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Business opportunities in India

India is currently the world's second most populous country with 1 billion people but by 2040, India is expected to become the world's most populous country (by then it'll be home to over 1.5 billion while China will have a population of under 1.5 billion.)

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The real estate sector in India is of great importance. According to the report of the Technical Group on Estimation of Housing Shortage, an estimated shortage of 26.53 million houses during the Eleventh Five Year Plan (2007-12) provides a big investment opportunity.

Further, real estate companies are coming up with various residential and commercial projects to fulfill the demand for residential and office properties in Tier-II and Tier-III cities. The growth in real estate in Tier-II and Tier-III cities is mainly due to increase in demand for organized realty and availability of land at affordable prices in these cities. The growth in real estate in Tier-II and Tier-III cities is mainly due to increase in demand for organized realty and availability of land at affordable prices in these cities.

According to the data released by the Department of Industrial Policy and Promotion (DIPP), housing and real estate sector including cineplex, multiplex, integrated townships and commercial complexes etc, attracted a cumulative foreign direct investment (FDI) worth US$ 9,405 million from April 2000 to January 2011 wherein the sector witnessed FDI amounting US$ 1,048 million during April-January 2010-11.

Over the next 10 to 15 years, 80 to 90 million housing dwelling units will have to be constructed with a majority of them catering to middle and lower income groups. The investment required for constructing the houses and related infrastructure in this period would, thus, be to the order of US $ 666 billion at roughly US $ 33 billion to US $ 44 billion per year.

It is estimated that 42 million sq. ft. of space will be required every year till 2008, only in I.T. and I.T.-enabled services especially in the cities like Bangalore, Chennai, Hyderabad and Pune, which is also now gradually shifting to North India.



Townships, housing, built-up infrastructure and construction – development projects. The sector would include, but not be restricted to, housing, commercial premises, hotels, resorts, hospitals, educational institutions, recreational facilities, city and regional level infrastructure.

100% Foreign Direct Investment is allowed through automatic rout subject to the following guidelines :

(1) Minimum area to be developed under each project shall be as under :

In case of development of serviced housing plots – 10 hectares.

In case of construction – development project - 50,000 sq. mtrs.

In case of combination project, any one of the above two conditions.

(2) Minimum capitalization of US $ 10 Million for wholly owned subsidiaries and US $ 5 Million for joint ventures with Indian partners. The funds would have to be brought in within six months of commencement of business of the Company.

(3) Original investment cannot be repatriated before a period of three years from completion of minimum capitalization. However, the investor may be permitted to exit earlier with prior approval of the Government through the FIPB.

(4) At least 50% of the project must be developed within a period of five years from the date of obtaining all statutory clearances. The investor shall not be permitted to sell undeveloped plots. For the purpose of these guidelines, "undeveloped plots" will mean where roads, water supply, street lighting, drainage, sewerage, and other conveniences, as applicable under prescribed regulations, have not been made available. It will be necessary that the investor provides this infrastructure and obtains the completion certificate from the concerned local body / service agency before he would be allowed to dispose of serviced housing plots.

(5) The project shall conform to the norms and standards, as laid down in the applicable building control regulations, bye-laws, rules, and other regulations of the State Government / Municipal / Local Body concerned.

(6) The investor shall be responsible for obtaining all necessary approvals, including those of the building / layout plans, developing internal and peripheral areas and other infrastructure facilities, payment of development, external development and other charges and complying with all other requirements as prescribed under applicable rules / bye-laws / regulations of the State Government / Municipal / Local Body concerned.

(7) The State Government / Municipal / Local Body concerned, which approves the building / development plans, shall monitor compliance of the above conditions by the developer.

Note:

(i) The conditions at (1) to (4) above would not apply to Hotel & Tourism, Hospital and SEZ’s.

(ii) For investment by NRIS, the conditions at (1) to (4) above would not apply.

(iii) 100% FDI is allowed under automatic route in development of Special Economics Zones (SEZ) without the conditions at (1) to (4) above. This will subject to the provisions of Special Economic Zones Act 2005 and the SEZ Policy of the Department of Commerce.

Some significant facts to real estate;

New Projects

• Private equity fund IL&FS Investment Managers (IIML) is estimated to have invested US$ 300 million in real estate and urban infrastructure projects in 2010.

• Close to Nalagarh in Solan district, Dabhota is set to be the latest industrial area to be developed by the Himachal Pradesh government, say officials. The state government has already issued a notification and asked the state land acquisition officials to acquire 2,020 bighas of land at Baghota to be developed into industrial plots

• Ramky Estates and Farms Limited, the real estate arm of the Ramky Group, is contemplating to enter Indian market by July 2011. The company is evaluating on land acquisitions in Kolkata and Bhubaneswar.

• Chennai-based VGN Developers Pvt Ltd has entered into a joint venture with private equity firm Pragnya Fund to initiate a new residential project with an investment of US$ 20.06 million in the city.

• Ascendas has entered into an agreement with a Japanese consortium of Mizuho Corporate Bank (MCB) and JGC Corporation to develop integrated townships in India, according to a press release from Ascendas. The integrated township is likely to be in Chennai, which has attracted investment by a number of companies from Japan. Ascendas of Singapore will be the master developer.

• Godrej Group's real estate company, Godrej Properties and Frontier Home Developers, has launched a residential project in Gurgaon with joint venture partner M/s. Frontier Home Developers Pvt. Ltd. This is a debut residential project in the national capital region (NCR) for Godrej Properties.

• Shristi Infrastructure Development Corporation will invest US$ 444.7 million over the next three years in seven small cities in West Bengal, Tripura and Rajasthan. The money would be used to build integrated townships, healthcare facilities, hospitality and sports facilities, retail malls, logistics hubs and commercial and residential complexes.

• Realty major Ansal Properties & Infrastructure Ltd plans to invest about US$ 330.8 million over the next three years on expansion of its existing integrated townships and to develop a group housing project in Haryana.

• Vision India Real Estate, a closely-held business group in the US, is investing US$ 5 million in Gem Group's upcoming residential project in Chennai. This will be the first joint development project for the US company that is proposing to invest US$ 100 to US$ 200 million over the next three years on projects, especially in the logistics arena.

• Realty major Embassy Property Developments has entered into a joint venture with MK Land Holding, a Malaysian company that specializes in pre-fabricated affordable housing, to build projects in the affordable housing segment. The proposed project entails an investment of over US$ 1.2 billion.

• Thai real estate developer Pruksa Global plans to invest US$ 218 million in projects in India and launched its first residential project in the country at Bangalore in October 2010.

• The International Finance Corporation (IFC) is in talks with several real estate developers to create large affordable housing projects in India. For FY-09 and FY-10 (fiscal year ending June 30), IFC's highest exposure has been in India. Out of the US$ 3.5 billion that IFC has committed in India, US$ 2.5-2.6 billion have been disbursed. IFC will continue to invest roughly US$ 1 billion in India every year for the next two or three years.

Government Initiatives

The government has introduced many progressive measures to unlock the potential of the sector and also to meet the increasing demand levels.

• 100 per cent FDI allowed in townships, housing, built-up infrastructure and construction development projects through the automatic route, subject to guidelines as prescribed by DIPP

• 100 per cent FDI is allowed under the automatic route in development of Special Economic Zones (SEZ), subject to the provisions of Special Economic Zones Act 2005 and the SEZ Policy of the Department of Commerce

• FDI is not allowed in Real Estate Business

In his 2011-12 Union Budget proposal speech, the Finance Minister Pranab Mukherjee has extended good news for real estate firms focused on affordable housing.

• He proposed raising the limit on housing loans eligible for a 1 per cent subsidy in interest rates.

• Widened the scope for housing under "priority-sector lending" for banks, making interest rates cheaper on them.

• The government earmarked a substantial amount to the Urban Development Ministry for spending on extension of Metro networks in Delhi, Bangalore and Chennai.

• The urban infrastructure development project has been allocated US$ 20.03 million.

• Urban Development Ministry has got total US$ 1.5 billion, an increase of US$ 68.53 million from the last fiscal 2010-11.

• The allocation for Bharat Nirman has been hiked to US$ 12.89 billion. Bharat Nirman consists of 6 flagship programs, the Pradhan Mantri Gram Sadak Yojana (PMGSY), Accelerated Irrigation Benefit Program, Rajiv Gandhi Grameen Vidyutikaran Yojana, Indira Awas Yojana, National Rural Drinking Water Program and Rural telephony.

The relaxed FDI rules implemented by Indian government have attracted more foreign investors and real estate in India. The revised investor friendly policies allowed foreigners to own property, and dropped the minimum size for housing estates built with foreign capital to 25 acres (10 hectares) from 100 acres (40 hectares). The overseas firms welcomed these modifications and they can now put up commercial buildings as long as the projects surpass 50,000 square meters (538,200 square feet) of floor space.

Our services in Real Estate:

• Identification of project

• Find out land or property for project.

• Getting report from marketing /technical consultant about feasibility, marketability, profitability etc., of project.

• Represent and negotiate on behalf of client.

• Verification of title of the property or land.

• Search of land record as per revenue and other local laws and bodies.

• Find out land use / zone prescribed by government.

• Preparation and registration of Agreements, Sale deeds and Development agreement, etc., as required under law.

• Conversion of land from Agriculture use to Non-Agriculture or industrial use as per local laws and central laws.

• Advising in preparation of Layout plan, other housing & building construction plans in concern to rules, regulations and mandatory norms prescribed by authority concerned to follow due process of law.

• Legal services in getting Layout Sanction for Housing Township and other constructed Buildup Township and construction permission/sanction plan from local government/bodies competent to give permissions for projects.

• Gives legal advice and instructions time to time, file petition/appeal/review and other legal proceedings if needed in furtherance / interest of project.

• Supervise, manage and take care the project as turnkey.

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