FDI Norms may be Eased by Government to Revive Real Estate Sector

Given the current outlook prevalent across the spectrum, certain relaxations of FDI policy for real estate properties are being considered by the government. These include 100% FDI for the RERA registered housing projects which have been completed and come with more than 100 apartments. It might be noted that this is being considered by the government during the coronavirus pandemic, at a time when real estate projects are stuck due to lack of funds. The influx of funds in the form of FDI would help to revive the realty sector and allow the developers to complete their stalled projects.

 Another major suggestion related to this matter is allowance of 100% FDI on warehouses. While FDI is allowed on warehouses, there are certain restrictions on the amount of foreign money that can be brought in. Warehouses are among the top preferences for investors for the high returns they can fetch. Even during the lockdown due to COVID-19, warehouses have been earning lucrative returns for their owners as various goods and services are still required. Relaxation of FDI on warehouses would create a major influx into the real estate sector.

The reason why RERA approved projects are being prioritised for the allowance of FDI is that investors prefer to buy such properties. Investing in RERA approved properties is more secure, and also ensures greater transparency. RERA had been established with the goal to prevent the developers from charging extra costs by unfair means. As the investors are less likely to be tricked when buying property approved by RERA, they can invest more confidently. Moreover, if something goes wrong, the buyer can also lodge a complaint with RERA and get the problem solved.

The real estate sector had been undergoing a major liquidity crisis in the recent years, which had originated from an economic slowdown. As the developers faced a shortage of funds, they were unable to complete many projects, leaving them stalled midway. Allowing FDI on ready to move homes would allow the developers to liquidate the completed projects. This, in turn, would provide them the cash which they can use to complete their stalled projects. However, it has also been observed that allowing FDI on completed projects wouldn’t cause any major change in the realty sector. This is because the number of completed projects is much lower than the ongoing ones.