FDI inflow in realty builds up to $3 bn in H1
The real estate sector has attracted FDI worth $3bn in the first half of ’06. This is the highest ever FDI inflow into the Indian real estate sector. Total FDI inflow into the country in FY06 was $7.5bn.
By Sudipto Dey, TNN |
NEW DELHI: The real estate sector has attracted FDI worth $3bn in the first half of ’06. This is the highest ever FDI inflow into the Indian real estate sector. Total FDI inflow into the country in FY06 was $7.5bn.
The Dubai-based Emaar Group is perhaps the biggest FDI contributor in the country, with the bulk of its $850m investment coming in the first half of this calendar year.
Other big ticket FDI inflows included Morgan Stanley Real Estate, investing Rs 300 crore in Alhpa G Corp, US-based Siachen Capital buying stake in Bangalore-based Nitesh Estates for $100m, and UK’s Liberty International which picked up 25% in Prozone Enterprises for Rs 202.5 crore to develop large format shopping centres.
However, India’s share in cross-border real estate investment is still small. Global cross-border real estate investments in the first half of ’06 touched $290bn, and this figure is expected to reach $600bn by the year end, according to estimates by realty consultancy Jones Lang LaSalle.
Foreign investment rules in India currently limit cross-border investment to development projects and impose a minimum capitalisation of $10m. FDI is allowed under the automatic route only for projects under development or greenfield projects with a minimum size of 50,000 sq metres.
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The minimum investment in case of a joint venture is $5m. Invested capital can only be repatriated after three years while sale of underdeveloped land is not allowed. Therefore, despite getting record FDI flow real estate, India does not feature among the leading destinations in Asia, which includes the likes of Japan, China, Hong Kong, Singapore and Thailand. China attracted $5bn worth of FDI in real estate in the first half of ’06.“Indian real estate will be popular once foreign investment regulations are relaxed,” said the Jones Lang LaSalle report. Industry analysts feel the country will end with total FDI inflow in the range of $4-4.5bn by the end of ’06.
“India is still a maturing market and it takes a longer time to close a real estate deal,” said Mridul Upreti, head, corporate finance and investments, Jones Lang LaSalle. It generally takes 5-6 months to close a real estate deal in India, against 2-3 months in developed markets.
Direct commercial real estate investment in the Asia Pacific market totalled $43bn in the first half of ’06, up 40% from last year. Cross-border investment represented 29% of total investment, up 28%, and inter-regional investment reached 18% of total investment, up 15% over the same period last year.
Japan now accounts for 51% of total Asia Pacific transaction activity, with Australia (12%), China (11%), Hong Kong (10%), and Singapore (7%) accounting for 40% of the transactions.
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