FDI in realty dips to lowest in four years
TNN
Sep 20, 2011
MUMBAI: Foreign direct investment (FDI) in India's real estate has dipped and is at its lowest in the last four years, said a FICCI-Ernst & Young report, which will be released later this week.
Of the overall FDI of Rs 1.70 lakh crore ($37.8 billion) in 2008-09, investments in the country's real estate comprised 3.36%. By 2010-11, it dipped to 2.97% against the total FDI of Rs 1.21 lakh crore ($ 27 billion), said the report. Interestingly, private equity in Indian real estate between January and June 2011, reached $444 million (over Rs 2,000 crore), which is 47% higher than the investments made in 2010 during the same period.
The report titled, "A new realty: Dissolving borders through cross-border integration", said pricing is set to go up. This is because the cost of the raw material has increased drastically, putting pressure on the profit margins of developers. "RBI continues efforts to curb inflation, which has prompted it to increase interest rates 12 times since March 2010. This would not only increase the equated monthly installment (EMI), but also increase the cost of construction, ultimately impacting the selling price of apartments," it said.
Between March 2009 and November 2010, developers sold more than 40 million sq ft of mid-income residential property in the National Capital Region (NCR) region alone. However, beginning 2011, the focus reverted to luxury housing. "The tightening liquidity has once again caused developers to focus on affordable housing," it added.
Oversupply of commercial property will continue to impact its growth. "Bangalore is set to witness increase in rental due to lowest vacancy rate and oversupply, while Noida may not experience an increase in rentals due to high vacancy rates. Mumbai and Delhi are the undisputed leaders in all forms of real estate, but due to scarcity of land, rising rentals and capital value, developers and industries are targeting Kolkata, Pune and cities such as Mysore, Chandigarh and Jaipur," it said.
Said Rajiv Kumar, FICCI secretary general, "India, raring to be an economic powerhouse, with a stable political environment, was quick to find its footing during the global recession. On the residential front, the sector will face significant shortage of homes for the mid-income group, and this has become a priority for the Government."
"Real estate prices have peaked, exceeding the pre-recession rates in some markets," said Ajit Krishnan, Partner & Real Estate & Infrastructure Leader, Ernst & Young. "The peak in 2007 set about a new trend with a few groups daring to risk working outside their local markets, having developed a risk appetite. As the markets change, those who have dared to work in a cross border capacity see opportunity in adversity. The downfall of one market emerges as an opportunity for another," he added.
Source: The Times of India,
http://timesofindia.indiatimes.com/business/india-business/FDI-in-realty-dips-to-lowest-in-four-years/articleshow/10046289.cms
MUMBAI: Foreign direct investment (FDI) in India's real estate has dipped and is at its lowest in the last four years, said a FICCI-Ernst & Young report, which will be released later this week.
Of the overall FDI of Rs 1.70 lakh crore ($37.8 billion) in 2008-09, investments in the country's real estate comprised 3.36%. By 2010-11, it dipped to 2.97% against the total FDI of Rs 1.21 lakh crore ($ 27 billion), said the report. Interestingly, private equity in Indian real estate between January and June 2011, reached $444 million (over Rs 2,000 crore), which is 47% higher than the investments made in 2010 during the same period.
The report titled, "A new realty: Dissolving borders through cross-border integration", said pricing is set to go up. This is because the cost of the raw material has increased drastically, putting pressure on the profit margins of developers. "RBI continues efforts to curb inflation, which has prompted it to increase interest rates 12 times since March 2010. This would not only increase the equated monthly installment (EMI), but also increase the cost of construction, ultimately impacting the selling price of apartments," it said.
Between March 2009 and November 2010, developers sold more than 40 million sq ft of mid-income residential property in the National Capital Region (NCR) region alone. However, beginning 2011, the focus reverted to luxury housing. "The tightening liquidity has once again caused developers to focus on affordable housing," it added.
Oversupply of commercial property will continue to impact its growth. "Bangalore is set to witness increase in rental due to lowest vacancy rate and oversupply, while Noida may not experience an increase in rentals due to high vacancy rates. Mumbai and Delhi are the undisputed leaders in all forms of real estate, but due to scarcity of land, rising rentals and capital value, developers and industries are targeting Kolkata, Pune and cities such as Mysore, Chandigarh and Jaipur," it said.
Said Rajiv Kumar, FICCI secretary general, "India, raring to be an economic powerhouse, with a stable political environment, was quick to find its footing during the global recession. On the residential front, the sector will face significant shortage of homes for the mid-income group, and this has become a priority for the Government."
"Real estate prices have peaked, exceeding the pre-recession rates in some markets," said Ajit Krishnan, Partner & Real Estate & Infrastructure Leader, Ernst & Young. "The peak in 2007 set about a new trend with a few groups daring to risk working outside their local markets, having developed a risk appetite. As the markets change, those who have dared to work in a cross border capacity see opportunity in adversity. The downfall of one market emerges as an opportunity for another," he added.
Source: The Times of India,
http://timesofindia.indiatimes.com/business/india-business/FDI-in-realty-dips-to-lowest-in-four-years/articleshow/10046289.cms
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