If you thought that all the big bucks entering India were through the stock market route or in setting up businesses in high growth sectors like IT or telecom, you were wrong. A large portion of FDI (foreign direct investment) is now being invested into India's housing sector.
The FDI in India's real estate and housing market jumped almost 80 times or 8000% between 2005 and 2010. In FY05, the FDI in this sector was a mere Rs 1.7 bn. This has however increased exponentially to Rs 136 bn in FY10. In the past 10 years, cumulative FDI inflows into this sector totaled Rs 381 bn or US $8.5 bn. This makes it fourth on the list of FDI inflows in the past decade. What is surprising is that this sector did not even feature in the top ten list in the 15 year period post liberalisation from 1991-2006.
Source: Department of Industrial Policy & Promotion; Note: Computers include hardware and software
Metros are where the money is. According to a leading business daily, the largest number of building projects where FDI is in action is in our very own financial capital, Mumbai. Of the 1,614 projects in which foreign investors have put in cash since 2005, 422 were cleared by the RBI's Mumbai office, followed by 316 in Delhi. Other large cities including Bangalore with 225 projects, Hyderabad with 105 projects and Chennai with 68 projects, also received foreign capital.
In Mumbai over the past four years, according to data from Times Property, average real estate prices have shot up significantly. Cuffe Parade, Ghatkopar, Andheri (W), Vashi and Bandra (W) have seen hikes of 72%, 95%, 96%, 87% and 79% respectively. The largest FDI in the last five years however has been in the construction of a technology park at Bandra Kurla Complex (BKC) in Mumbai, totaling US$ 372 m. Rates of Bandra (E), where BKC is located have incidentally increased by 162% since August 2006.
But, due to the huge boom in the property market across the country, FDIs are not confined to metros and big cities. Since 2005, real estate projects have been approved by RBI offices in Bhopal, Kanpur, Kochi, Jaipur and Panaji, amongst others.
Offshore banking zone, Mauritius has contributed the maximum to FDI fund inflow to India, totaling 42% of total funds in the past decade.
With new iconic structures such as World One by Lodha Developers and the planned hill city Lavasa, by HCC coming up, India's property market is expected to see more money from foreign investors. Initial public offerings by the developers are also an easy exit route for the foreign investors to cash in on their investments.
For investors in real estate and home buyers, however, this may means paying a heavy premium. While buying a house to reside in may not be postponed, investments could certainly be more value driven.
More Views on News
Sorry! There are no related views on news for this company/sector.
LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.
SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.
Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India. Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: email@example.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407