Private equity in realty sector to grow up to USD 3bn in 2yrs

The government's decision to relax FDI norms in the construction sector is likely to attract private equity investments to the tune of up to USD 3 billion in the real estate market in the next two years, according to property consultant Jones Lang LaSalle (JLL).
The real estate private equity market inflows which stood at around USD 1-1.5 billion per annum over the last few years, is likely to double in the next two years due to the relaxation of FDI norms, JLL Chief Operating Officer (business and international) Ramesh Nair said in a statement.
"The government's announcement of easier FDI norms for the construction sector has generated a lot of excitement among country's real estate players. The fact that 100 per cent FDI will now be allowed under automatic route to invest in completed assets along with relaxation of other norms, it is expected that FDI inflows will increase significantly," he said.

He said the modification of the 3-year lock-in period basically opens the portals wide for FDI funds who were deterred by this clause so far.
"It also means that there will be more pressure on developers to accelerate construction of projects being funded so that these funds can exit at a favourable time," Nair added.
Investors will now be permitted to exit either on completion of the project, or after the completion of support infrastructure in the project such as internal and approach roads, water supply, street lights, sewerage, among others.

This new exit feature correctly assumes that the successful deployment of such infrastructure is a major landmark point in a project's life cycle, post which all other development will happen assuredly and according to stipulated time lines, he said.

"Allowing 100 per cent FDI automatic route in completed project for operation and management of not only townships but also shopping complexes and business centres, will enable developers to sell completed malls and integrated townships to foreign investors. This will significantly increase the volume of the retail real estate business," he said.
Also, with a lot more projects qualifying under FDI funding, the refinancing business will see significant increase, Nair said.