Foreign Institutions Investing in Indian Real Estate
VioletStar January 2nd, 2007
India changed its policy in February 2005 that allowed foreign investment of upto 100% in construction development projects with fast-track approvals. The return on investment could be as high as 25% which is a real attraction to foreign institutions.
International funds had reportedly invested some $2.5 billion in Indian real estate. Goldman Sachs’ Whitehall Street Real Estate Funds planned to invest up to $1 billion in Indian , real estate, private equity, wealth management, and other businesses in India for its clients. CalPERS (California Public Employees’ Retirement System) also invested $100 million in a $400 million real estate fund in India.
The policy reform in india reduced the minimum development project size requirement from 100 acres to 25 acres for housing, and about 8 acres for other property development types. However, in order to attract serious investors, foreign investors need a minimum capitalization of $5 million for joint ventures and $10 million for wholly-owned subsidiaries.
Investors from Asia has been rising the current of India’s construction development industry. Large development companies from Singapore such as Ascendas, CapitaLand and Keppel Land have already had projects in india. In June 2005, Ascendas launched the International Tech Park in Bangalore and the Vanenburg IT Park in Hyderabad. Keppel Land also has built a few IT parks. The Salim Group of Indonesia, has proposed four investment projects with various concepts in West Bengal.
Real estate experts believe Indian real estate is unlikely to face speculative bubbles like those in other Asian markets in the mid-to-late 1990s. India pursues conservative “floor space indices” or “floor area ratio”, which measure the relationship between the size of a lot and the total space that can be built on it. That index is between 1 and 2 in most Indian markets, while in land-constrained Hong Kong, it went up to more than 10.
Source: Knowledge at Wharton
