FDI in Real Estate

Real estate industry, in India, is growing at a whopping rate of 30% for last few years. According to the survey by FICCI, the magnitude of real estate industry in India is of US$ 12 billion. The double digit growth of this industry is primarily ascribed to the BPOs, Call centers, Retail industry and other IT industries. In India, 80% of the real estate developed is residential areas and rest 20% includes office spaces, shopping complexes, hotels, and hospitals. Policy makers have recently decided to stress on flourishing proper infrastructure for the country. In this process, they have decided to liberalize the FDI policies to attract large investments.

In recent time, the progressive economic policy on FDI norms has been the most significant decisions taken by central government. Prior to it, only NRIs and persons of Indian origin were allowed to invest in the real estate & housing sectors. Foreign investors were allowed to invest in integrated townships and settlements only. They were permitted to invest either through a wholly owned subsidiary or through a joint venture company in India along with a local partner. The ultimate effect of all these restrictions on foreign investors was the slow rate of expansion of infrastructure.

Rise of Indian Real Estate
Indian Real estate has been on rise from last few years. The total amount of FDI inflow has been continuously increasing and along with it the percentage of FDI in real estate sector is also increasing. The total FDI has manifolded almost four times, from US$ 2.70 billion to about US$ 8 billion, during the financial period of 2003-07. This sudden boost in real estate FDI is mainly due to the progressive government norms. Here is the tabular form of the data of total FDI in India and the percentage of real estate sectors in FDI.

Financial Year	Total FDI Inflow	Real Estate Percentage in Total FDI
2003-04	US$ 2.7 billion	4.5%
2004-05	US$ 3.75 billion	10.6%
2005-06	US$ 5.46 billion	16%
2006-07	US$ 8 billion	26.5%

Advantages of FDI

• The biggest advantage of FDI in the real estate sector would be towards making this sector organized.
  
  
• Arrival of major investors will help in increasing professionalism.
  
  
• A healthy and competitive market environment will be created for domestic as well as foreign investors.
  
  
• With the entrance of foreign investors, it will be easier to use the latest and superior technology which will definitely help in increasing the quality in real estate.