FDI GUIDELINES

CONTINUED FROM YESTERDAY................


FDI - inviting real estate investments

Not surprisingly, most foreign investors have aimed India in a big way, largely through joint ventures. Along with curtailing the risk factor, it provides the participating companies an exit route. Since 2005, when FDI in Indian real estate sector was permitted, US $7-8 billion have been parked in.
The Government of India's liberalization and economic reforms programme encourages industrial policy reforms that have reduced the industrial licensing requirements, removed restrictions on investment and expansion, and facilitated easy access to foreign technology and FDI. Increased inflow of investments arising out of flexible FDI policies is sure to have a direct and positive impact on the real restate scenario of India. More investments mean more job opportunities and more jobs means more workforces. This has created a huge demand and supply gap in housing in India. The booming IT industry has also resulted in a large section of young investors who with high-income jobs chose real estate as an investment option.
Indian Hotel industry - The real estate opportunity

Several projects in the Indian Hospitality sector have been steadily coming up with respect to the viability of hotel business in India. Nevertheless, the real estate and hotel industry of India have also been aligning their roadmap in quite a rhythmic way.
As per the recent quarterly survey on project investment by ProjectsToday, investments to the tune of Rs 8,241 crore have been lined up for 160 hotel projects at different parts of the country.
Maharashtra tops the chart garnering projects worth Rs 2,281 crore, followed by Andhra Pradesh, which takes the share of Rs 931 crore with about 40 projects in its kitty.
With regard to the demand and supply equation between hospitality and real estate, commercial space between 30 and 35 million square feet will be required by Indian hospitality sector, in 2005-09, in top cities of India viz. Mumbai, Delhi, Chennai, Bangalore, Kolkata and Hyderabad.
As per the Cushman and Wakefield report, the hotel sector will invest USD 8-9 billion in real estate to complete its new projects.
This is deemed as just the beginning. Opportunities in Tier-II and Tier-III cities too are looking great. Analysts estimate that there are about 16 cities like Jaipur, Agra, Goa, Pune, Ludhiana, Chandigarh, Ahmedabad and Cochin that have potential for a stalwart hotel industry.
Given the rapid economic development going on in the country, India is likely to become one of the top five destinations for business travelers in the years ahead, says London based World Travel and Tourism Council.
If we take a look at the availability of hotel rooms, there are 50,000 luxury rooms in the country at present. The tariffs for these rooms are generally in the range between Rs 4,000 and Rs 15,000 a day. It has been estimated that there will be shortage of about 33 per cent in availability of rooms in the next couple of years.
In all, Indian hotels need to add some 1-lakh rooms if they want to meet the market demands. The capital city of Delhi alone will be short of 20,000 rooms.
However, it is estimated that the current projects will only be able to meet 75 per cent of the total requirements. Such are the trends that indicate towards the dynamic opportunities of growth the hotel industry offers.
Interestingly, the property developers of India have been foraying into the hotel sector; as they have envisaged enormous opportunities as they bag mega contracts to construct hotels. Of late, India's real estate major Unitech joined hands with global hospitality giant Marriott International to construct 28 hotels at a whopping cost of USD 720 million, in the next 4-years.
Delhi based construction company Uppal group is already running a 5-star luxury hotel Ecotel business hotel spread in 10.5 acre in Delhi.
The Indian government has also laid ambitious plans to revive the state of its hotels with fresh investments of USD 55.5 million. Under the plan, Hotel Samrat, Hotel Ashok and Hotel Janpath will be given a facelift with provisions of most-modern facilities.
Boom in land prices
Of late, the growth prospect in Indian hotel industry is transcending the boom to the Indian real estate market.
The land prices have been touching new heights as hospitality giants hunt for land to establish their new hotels. The recent deal under which Hotel LeelaVentures paid as much as Rs 611 crore, for a plot; speak volumes about the latent investment opportunities in the Indian hospitality sector.
Similarly, Emaar-MGF bid a whopping Rs 388 crore for two pieces of land at a recent auction organized by Delhi Development Authority (DDA).
Investment avenues
It’s the right time to invest in Indian hotel industry. Returns are impressive and opportunities are infinite.
Take a look at the growth numbers. During 2005-06, the net profit of the hotel companies grew by skyrocketing 140.14 per cent to Rs 502.45 crore, over the preceding year.
Healthy trends are reported in Average Room Rates (ARRs) and occupancy rates are also going north.
In Mumbai, the ARR went up from Rs 1,822 of 2002-03 to Rs 4,307 in 2004-05. Similar was the trend in Delhi and Bangalore where the ARR increased from RS 2,918 and Rs 2,149 to Rs 5,498 and Rs 6,762, respectively in the same period. (See Chart)
With this, investing in Indian hotels is pretty profitable. The Internal Rate of Return (IRR) is close to 30 per cent. New hotel projects become profitable after 3-4 years and break even in a period of five to seven years.
The trends are not going unnoticed. A flurry of action is observed in the sector, from investment point of view. Corporates and venture capitalists from across the world are increasingly interested in buying hotels in India and paying hefty price to pick a stake in Indian hotels.
ICICI Venture Funds paid Rs 100 crore for picking stake in Hyderabad’s Viceroy Hotels. WestBridge Capital Partners acquired 10 per cent stake for Rs 25 crore in Royal Orchid Hotels.
Besides, several other deals have been inked in the sector. India’s largest private company Reliance has plans to saunter into hospitality sector. Textile behemoth Bombay Dyeing is in talks with Walt Disney, Ritz Carlton and Peninsula to form collaborations.




Opportunities for Investors in Indian Real Estate

India in the recent times has been the potential goldmine for investors all over the world. With a booming economy and liberalized government policies, investors from all over the globe are choosing India as their business destination.
As Indian real estate rules the economic vibes of the country, the most important beneficiary of the recent boom in this sector is the investors. Driven by positive growth in the real estate scenario and the Government of India’s decision to allow100% foreign direct investment (FDI) under the 'automatic route' in the construction and development there has been a significant rise in the number of Indian as well as foreign investors in the realty sector.
While top developers in India like the DLF, Ansal, Omaxe, Sobha Developers, Bengal Ambuja, Unitech, Vatika and Sahara Infrastructure among a few have initiated large scale real estate developments in the residential sector catering to all segments of the society. With more corporate houses entering real estate, a corporatisation of real estate can be witnessed.
Real estate is much more professionally managed with a number of big players (developers as well as corporates) entering the business. There are no monopolistic positions in real estate, as there are more players today in the development game. The greater the number of players, the healthier the competition and the beneficiary of all this would at last be the end-user.
In the residential segment, with the increase of disposable incomes and easy availability of home loans, most builders are trying to woo investors with lucrative features and the latest inclusions are premium luxury apartments and condominiums fitted with the most modern accessories in home luxury.
The commercial ventures include state-of-the-art office spaces, sprawling malls, multiplexes and retail outlets. Reports indicate that around 200 new malls with a combined retail space of Rs.2.5 crore/sq.ft and investment of Rs.12.500 crore are expected to come up in this year.
The boom and the relaxation in FDI are also attracting interest from foreign investors to invest in India and many are seen tying up with the local developers in expanding their business. As the competition in the market is intense, builders are going out of their way to be different and provide quality services.
Major real estate investor’s in the forayEmmar Properties, of Dubai one of the largest listed real estate developer in the world has tied up with the Delhi-based MGF Developments to announce India's largest FDI in the realty sector for mall and other facilities in Gurgaon. On the other hand, in a recent development DLF and UK-based construction major, Laing O'Rourke (LOR), has joined hands for participation in airport modernization and infrastructure projects. Again, Morgan-Stanley Real Estate has announced that its investment of around US$ 68 million in Mantri Developers Private Ltd, a private Bangalore-based real estate developer. DB Real Estate, a unit of Deutsche Bank AG, has set up plans to start a global fund that will invest as much as US$ 300 million in India to tap an expected surge in demand for property.Vancouver-based Royal Indian Raj International Corporation (RIRIC) will invest a whopping US$ 2.9 billion in a single real-estate project named Royal Garden City in Bangalore. Estimated to be of retail value Rs 41,000 crores, this project is to be completed in period of 10 years. Indonesia-based Siputra Selim group is slated to invest $200 million into the housing sector in Kolkata.
Indiabulls Real Estate (IREL) is proposing to enter into arrangements with Dev Property Development, a company incorporated in the Isle of Man, whereby Dev shall subscribe to new shares and also acquire a minority shareholding from the company, in Indiabulls Property (IPPL), Indiabulls Real Estate (IRECPL) and Indiabulls Infrastructure Development (IIDL). Dev has completed an initial public offering of its ordinary shares for a total amount of Rs 12 billion or GBP 138 million and shall be listed on the alternative investment market of the London Stock Exchange. As the real estate investments open up opportunities for the associated fields like Home Loans and Home Insurance, a number of global insurance companies have shown interest in the sector. This include companies like Cesma International from Singapore, American International Group Inc (AIG), High Point Rendel of the UK, Colony Capital and Brack Capital of the US, and Lee Kim Tah Holdings to name a few. As the Indian real-estate companies are in the expansion process to meet the demand for homes, offices and retail space as overseas companies are allowed in more industries and faster economic growth boosts middle-class incomes in the country. This has also generated the need for funds for investment into the realty sector creating the need for organized finance.As India opens up its market to foreign players there is bound to be a competitive edge to give quality-based performance for customer satisfaction which will consequently bring in quality technology and transparency in the construction and realty sector. And the ultimate winner irrespective of all is surely to be the buyers.

TO BE CONTINUED TOMORROW......................