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100 percent FDI in real estate into consideration by the government

100 percent FDI in real estate into consideration by the government

A long-standing demand of the real estate industry to allow 100 percent foreign direct investment (FDI) for completed residential projects with occupancy certificates (OC) is finally being into consideration by the government. The Ministry of Commerce and Industry is considering relaxation in the FDI policy for the real estate sector of RERA registered completed projects with over 100 housing units.

The consideration by the government for relaxation comes amidst coronavirus induced lockdown, economic slowdown, and lack of liquidity for real estate. This will help realty players to tide over the economic slowdown by monetizing their completed projects. The 100 percent FDI into completed projects will allow real estate developers to focus on pending residential projects that are mainly stalled due to a shortage of funds.

The real estate sector in India went through rough weather for the last couple of years due to liquidity crisis and subdued demand. Almost 80% of real estate in India is residential space, while the rest constitutes office space, shopping malls, hotels, and hospitals. Earlier FDI in the real estate sector was not allowed, except for non- resident Indians and overseas corporate bodies. The central bank of India allowed FDI investment with certain terms and conditions for the first time during 2005.

Since 2005 India’s real estate sector has received more than USD 25 billion in investment and whereas between 2015-2019, the industry has received USD 16.6 billion worth of foreign direct investment, an astounding jump of 84.4% was registered in FDI investments that flowed into the country in 2005-2014.

The real estate sector since 2015, has witnessed several big-ticket incomes yielding investments into commercial and retail assets. During this period sector has registered entry of several renowned fund houses like Canadian pension funds, Blackstone, Singapore-based funds such as GIC, Ascendas, & Xander, and others.

Several industry leaders and experts are viewing this policy change as a big game-changer for the real estate sector. The kind of real estate inventory volume available, subdued demand and economic slowdown, the proposal has tremendous advantages that could turn around the real estate sector and Indian economy.

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