Blend of Regulatory Norms and Growth of Indian Real Estate

The Corridors by Ireo – Gurgaon’s Sector 67A

The Corridors by Ireo – Gurgaon’s Sector 67A

Irrespective of the sluggish economy and the subsequent liquidity crunch in the market, Indian realty sector has been expanding the scope of its operations in all sectors of construction. It has considerably remained insolent to the anxiety triggered by continuous fall in the value of rupee and the retraction of foreign investments. Over the last decade, FDI and NRI investment pools have persistently found their channels into the Indian construction business.

Considering the negative sentiment in the commercial arena and the blocks in the manufacturing output in the economy, the Indian government is contemplating to relax the FDI norms in order to attract a larger quantum of foreign investments in the realty sector. From minimum built up area requirement to be condensed and minimum lock-in period to be redefined, the govt. envisions to bring down the minimum investment requirements in the field of foreign investments.

In the present day, a minimum 10 hectares of land shall be owned in order to develop housing plots and the construction of apartments through FDI investments needs to have a minimum total built up area of 50,000 square meters. So in accordance to the prerequisites mentioned above, 100% FDI is permitted through the automatic route in realty only along with certain riders. Therefore, in order to induce liquidity in the realty ecosystem and smoothen the investment channels, the government is planning to execute few vital reforms.

Read more: Silicon India

Realtors from South make inroads into high-growth NCR

Some major property companies based in South India, such as Puravankara and Sobha Developers, are spreading their wings in the high-growth National Capital Region market.

Puravankara Developers plans to bring its Provident brand in NCR–Gurgaon soon. Sobha Developers is constructing a luxury project at Dwarka Expressway and has regional expansion plans.

Sobha has also planned new project launches in Kochi and Kozhikode. It has many projects on at Chennai and Bangalore.

Jackbastian Nazareth, chief executive officer of Puravankara, told Business Standard the company was evaluating various proposals to enter new areas, including NCR, in a ‘joint development mode’. It already has a sales office in Gurgaon. The plan is to bring its Provident brand across the country. “Affordable for customers and profitability for us,” is how Nazareth defines his ‘premium affordable’ concept. Puravankara recently launched Purva Skydale, spread over 4.2 acres, in Bangalore. It is to soon come up with ‘Manhattan Condos’ in Chennai.

“Being present in NCR will give them a bigger brand, which will be recognised by all. Besides, it is such a big investor market; you have to be present in the North markets to have a wider reach,” said a person tracking the sector.

Read more: Business Standard

Property market not to gain from curbs on overseas investments

Recently, the Reserve Bank of India reduced the permitted amount of annual remittances through the Liberalised Remittance Scheme (LRS) to $75,000 from $200,000 and also prohibited overseas property investments.

Data from RBI show that there was an outflow of $1.2 billion in fiscal 2012-13 under LRS and only six per cent ($78 million) was used for property purchase.

While this may not seem like a large amount, outflows have shot up 100 times, from around $10 million when the scheme was introduced in FY05.

So where is this Rs 533 crore that went towards home purchases abroad likely to flow now? Given that the Indian real estate market beat most overseas markets in the last few years, it may seem that the local market will benefit from this, but experts disagree.

No substitute

“Overseas investments are viewed as a geographical market diversification as well as a currency diversification,” says Ajay Bagga, Head – Private Wealth Management, Deutsche Bank India, “while domestic property investments are for personal end use or for investments”.

He recommended overseas mutual funds offered by leading fund houses to achieve currency and markets diversification.

Sumeeth Vaid, Founder and CEO of Ffreedom Financial Planners, agrees that domestic and overseas property purchases are not inter-changeable but believes that property should be viewed as a goal rather than as a part of asset allocation.

Read more: Business Line

House prices tumble as buyers delay purchases

Drop in residential property prices may have been a buyer’s dream till recently, but now it is as real as it can get. Although the real estate industry is still somewhat in denial, a recent survey by the National Housing Bank (NHB) has thrown up transaction data from banks and housing finance companies to establish that property prices have indeed dropped in most parts of the country.

NHB Chairman and Managing Director RV Verma tells Business Standard that the study, according to which 22 out of 26 cities have seen downward movement in residential property prices in the period from April to June compared to the previous quarter, is scientific as it’s based on live transactions.

The industry is dismissive. “Who says prices are down? No such thing (has happened) in the primary market,” counters an analyst. Indicating that the Diwali rush is round the corner, a broker says many launches and deliveries have been planned around that time.

But, if Diwali is what the real estate industry has been hinging its hopes on to bring about a revival, the window of opportunity has suddenly shrunk. A large number of offers that have been in the making for months and are now ready to be lined up for the festival season must be reviewed and redone. That’s because the Reserve Bank of India struck down the 80-20 subvention scheme last week in a move that is being viewed as a spoiler for the sector which is already down. In the 80-20 scheme, the buyer pays only 20 per cent of a property’s cost upfront and until the house is handed over to the buyer, the builder pays the equated monthly installments to the bank.

Read more: Business Standard

Rupee gains for a fifth day; corporates sell dollars

The rupee rose to a three-week high on Wednesday, extending gains for a fifth session, with corporates selling the dollar as the currency continued its recovery.

The rupee’s sharp recovery has been aided by the easing of geopolitical concerns, with an attack on Syria appearing less imminent, and the announcement of a series of steps to attract inflows by the new central bank governor, Raghuram Rajan.

Dealers cited large dollar inflows from a private petrochemical company as well as some likely dollar selling related to Mylan Inc’s $1.6 billion deal to acquire a unit of Strides Arcolab Ltd.

Foreign institutional investors (FIIs) bought $421.15 million worth of shares on Tuesday, bringing their total to nearly $800 million over the previous four sessions.

“The panic dollar buying has reduced. Those who were sitting on the sidelines hoping for further falls in the currency have started selling. I expect the rupee to recover to 61 to the dollar,” said Satyajit Kanjilal, chief executive at ForexServe.

The partially convertible rupee closed at 63.38/39 per dollar compared with 63.84/85 on Tuesday. It rose to 63.0575 in session, its best level since Aug. 19.

Read more: Hindustan Times


Foreign varsities get independent access to India

The government has decided to allow foreign universities to operate independently in India, set up campuses and offer degrees without having a local partner—a move that finally opens the gates for foreign educational institutions seeking to establish a presence in the country.

To foreign universities, the move presents an opportunity to tap a country with a population of 1.2 billion. To Indians (at least those who can afford it), it is an opportunity to receive quality education without leaving India (and without paying in dollars). And to India, it could mean significant foreign direct investment.

The department of industrial policy and promotion (DIPP) and the department of economic affairs (DEA) have agreed to allow overseas universities to operate as so-called Section 25 or non-profit companies under the newly passed Companies Act, the human resource development (HRD) ministry said on Tuesday.

Companies registered under Section 25 of India’s Companies Act cannot distribute profit or dividends to members, which means that the foreign universities cannot repatriate money—a constraint that was criticised by at least one expert.

Read more: Mint

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