Preeti Mehra
Moumita Bakshi

New Delhi , March 24

THE liberalised foreign direct investment (FDI) norms combined with rapid economic activity is expected to galvanise the realty sector, with leading global consultants such as KPMG and CB Richard Ellis foreseeing massive investments flowing in projects such as residential townships, technology parks, warehouses and Special Economic Zones (SEZs).

As a result several companies and consultancy executives are planning to set up real estate funds to woo large construction companies, especially in the US.

"There is a very positive response from large realty chains and it is a matter of time before US construction companies begin to park their funds in commercial space within the Indian real estate sector," said Mr Naseer Munjee, Senior Advisor, KPMG.

According to him, international chains were looking at large commercial projects, with SEZs and warehousing holding huge potential. "SEZs with their clustering approach and controlled space format is attractive to investors, while VAT in the horizon could lend added importance to warehousing," he pointed out.

So far, only a handful of players have forayed into India, including a consortium of UK's High Point Rendel, US-based Edaw and Tokyo-based Kikken Sekkel; Canada-based Royal Indian Raj International Corporation; Dubai-based Emaar Group; Lee Kim Tah Holdings; and CESMA International, a subsidiary of the Singapore Government's housing agency. As per some estimates while China attracts about 3.2 per cent of its gross domestic product as FDI in its real estate sector, India draws 1.1 per cent.

The scene is, however, set to change with Government's recent decision to permit 100 per cent FDI in construction development sector on automatic route. In addition, the norms relating to the land area have been eased to 25 acres from 100 acres earlier.

According to Chesterton Meghraj Property Consultants, much of the investments would come in IT parks and residential projects. "We see companies from West Asia and South East Asia eyeing India's real estate sector. Interest worth about $2,000 million has already been expressed after the recent announcement. The country's leadership position in back office operations could trigger a requirement of 70 million square feet capacity in the next 2-3 years," said Director, Mr Santhosh Kumar.

Agrees Mr Anshuman Magazine, Managing Director - South Asia, CB Richard Ellis. "In the last 16 months, we have seen players in South East Asia, US and Europe taking interest in our realty sector. But we have to understand that these investors are also examining other markets such as Mexico, South East Asian nations and Eastern Europe," he said.

Knight Frank India Chairman, Mr Pranay Vakil sees a Rs 5,000-crore FDI coming in the first phase. "Township development would be the most lucrative segment for investment. The first phase would last for the next two years - an acid test for developers as they will have to sell what they build,'' he said.

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