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In the times to come, the real estate India market may undergo some such changes, after which while the mode of marketing in this area will be changed, the investment in property will not be a profitable deal. Now trends of investment in property market were also discussed during the meeting of an investors club recently.
As told by the general secretary of the club as well as a renowned advisor of tax and investment, Mr. Subhas Lakhotia that with the increase of FDI volume, the concept of pre-launch will be a matter of past. Simultaneously, annual return of 24-36% by way of investment to buy property in India will also be reduced.
In his opinion it may be the reason that the real estate India market will be flooded with money and it will reduce the difference in demand and supply.
As per the views of Lakhotia, bloc investment in real estate India may be better in changed scenario. He suggested that the whole investors should gather at one platform and invest in real estate collectively. In his opinion, investment in bloc deal of land in tier-III cities only may be beneficial that too by imposing a three years lock-in period.

Today the hottest topic is increase in rate of interest for home loan. Before increase in interest rates, the constant increase in property price was the main theme of the real estate India market. Now costly home loan over the increased price of property in India has troubled the buyers. A group of property market experts agrees that the costly home loan era will prevail for a longer period, whereas as per the views of the other group, the increase in interest rates may not continue for a long time. The government has adopted the traditional formula to control the rising cost by increasing the CRR that now does not look very practicable. The dearness cannot be controlled by removing the money form the real estate India market but it is necessary to increase availability of goods, many economists are also of the same opinion.

Real Estate India has seen a tremendous positive change in the last decade. Today, Indian construction industry enjoys a substantial presence in the world and has reached a niche where there is no going back. Escalating GDP, improving demographics, growing affordability, and rising impact of IT and ITes are some of the factors that are believed to have fuelled the growth.

 

The booming real estate India sector is all set to witness a cumulative investment inflow of around $435 billion in the next approaching years, says a report by Edelweiss Securities.

 

Further, data showcased by known property surveys have come up with results that the real estate India is all set to see an average annual addition of 2.3 billion sq ft in residential, 61 million sq ft in office and 25 million sq ft in retail space. This makes a total of 33% increase in total constructed area five years down the line.

There are going to be several factors that are likely to pave the way for large scale capital inflow from FDI, private equity and real estate funds. The list of features includes chunks of large scale land acquired by some known names in the real estate India sector, government incentive for public private partnership models and high amount of bank finance.

 

The report further forecasts and estimated investment of approximately $396 billion for the housing segment alone over the next few years, with a yearly investment of $83 billion. Likewise, the expected investment for the commercial sectors is around $27 billion with an annual investment of $5 billion and retail with $13 billion (annual investment of $3 billion), resulting in a total investment of $435 billion. This indicates a good growth in buy property in India.

 

Standing for 91% of the overall real estate India activity in
India, Housing sector alone acts as the principal growth driver. The nest biggest segment is commercial space, with 80% of the demand sprouting from mushrooming IT/ITes sector.

At present, the government allows FDI in real estate India, but does not permit foreign institutional investment. It is, however, considering a proposal not to view FDI and FII as distinct investment flows while specifying an overall limit.

It is yet to permit foreign venture capital investors (FVCI) in the realty sector. To ensure that the concept of special economic zones (SEZs) did not distort the realty market, the RBI has classified lending to SEZs on par with commercial real estate, according it higher risk weight and provisioning.

The RBI allows ECB in real estate India projects involving integrated townships of 100 acres or more. In real estate India projects, a large portion of money is required for land acquisition, which is classified as working capital. But end-use restrictions like not allowing ECB money to be used for working capital take away its attractiveness.

Previously, only NRI’s and PIO’s were allowed to invest in the housing and the real estate India sectors. Foreign investors other than NRIs were allowed to invest only in development of integrated townships and settlements either through a wholly-owned subsidiary or through a joint venture (JV) company along with a local partner.

India fully opened FDI in real estate India in 2005. However, norms issued later made a minimum capitalization of $10 million for wholly-owned subsidiaries and $5 million for joint ventures mandatory. The government also imposed a minimum area requirement. 

The department of industrial policy and promotion had in March 2005 allowed FDI in real estate India in projects in a minimum area of 25 acres.

The finance ministry has allowed external commercial borrowing (ECB) in realty projects involving integrated townships of 25 acres or 50,000 sq m. However, the Reserve Bank of
India has not yet notified it.

Any ethical professional will insist that the first rule of investing is to diversify your portfolio regarding real estate India and other Countries. Generally no more than 30% of available investment funds should be allocated to any one category. Stocks, bonds and other savings instruments usually form one leg of a many pronged platform. Direct commodity investing is a highly risky venture, usually safe only for the savvy investor who has time to closely monitor the market. Options, commodity oriented mutual funds and other indirect investments are less risky, but still far from wise for the average person.

So what else is there? For many, real estate investment is an essential part of a well-rounded portfolio.

If you want to include “paper” in your investment scheme, real estate India or other countries offers several opportunities. REITs (Real Estate Investment Trusts), options, property oriented mutual funds, and other mortgage backed securities are available in a dizzying array.

REITsof India or other countries are entities that invest in real estate India or their respective countries related assets, such as shopping centers, office buildings, hotels, and mortgages secured by real estate. REITs fall into one of three categories. Equity REITs, which invest in or own real estate like real estate India for
India and make money for investors from the rents they collect. Mortgage REITs which lend money to owners and developers or invest in financial instruments secured by mortgages on real estate and Hybrid REITs which are a combination of the two. To qualify, a company has to pay 90% of its taxable income to shareholders every year and invest at least 75% of its assets in real estate and generate 75% or more of its gross income from investments in or mortgages on real property.

 

Foreign Direct Investment is encouraged and permitted, subject to certain conditions, in the following real estate India sectors:

·         Hotel Development

·         Tourism

·         Hospitality

·         Township development

·         Developing Commercial Real Estate

·         Built-up infrastructure

·         Housing and construction projects

·         Building Resorts

·         Building Hospitals

·         Building Educational institutions

·         Building Recreational facilities

·         Infrastructure projects: regional and local level

·         Special Economic Zones (SEZ’s)

 

So foreigner can take the advantage of these facilities available in real estate India sector

Investment in housing and property is beset with many uncertainties in the prevailing real estate India scenario. The investment and transaction decisions in this sector are characterized by uncertainties due to low level of disclosures and information.

 

Investment in property has always been known as lucrative, but due to lack of transparency in the property markets for proper valuation, potential investors exercise caution before taking the plunge. Real estate India also requires a huge amount of investible capital; hence professionalism would help bringing in confidence among players.

 

Discipline and better governance of the real estate India business would go a long way in a sector facing challenges from legal, taxation and other regulatory issues like the property tax and stamp duty structure, which create high cost of transactions.

 

Courtesy: TOI Dated 15/04/07