Parsvnath to explore raising foreign funds as govt eases rules

Company to also explore listing of 12 Delhi Metro malls through REITs following tax sops offered in the Budget for this instrument

Realty firm Parsvnath Developers will consider raising foreign funds in two commercial projects in the national capital that have now become FDI compliant after the government eased rules in the Budget.

At an investment of about Rs 600 crore, the company is developing a commercial project on KG Marg near Connaught Place and a shopping mall at Rohini here.

The company would also explore listing of about 12 Delhi Metro malls through Real Estate Investment Trusts (REITs) as tax sops offered in the Budget for this instrument have paved the way for its launch in the Indian market.

"With the government relaxing FDI rules in real estate, our two commercial projects in Delhi's KG Marg and Rohini will become FDI compliant. We will explore the option of raising foreign funds in these two projects," Parsvnath Developers Chairman Pradeep Jain told PTI.

The company would rope in FDI partner if the investment proposals are attractive, he added.

Parsvnath is already looking to sell land worth Rs 1,000 crore in south India or form joint ventures for reducing debt that stands at about Rs 1,200 crore.

In Budget, relaxations have been made in rules of Foreign Direct Investment (FDI) in real estate and construction, which is 100 per cent allowed through automatic route.

The requirement of the built-up area for FDI has been reduced from 50,000 sq metres to 20,000 sq metres and capital conditions for FDI from $10 million to $5 million with a three year post completion lock in.

"Size of these two projects are small but their values are high. Foreign investors were interested to put money in the KG Marg project, but earlier this project was not eligible for FDI funding," he said.

Parsvnath had bought about 7,500 sq metre land at Rohini in 2006 from Delhi Development Authority (DDA), while 1.18 acres of land at KG Marg was acquired in 2008 for Rs 212 crore.

It has started the construction of 3 lakh sq ft shopping mall in Rohini, while the work on KG Marg project that has a leasable area of 1.3 lakh sq ft would start after monsoon.

Jain said the company would explore listing of about 12 Delhi Metro malls through REITs, which can be listed on stock exchanges like shares of any firm and allow retail and institutional investors to buy/sell those securities.

In his Budget speech, Finance Minister Arun Jaitley had said: "REITS have been successfully used as instruments for pooling of investment in several countries. I intend to provide necessary incentives for REITS which will have pass through for the purpose of taxation".

Market regulator Sebi had proposed draft guidelines relating to REITs and the same were placed in public domain for comments. Final norms are yet to be notified. Sebi as well as industry players had asked the government to provide clarity on tax benefits for REITs.