Wednesday, June 25, 2008

Real estate FDI inflow up nearly five-fold

- Chellamuthu Kuppusamy
Quite understandably there are reports on surging inflation, increasing interest rates and the potential impact on housing sector etc flowing across. This, along with FIIs pulling out from Indian equity market, is not surprising indeed. But here is an interesting piece of information that goes against this theory. FDI investment in real estate sector has increased nearly five-fold this year.

Courtesy: Hindu business line.

New Delhi, June 24"
The Indian real estate and housing space emerged as the darling of foreign investors in 2007-08, clinching FDI equity inflows of about Rs 8,749 crore, a near five-fold increase over FY07.
“The investors have seen that the real estate potential in India is huge. The returns are quite attractive. In fact, we see the trend picking up even further this year as the prices are getting more attractive for investors,” Mr Ramesh Sanka, Chief Financial Officer at DLF said.
Late last year, DLF Ltd had sold 49 per cent stake in eight residential project SPVs to private equity investors for a total consideration of Rs 1,675 crore.
A Merrill Lynch & Co entity had bought 49 per cent equity in seven residential projects in Chennai, Bangalore, Kochi and Indore for Rs 1,481 crore. The company — headed by Mr K.P. Singh — has also diluted 49 per cent stake, in another middle-income housing project in Panchkula, Haryana, to Brahma Investments for Rs 194 crore.
According to data released by the Government on Tuesday, the real estate sector, thrown open in 2004-05, saw the FDI picking up significantly between FY05 and FY08; it was Rs 171 crore in 2005-06 surging to Rs 2,121 crore in 2006-07.
“Over the last three years, there has been a build-up in investor interest. We saw the impact of that interest and euphoria for FY07 and FY08 as new townships and projects were announced. Depending on the asset class within real estate sector, the average rate of return stood at 25-35 per cent for India, against a global average of single digit return,” Mr Sanjay Verma, Executive Managing Director, South Asia, of Cushman & Wakefield said.
“However, at the beginning of the current year we have seen some asset bubble deflation. With prices moving southwards, choppiness in the stock markets, pressure on interest rates and global issues, while deals will still happen, pricing will be the question,” Mr Verma added.


Realty Rider said...

Real estate industry in India is presently worth $12 billion and is growing at the rate of 30 per cent per annum. The importance of real estate sector in India can be gauged from the fact that it is the second largest employer next only to agriculture.With growing opportunities, major asset management firms from abroad are investing in the local Indian market. India is poised as the most favorite FDI destination in South East Asia, outpacing China. The real estate market in India is flooded with overseas funds. FDI in India is expected to increase to US$15 billion this year, triple the 2004 figure.With the amendment of the Indian government in March 2005, FDI was relaxed up to 100 per cent in the construction business. This amendment has cleared the path for foreign investment to meet the demand into development of the commercial and residential real estate in India. It has also encouraged several large financial firms and private equity funds to launch exclusive funds targeting the real estate sector.For more view-

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