FREQUENTLY ASKED QUESTIONS |
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This section is an effort of 'Estate Consultants", addressed at the global community of investors, who are desirous of investing large capital in Indian Real Estate, with the objective of earnings by way of capital appreciation & rental returns Q: Can we buy properties in India to earn capital yield or rental returns? A: Foreign direct investment (FDI) is currently allowed only in properties which qualify under the following norms. *minimum area threshold for Foreign Direct Investment in Integrated Residential Township projects is 25 acres *commercial real estate developments projects with a minimum built area of 50,000 sq. metres. Foreign investors are still barred from acquiring and trading in undeveloped land Q: Can we buy pre-leased office buildings which are already occupied? A: Only through an Indian company or trough an NRI (Non Resident Indian), if the property does not qualify in either of the above *. Also to bear in mind would be that, with ample local funds chasing real estate in India; the best opportunities, here, exist at the project-inception stage. One could then easily look forward to a double edged earning; both by way of capital appreciation of 20% + per annum, as well as rental returns, post-possession, in the range of 11% to 16% per annum, varying with the stage of investment. Other than the above; availability of genuine pre-leased, occupied properties are quite rare. Q: What kind of returns can we expect from investment in real estate in INDIA? A: Price rise typically occurs along the entire 'project-life-cycle' of any proposed real estate development, fuelled by the following predominant factors among others. 1. A major gap
between real time demand & ready supply India is currently on a growth path for the past few years; wherein the growth engines are running full-scale. With a GDP growth rate of 7% & real estate being among the largest contributor to the same; the buoyancy is here to stay. The country has evolved as the second fastest growing economy among emerging markets, preceded only by China. Real Estate in India has a long product/ industry life-cycle to travel, since much of it is still in its infancy & is yet to get organized & structured. Although, the property market here has witnessed unprecedented growth, ranging between 30% to 100% per annum (varying with location & type of properties) in the recent past; a more somber & conservative estimate could well make you richer by 25% p.a at the least. Mate this with an ever rising demand for rental properties & you have a potential return of 25% on book value + 10% ROI by way of rental returns. Q: We are a transnational real estate development company & would like to develop large properties in India. Which is the best entry route for a company like ours? A: You are most welcome & we would go all out to assist you in your endeavors. However, before you set foot on a foreign land, you would naturally conduct extensive research on the business process in the respective country & its market dynamics because each country would invariably differ on these parameters. The liberalization of the Indian economy, as a process has been initiated a few years back; but a country as vast & diverse as this cannot follow a prescribed norm, which may have worked for another country at a similar stage in the growth curve. It has to necessarily chalk out its own course which is unique to its diversity & dynamics. Real Estate in India has so far been predominantly unorganized. The buoyancy of the past couple of years has deservedly earned it an 'Industry' status. Also; a growing incidence of old & new economy corporates entering the industry from time to time has brought about the much desired accountability & quality conciousness. However, the entire process starting with acquiring the plot to getting permissions for development to getting occupancy certificates is still mired in a fair amount of red-tapism. Since you want to be hear to uphold your shareholder value & investor's returns; your focus at least in the first few years of the learning curve should be to study the markets without engaging in the hassles associated with it. The price which you must pay for this luxury is a joint venture with one or more of the Indian developer who would more than welcome you for the value that you add to the JV. This could be in the form of capital infusion, project management, technology, branding, etc. In all of the above, you must ask; what role would you expect us to play, as brokers: While we endeavor
to assist you with fully integrated services through a
single point source; a detailed line-up of the scope of our
services would help us both, understand each other to
achieve our common goals. |
