Investing in the Indian Real Estate Market

These days the real estate market in India is reaching an all time peak. With the emergence of multinationals, the demand for office and residential space has managed to increase several folds. However, the investors of this market still tend to consider that India is an emerging market for the restrictive laws relating to Foreign Direct Investment (FDI) and therefore, earning profit is very difficult in India’s property sector. Sensing this, the government has liberalized the laws relating to FDI during the month of February 2005. With this change, the now Non Resident Indians (NRIs) or Overseas Corporate Bodies (OCBs) are able to invest all the way up to 100% of the sector and also in real estate industry as well as construction ventures. A foreign Company with 60% NRI holding is considered as OCBs. Nevertheless, the government has certain rules put in place for the purchase of commercial property by foreign companies i.e. property for business purposes.

Although the investment period for real estate is restricted to a minimum of 3 years for the FDI to avoid speculative trading, the real charm is that the investment is now allowed in the smaller projects of 25 acres, (which was 100 acres earlier). The hassle-free and the easiest way to enter this market is through the purchase of an investment fund. There are several attractive and very transparent funds coming from some very well reputed investments houses. It is expected that with the liberated laws, real estate investment fund will emerge very soon. But care should always be taken before acquiring any land and legal help should always be taken throughout each step of buying process.

The increase in global real estate investment interest in India is evident from the fact that US real estate billionaire, Sam Zell for example, has named India as the world’s lowest cost housing market and is planning to make some substantial investments there. Further, Dubai based Emaar Group has already invested USD 100 million in Hyderabad. And companies from places as diverse as Canada, Malaysia, Tokyo, UK, and Singapore have all committed more than millions of dollars for India. This is all the result of easing of laws along with some impressive price growth for Indian property.

The local factors which contribute to this real estate market expansion can be found in the rise in demand for the property which is for rent and sale. With India’s population raising up to over a million, the potential for growth in the demand for property is rather huge. In addition to this, the growth of the IT sectors and outsourcing in particular geographical areas has led to the demand for office and housing space in all of those areas. With the increase in the buying power of these professionals as well as the availability of housing loans, it has been made possible for them to be able to afford their own houses. The increase in demand has also inflated the property prices.

Before 2005 there was only 1.1% of foreign direct investment in India’s real estate sector. However, after Government easing the controls and restriction on foreign ownership of immovable property and also on terms of ownership, there is a strong inward inflow of foreign investment interest in India. This is why the government of India is very keen to attract investment in this sector whilst also being in favor of control investment. As a result, the local builders are earning around 30-50% of return rates on capital, and property prices have increased in an excess of 20%. Cities such as New Delhi, Mumbai and Banglore are the main areas of attraction for these stated investments.

Article Source: http://www.realestatepropertyarticles.com.

About the Author:
Ann Sommers is a contributing real estate editor at http://www.realestatepropertyarticles.com/. This article may be reproduced provided that its complete content, links and author byline are kept intact and unchanged. No additional links permitted. Hyperlinks and/or URLs must remain both human clickable and search engine spiderable.