By: R K Chopra, Secretary General, Indo-American Chamber of Commerce
Track2Realty Exclusive: Why the US investors are shying away from investing in India? Primarily, it is the fear of change in policy as they had experienced in the past. Lack of significant growth is also another factor that is working against their investment in the Indian realty stocks.
The high interest rates, equally high levels of premium, absence of a uniform policy in housing, recent difficulties in the land acquisition etc. are factors, which are affecting the investment and lack of enthusiasm among the PE investors to focus on India.
We have to evolve a stable policy and at the same time that policy should be transparent and comparable to those in other countries. This can renew the interests of the foreign investors in the realty stocks and bring in the required resources for boosting the sector.
Private equity funds invested close to US$ 1.7 billion in 2011. However, FDI in real estate in 2011-12 (April-January) has reached only 492.5 million. Given proper encouragement and direction, this could go up to US$ 5 billion by 2014. Of course, our financial system should be re-tuned to absorb the excess inflow of dollars on account of the relaxed PE investment norms.
The other area is to relax the rules for foreign investment in projects beyond townships and satellite towns. Such projects entail huge investment and acquisition of huge tracts of land, which is cumbersome and dilatory in the present situation.
Much awaited land acquisition bill is still under debate. Moreover, foreign investors like to test the waters with smaller investments before getting into bigger ones. It is important to ensure early passage of the bill and also to allow equity participation in smaller housing projects.
There is an economic rationality for such policy since some of the real estate companies in India are facing huge resource crunch. Joint ventures and collaborations will help them to shore up their bottom lines.
Next: The way forward to US investment in Indian realty
