India of today can be acknowledged as the one of the fastest growing economy in the world and in this current economic status, real estate has emerged as one of the most appealing investment areas for domestic as well as foreign investors. And this high growth curve in the real estate sector owes some credit to a booming economy and liberalized Foreign Direct Investments (FDI) regime in the real estate sector.
FDI inflows into India rose 13% on year in FY20 to a record $49.97 billion compared to $44.36 billion in 2018-19. In 2019, FDI flows to the region declined by 5%, to $474 billion, despite gains in South East Asia, China and India, according to the Geneva-based organisation.
India currently allows 100% FDI through the automatic route in construction-development projects — townships, residential and commercial buildings, roads, bridges, hotels, resorts, hospitals, educational institutions, recreational facilities and city and regional-level infrastructure. This is subject to conditions such as a three-year lock-in period before the original investment can be repatriated.
FDI into India rose 13% to a record $49.97 billion in FY20 from $44.36 billion a year earlier.
Foreign Direct Investment : The construction industry makes up for a major part of India’s GDP. Being a significant contributor to the GDP of India, the industry acts as a gateway for more opportunities. Investment in the construction industry in India, therefore, directly leads to the country’s economic development. The Construction industry in India consists of the real estate as well as the urban development segment. The Real estate segment covers residential, office, retail, hotels and leisure parks, among others, while urban development segment broadly consists of sub-segments such as Water supply, Sanitation, Urban transport, Schools, and Healthcare.
International real-estate developers have long looked forward to investing in India. But with the global market in a slump for the past few years, the opportunities were fewer. Now, as new overseas developers show interest, investing across sectors, the scene seems to be gearing up again in Indian residential, commercial, industrial, logistics, retail and warehousing.
In mid-August, Japanese property firm Sumitomo Realty bought a three-acre plot in Mumbai’s Bandra-Kurla complex. Last year, Australian firm LOGOS ventured into the warehousing sector, Singapore-based Assetz invested in logistics and residential real-estate and Dubai’s Danube Home introduced its home interiors services.
big firms are making their presence felt in India too. These include the Trump Organization, which has launched properties in Pune; Dubai-based Emaar Group (which built the Burj Khalifa), and Hong Kong-based Risland Holdings, which is developing commercial hubs, townships and office spaces.
By 2025, Construction market in the country. is expected to emerge as the 3rd largest globally and the construction output is expected to grow on an average of 7.1% each year. An enhancement in the construction industry will directly have a positive effect on other industries like cement, technology, steel, etc. The development of a nation is recognized through its infrastructure. FDI in the construction department in North India will bring with it new possibilities to uplift the construction industry.
100% FDI in construction development sector under automatic route is permitted in completed projects for operations and management of townships, malls/shopping complexes, and business constructions.
100% FDI in real estate in India is allowed under the automatic route for urban infrastructures such as urban transport, water supply and sewerage and sewage treatment.
LATEST INVESTMENTS INTO THE INDIAN ECONOMY : In June 2020, Jio Platforms Ltd. sold 22.38 per cent stake worth Rs 1.04 trillion (US$ 14.75 billion) to ten global investors in a span of eight weeks under separate deals, involving Facebook, Silver Lake, Vista, General Atlantic, Mubadala, Abu Dhabi Investment Authority (ADIA), TPG Capital and L. Catterton. This is the largest continuous fundraise by any company in the world.
In January 2020, Amazon India announced investment of US$ 1 billion for digitising small and medium businesses and creating one million jobs by 2025.
In January 2020, Mastercard announced its plans to invest up to US$ 1 billion in India over the next five years to double its research and development effort in the Indian market.
In October 2019, French oil and gas giant, Total S.A., acquired 37.4 per cent stake in Adani Gas Ltd for Rs 5,662 crore (US$ 810 million), making it the largest FDI in India’s city gas distribution (CGD) sector.
In August 2019, Reliance Industries (RIL) announced one of India’s biggest FDI deals with Saudi Aramco to buy a 20 per cent stake in Reliance’s oil-to-chemicals (OTC) business at an enterprise value of US$ 75 billion.