India’s Foreign Direct Investment inflows have doubled to $2.9 billion during April-July 2006 as compared to the $1.5 billion during the same period last year. And the real estate sector is no exception. Sensing the demand of foreign investors, the Indian government has liberalized the laws relating to FDI in February 2005. Now Non Resident Indians (NRI’s) and Overseas Corporate Bodies (OCB’s) can invest upto 100% in the sector.



Foreign Direct Investment in real estate is now possible without the need for permission by the Foreign Investment Promotion Board. So, the liberalized FDI regime, coupled with the strong potential of the industry is going to help pump money into the sector. Currently, FDI in India is targeting township, housing, construction development projects, built-up infrastructure etc.

Real estate requires specialized knowledge regarding the local environment, so, joint ventures with the local firms are becoming the foreign investment trend. The Indian government repealed the Urban Land Ceiling Act in 2001 and a large quantum of land is now free for construction. Investment is now also allowed for smaller projects of just 25 acres thus inviting better flow of FDI for real estate investment in India.

Home investment in India is also going to see a great rise as according to the Tenth Plan estimates, there is supposed to a shortage of 22.4 million dwelling units in the coming years. So, the FDI inflow will be welcomed in the housing sector.

Also, the growth of the IT sector and the demand for commercial space is in turn contributing immensely to the FDI demand. The current attractive destinations for foreign investment are Delhi, Mumbai, Kolkata, Chennai and Bangalore. But the trend is expected to spread to other cities as well.

Though foreign investors are keen to invest in India, there are yet certain deterrents. Investors are demanding increased professionalism and a healthy and competitive market environment for both domestic and foreign players. This will certainly help to organize the sector better and will bring in superior technology.

A survey by the FICCI (Federation of Indian Chamber of Commerce and Industry) reveals that foreign investors want better guidelines regarding investment norms. They should be flexible enough so that they encourage a continuous FDI flow which will result on increased supply, keeping costs in check and ultimately benefiting the consumer.