New FDI Norms a Boom for both Developers and Buyers
With the central union cabinet giving a green signal to the new FDI norms in real estate and construction segment, real estate companies facing heavy debt and sluggish liquidity are hopeful of a turnaround. Real estate experts believe that the relaxation of FDI norms is a win-win situation for both builders as well as buyers as favorable norms for foreign developers would inject funds in the market opening up new projects leading to an increase in the supply side for the residential and commercial real estate segment as a while.
The new FDI rules have reduced the minimum built up area requirement to 20,000 square meters from 50,000 square meters while the minimum capital requirement has been reduced from $10 million to $5 million respectively. The stocks of all major real estate companies have been in the green ever since the cabinet approved the new FDI norms signaling a positive market sentiment. Realty experts believe that the relaxed FDI norms will help foreign investors to show interest in smaller projects especially those in tier-2 and tier-3 cities spreading the Indian real estate sector’s intrinsic growth prospects. The new FDI norms also allow any real estate project that commits channelize a minimum of 30 per cent of the total cost for low cost affordable housing from minimum built up area and capitalization requirements paving way for more emphasis on affordable housing.
For the real estate developers facing heavy debt along with a sluggish demand, approval delays and rising interest cost, the new FDI norms open up channels for foreign collaborations in multiple projects in the near future allowing them to reverse their fortunes in the near future. With new projects likely to enter the market, the lack of supply is going to receive a positive impetus leading to a happy realty segment for both buyers and real estate developers.
Source: The HinduBusinessLine
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