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Fund attack
on Indian Real Estate
By Sharad Matade
Over the past decade, India
has emerged as a leader in the global economy. India has succeeded to
attract foreign investors. Many foreign investors are expanding their wings
in India. Global giants like ELI Lilly, General Electric, and Howlett
Packard have set up their research and development facilities in India.
Real estate is one of the
fastest growing industry India. The industry has an appropriate linkage with
other industry. Around 250 industries are working with this industry.
The government has permitted
100 per cent foreign investment in the construction sector for a three years
period. The government has also reduced the minimum size, based on feedback
from prospective investors. These positive steps have opened the door for
foreign investors to make strong Indian economy . Real estate industry
always play a vital role to grow economy of any country . Singapore and Hong
Kong are cites of the countries, in which real estate played major role to
construct their economy. For example, it accounts for about 8 per cent of
UK's GDP , 16 per cent of Ireland's and 11 per cent of Dubai's. The real
estate was prime operator of the notable 16 per cent growth in Dubai's GDP
in 2004.
In India, real estate
contributes 6 per cent to GDP, which is not so bad but not good enough. The
industry has also make major part to set up basic infrastructure.
Foreign investors are more
interested to invest in commercial than residential projects. Because
commercial projects are easier to sell to institutional buyers than
individual buyers. FDI would be about $ 8 billion , of which the share of
the sector is estimated at 26.5 per cent against 16 per cent in 2006.
according to recent survey, Indian real estate market will grow more than
three times to reach $ 60 billion, of which foreign investors will
contribute around $ 25- 28 billion. The government has lucrative policies
for foreign investors. Major foreign investors like Indian Raj, Goldman,
Sach's Blackstone and Emmar Properties have announced plan to invest in
India. FDI would provides employment for over 2 lakh youth.
The demand for office space
have grown for around 19 million sq ft 2006-07 from four million sq ft in
1999-2000. by 2010, IT and Business process outsourcing sectors will demand
for 200 million sq ft in major metros. According to findings, the biggest US
Penssion Funds, CalPERS, hedge fund Fasallon Capital Management , US based
developer Tishman Speyer and NRI fund Trikona Capital too have drawn plans
to invests in the real estate. Domestic players like HDFC , Kotak Realty
Fund, India Real Estate Fund, India Real Estate Fund and UTI venture Fund
were also very active. Even around 25 million Non Residential Indian (NRIs)
, living across 125 countries are investing in major cities and hill
station. They are investing in residential properties than commercial
properties.
In India, major developers
like DLF, Parasvnath Developers Limited , Omeax have came up with Initial
public offers. Even Global big name such as Morgan Stanely, Lehman Brothers,
HSBC and ABN Amro are ready to pick up stake in local realty firms. And they
have also been acclaimed with cheer.
The government has allowed 100
per cent foreign investments in construction projects with fast -track
approvals. But real butter for foreign investors of potential returns of 25
per cent and more in Indian projects that might be hard to come by in the US
and western Europe today. According to industry sources, around 100 foreign
investors have stepped in Indian investment market.
The raising the funds include
Wall street powerhouse such as the Blackstone Group ( US$ 1 billion), Gold
Man Sach's (US$ 1 billion), Citi Group Property Investors (US$ 125 million),
Morgan Stanley (US$ 70 million) and GE commercial Finance Real Estate (US$
63 million).
Funds and investments in
Indian Real Estate will do nothing good to the direct property purchasers.
These will fuel in further enhancement of property price in the country. The
norms of FDI slapped to FII and other Hedge Funds was a right move by the
Indian government which makes these funds committed for at least 3 to 5
years. What happened in Korea and what is going on in US with Sub-prime rate
is the prof that we must take these funds and their expectations very
seriously.
Major projects cleared by FIPB
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Dubai based Emmar USD 500.0
million
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CESMA Intt Pvt Ltd with AP
Govt- township project at Hyderabad and Vijaywada
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Jakarta based Salin group
USD 100.0 million project at Kolkata.
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Lee Kim Tah holdings ,
Singapore USD 155.0 million project at Chennai.
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IJM's USD 350.0 Mn project
at Mohali, Chandigarh.
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Keppel Land , Singapore 's
USD 13.0 million land acquisition at Bangalore for condominium project in
JV with Purvankara
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Capital Land's investment
with Runwal Group , Mumbai
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Morgan Stanley's USD 70
million in Mantri , Bangalore.
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