Define Investments

Investments

Due to arrival of MNCs, real estate emerged as popular sector for private equity fund. Some of the recent investments in this sector are discussed below:

Sahara India has joined hands with the US-based Turner Construction Company. The Joint venture of Sahara Turner Construction, will build integrated townships called Sahara City Homes and other Sahara India projects in India worth US$ 25 billion over the next 20 years

DLF acquired the additional 26 per cent stake in its joint venture company—DLF Hotels & Hospitality Ltd (DHHL)—from Aro Participation Ltd and Splendid Property Company Ltd, affiliates of Hilton International. At present, the company holds 74 per cent equity in DHHL

Pride Group of Hotels, which owns a chain of upscale mid-market and business hotels is planning to set up a series of new properties and this will involve an investment of Rs 1,000 crore (US$ 203.18 million) over the next few years. The company plans to have a mix of owned and managed properties having 3,500 rooms by 2015-16.

Government Initiatives

100% FDI investment is permitted by the government of India for the development of townships.

Government of India grants interest subsidy on loans up to ` 1.5 millions for ‘New Home Loan borrowers’ subject to the condition that the cost of the house must not exceed ` 2.5 million.

100% FDI investment is allowed in the development of Special Economic Zones (SEZ) under the automatic route subject to the provisions of Special Economic Zones Act 2005 and the SEZ Policy of the Department of Commerce.

In the Union Budget 2011-12, the Government provided various initiatives for the real estate sector, especially focusing on affordable housing. Some of these initiatives are listed below:

Increasing the limit on housing loans eligible for a 1 per cent subsidy in interest rates

Widening the scope for housing under “priority-sector lending” for banks, making interest rates cheaper on them

Allocating substantial amount to the Urban Development Ministry for spending on extension of Metro networks in Delhi, Bengaluru and Chennai

Earmarking US$ 20.03 million for the urban infrastructure development project. The Urban Development Ministry received US$ 1.5 billion, an increase of US$ 68.53 million from the last fiscal 2010-11

The role of real estate sector in the Indian economy is extraordinary. It gives larger employment opportunity next to the agricultural sector. This sector will grow rapidly in the next decade. The market share of this sector is expected to touch US$ 180 billion by 2020 in India. The contribution of housing sector alone is 5-6% of the India’s GDP. In India, the construction industry is ranked 3rd out of 14 major sectors as per the study conducted by ICRA. Therefore, real estate acts as a means for adding impetus to growth of the Indian economy.