign capital keeps flowing into the country. The government has taken many initiatives in recent years such as relaxing FDI norms across sectors such as defence, PSU oil refineries, telecom, power exchanges, and stock exchanges, among others.

Bikram, Mumbai

27th January 2016

This move will likely boost overseas fund flows into a sector struggling with project delays and weak demand, as the changed rule have been the most investor friendly since the industry was opened up about a decade ago.

Ravindra Singh,

5th January 2016

Comment

Yes, the new rules that became effective on Nov. 24 finished the need for a minimum fixed project size and did away with a regulation that specified foreign entities could only invest in the so-called ''greenfield'' projects.

Investors have been shying away from Indian real estate as the industry is struggling with project delays between a complicated approval process involving many authorities. That led to a flop in demand, as buyers were worried about their investments getting stuck in delayed projects. A flow in interest rates till the middle of this year also hurt prospective investors as well as builders.

Suresh,

5th January 2016