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NRI investments in property set to grow with better market conditions

An estimated 30 million NRIs, living in 130 countries, are sending remittances back home regularly. According to the World Bank, India continues to retain the top slot in remittances by expatriates from abroad. India will beat China in receiving the highest amount of remittances for five consecutive years.

For 2011, NRI remittances are likely to touch 4 58 billion against China’s 4 57 billion. In 2010, India received 4 54 billion in foreign exchange remittances , three percent of India’s GDP, beating China’s 4 53 billion.

The rupee depreciation and West Asian currencies linked to dollar which is appreciating against the rupee are major driving forces that resulted in a surge in remittances to India. The remittances are mainly used for family needs and investments in stocks, property and term deposits. Real estate here is preferred because of a desire to create a higher lifestyle for the family and the price appreciation in the long term.

Though there was an interim sluggishness in NRI investments, industry experts feel the trend is going to pick up in the coming months due to the uncertainty prevailing in the global economy and the attractive investment opportunities offered here. There are opportunities opening up for developers in new markets such as Mauritius. This is ample proof of the surge in NRI investments in real estate.

Property shows are held regularly now in various countries such as US, UK, and West Asia due to the concentration of a large number of expatriates in particular areas. The organisers focus on the many options available in various localities here.

Since liberalisation in the 1990s, investment norms have been simplified to enable NRIs and persons of Indian origin (PIO) to invest in real estate here. Realtors here have also set shop in some countries to interact directly with overseas Indians and extend effective after sales services. Moreover, housing finance companies and banks with their representative offices in various countries offer home loans to NRI investors.

An Indian citizen who resides outside India is permitted to acquire property in India other than agricultural, plantation property and farmhouse. NRIs get almost all the privileges that residents have while investing in real estate.

They can acquire, inherit, transfer and gift residential or commercial property. The purchase can be made through funds remitted to India through normal banking channels or funds held in certain types of accounts maintained in India. They can get home loans, mortgage loans and loans against future rental income.

While sale proceeds up to two residential properties can be repatriated after a lock-in period of three years, there is no restrictions on commercial property. Up to one million dollars per year from such a sale can be remitted outside India from a non-resident ordinary account. Rental income can be repatriated after payment of tax, wherever applicable.

A number of property management companies including MNCs have set up shop in major cities to extend property management services. This is a boon to NRIs and PIOs investing in India while living in other countries.

NRIs, while returning, can retain their foreign current assets acquired, held or owned while abroad, or inherited from a person who was a resident outside India even after return to India for permanent settlement. However, income earned from an overseas asset needs to be repatriated to India and credited to a resident foreign currency (RFC) account.

Source: http://economictimes.indiatimes.com/features/financial-times/nri-investments-in-property-set-to-grow-with-better-market-conditions/articleshow/11760883.cms

Real Estate Firms Drop Overseas Plans, To Stay Grounded in India

Real estate companies, which started venturing overseas around 2006-07, are reviewing their global plans. With the slump in international realty markets, many domestic companies are either withdrawing from weak markets or putting their global plans on hold, reports Business Standard. Raheja Developers, for instance, has shelved plans to enter markets such as Mauritius and Colombo. Hiranandani Group, which has a major presence in Dubai, has changed its strategy. It’s stopped launching new projects, and is focusing on completing existing projects for other developers on a contractual basis. Omaxe has already exited Dubai.

Darshan Hiranandani, director and chief executive officer, Hircon International, a joint venture between the Hiranandani group and ETA Star, told Business Standard the company was not launching any new project in Dubai due to the slump. “Our strategy is to complete the incomplete projects for other developers on a contractual basis.” According to him, 23 Marina in Dubai, which was recently completed, has been sold out. However, the launch of Business Bay, which the company says ‘coming soon’ on its website, will not be for sometime. He was optimistic the market would recover soon.

But Nayan Raheja, director, Raheja Developers, is not so hopeful about prospects of the international market. The Dubai market would not recover, at least in the next five years, he said. “Nobody should be looking at the Dubai market as of today,” said Raheja. Raheja Developers, which was evaluating opportunities to enter Mauritius and Colombo, is giving it a miss in the wake of the global economic and realty gloom. “There is negative sentiment internationally. At this point, we are not even considering venturing out,” Raheja said. Tata Housing is one of the few companies looking overseas at this point. After establishing itself in the Maldives, the company is looking at Colombo in Sri Lanka.

Its managing director and chief executive, Brotin Banerjee, said, “We are confident of finalising a few projects in Sri Lanka this financial year — Colombo will be one of the locations. All these international projects are being planned through separate special purpose vehicles formed for each country or project.” Banerjee said the company was in the final stages of due diligence for two mixed-use development projects of two million square feet each in Colombo. Of this, one could be affordable housing. “With peace returning to the island nation, real estate will be a big growth story there,” Banerjee said. Tata Housing has earmarked Rs 1,000 crore for various ventures in 2011-12. “We work on a multi-city strategy and projects targeting all customer segments and hence, a slowdown in some geographies or customer segments does not adversely impact us,” said Banerjee.

Omaxe Group entered Dubai in 2007, with a goal of expanding in West Asia. But after investing Rs 50 crore (the first instalment of a Rs 1,600-crore project) through a joint venture with Dubai World’s property developer, Nakheel, Omaxe withdrew from the market due to a near lull. “We got the investment back, as Nakheel put the projects on hold indefinitely,” said Rohtas Goel, chairman and managing director, Omaxe. And now, the company has no plan of expanding outside India.
According to Sunil Dahiya, managing director of Vigneshswara Developers and vice-president of the National Real Estate Development Council, it is not just real estate developers, but also construction companies, which are withdrawing from the Gulf. “Indian companies in West Asia, especially into construction projects, are experiencing a near lull, as no major work is happening there. The contractors are not being paid,” he said. At least 10 to 15 construction companies present in the Gulf are suffering from the slump. Real estate consulting firm Cushman & Wakefield’s chief executive for Asia Pacific, Sanjay Verma, said, “For those over expanded, it would be a sensible move to focus on their core strength at this point.”

Source:http://www.realtyplusmag.com/rpnewsletter/Fullstory_Newsletter.asp?news_id=18086&cat_id=1

Morgan Stanley to invest Rs 600 crore in Mumbai projects

The global real estate fund of Morgan Stanley is in talks with Mumbai-based Sheth Developers to invest $100 million to $125 million (Rs 530 crore to Rs 600 crore) in a residential project in Mumbai. The Morgan Stanley fund will invest in the unlisted Indian firm’s project in the western suburbs of Mumbai, Business Standard reported, citing sources.Morgan Stanley declined to comment and Sheth Developers did not return phone calls seeking comment. Sheth Developers acquired an 18-acre land parcel in Andheri from Borosil Glass Works in 2010 for about Rs 875 crore and plans to develop a large residential project there, said the sources.

If completed, the investment would be the first in India by the Morgan Stanley fund in three years, two of the sources said. The fund has invested about $750 million so far in India. In October, sources told Reuters that a bunch of investors including a fund managed by Morgan Stanley and the Government of Singapore Investment Corp are in separate talks to buy a Mumbai property from Indian textiles firm Alok Industries for about $200 million (Rs 1,100 crore). Last month, the Wall Street bank named Shirish Godbole as the head of its global real estate investment fund in India.

Indian developers have come under pressure over the past year as rising interest rates deter residential buyers and funding for builders becomes scarce as economic growth slows.

Source:http://www.realtyplusmag.com/rpnewsletter/Fullstory_Newsletter.asp?news_id=17729&cat_id=1

Investment in Real Estate by US NRIs dips but Bangalore retains top slot

The impact of economic slowdown has been increasingly felt on the overall demand pattern among US NRIs while investing in real estate back home. However, Bangalore continues to remain the favoured destination for investment in housing. But the quantum of demand has dipped over the years. An estimated 45 per cent of the US NRIs wish to seek home loans while investing in residential property across the country.

In a survey conducted during the 2-day property show organised by Priya Publications and REBI and held in Edison and Santa Clara during November 12-20 , southern cities drew more demand for investment in real estate. In bay area alone, Bangalore continues to remain as the favoured destination for techies as chances of re-employment are better in the city for returning NRIs. Whereas in Edison area, Chennai topped the list of cities for realty investment.

Other cities that evinced keen interest among NRIs include Ahmedabad, Pune, Delhi, Gurgaon , Mumbai, Hyderabad and Kochi. Among tier III cities that are driving demand specific mention must be made about Mysore, Mangalore, Vishakhapattinam and Coimbatore in south. Incidentally the level of interest for investment in Ahmedabad is up especially with the state receiving more foreign investment for infrastructure projects leading to better yield for investors.

Unlike earlier, demand for villas has surged with a significant number of visitors evincing keen interest to invest in villa projects in southern cities. Other categories of properties for which demand continues include office space, developed plot and retail units. A majority of the US NRIs are looking for professionally managed property management companies to manage their properties during their absence in India. The setting up of shops by MNCs like L J Hooker, Red Sky and Remax has encouraged them to look at additional investment in real estate.

The availability of guaranteed rental income properties has generated much interest due to minimal financial outgo and the flexibility to offset EMI payment against rental income every month. As developers are keen to manage such properties for the initial years, NRIs evinced keen interest to invest in such properties.

According to market sources, the overall situation is yet to improve though a majority of the techies are able to hold on to the jobs as there continues to be a demand for skilled jobs across US. However, those companies which are depending on the federal government for a chunk of its business are finding the going tough. For instance Cisco has laid off 10% of its employees all over the world because 20% of the revenue comes from the federal government spending.

Industry sources point out that 3-5 % of employees getting laid off is common in every company. Asset prices collapsed and three-fifths of households in the US saw their wealth decline between 2007 and 2009. More than a quarter lost over half of their wealth. America’s average annual unemployment rate zoomed upwards too when it went from 5.8% in 2008 to 9.3% in 2009 and 9.6% in 2010.

Source:http://economictimes.indiatimes.com/features/et-realty/investment-in-real-estate-by-us-nris-dips-but-bangalore-retains-top-slot/articleshow/11102105.cms

Fresh Govt push for retail, civil aviation FDI

The government has not given up on liberalizing the foreign direct investment (FDI) regime despite suffering a setback on allowing foreign retail chains to set up shop in India. Within a week of announcing a pause on FDI in multi-brand retail, it is beginning fresh consultations with stakeholders, starting Tuesday, to get the plan back on track. To begin with, the food processing sector and small and medium enterprises are being consulted, with farmer groups and traders to follow.

Separately, the finance ministry is in talks with the Securities & Exchange Board of India (SEBI) to see how foreign airlines that acquire stakes in Indian carriers are not bogged down by the new Takeover Code in completing transactions. The new rules mandate that companies acquiring 25% or more in another entity have to make an open offer for an additional 20% stake. If the rules were to be applied to the civil aviation sector, then the FDI ceiling would be breached as the Manmohan Singh government is planning to allow foreign airlines to acquire up to 26% stake in Indian entities, which has hitherto been a taboo.

Sources said the issue is expected to be sorted out over the next few days as all ministries – including civil aviation that initially suggested a 24% cap – are now on board. If everything goes according to script, the government is planning to get Cabinet clearance soon after the winter session of Parliament ends.

The move, which is back in favour after a decade, is expected to ease the pressure on debt-laden airlines such as Vijay Mallya-promoted Kingfisher. While Indian airlines were earlier resisting the entry of overseas giants, they are the ones who are now keen on a partnership. Ditto for FDI in multi-brand retail where again, Indian promoters are now hoping that global chains will tie up with them and also ease the burden.

While a part of the discussion is aimed at getting feedback from the stakeholders, a major part of the exercise will focus on educating them about the advantages of allowing foreign retailers who are expected to bring in new technology to reduce wastage, generate jobs and help local vendors scale up to meet international standards. The discussions are also expected to focus on providing additional safeguards to protect local interests. Last week, the government had said it had decided to put the plan to allow 51% FDI in multi-brand retail on hold till a consensus was reached.

Source:http://timesofindia.indiatimes.com/business/india-business/Fresh-govt-push-for-retail-civil-aviation-FDI/articleshow/11088671.cms

Canada Based PE Fund SITQ Decides to Shut Down Indian Operations

Canada-based PE fund SITQ, which had plans to invest up to $1.6 billion in the Indian real estate sector, is shutting down its operations in the country. The fund has not been able to identify deals in the ‘right value’, said a person with direct knowledge of the development. SITQ, which is a part of Canadian business group Caisse de depot et placement du Quebec, merged with Ivanhoe Cambridge, another PE fund of the group, in July this year. The fund manages a portfolio of $30 billion across 24 countries. Its assets include office buildings, business parks, hotels, apartments and retirement homes in cities across Canada, US, France, UK and Germany.

It entered the Indian market in 2007, with a focus on the real estate sector. A year later, the impact of global recession was being felt in local markets leading to a lull in corporate activity and a drop in deal flow right up to 2010. “We did not find the right formula to make direct investments in India and direct investments take time to achieve,” said a company spokesperson over an email response. “As we are always on the lookout to increase our global presence especially in high growth markets such as India, we will keep monitoring the situation and may re-evaluate our position over time.”

SITQ planned to make direct investments in India, and appointed Aditya Bhargava as managing director to devise strategy and scout for investment opportunities. So far, its investments in the country have primarily been routed through the ‘fund of funds’ route, a situation where PE firms invest in other funds that in turn invest in companies. SITQ, which has so far invested in funds of other real estate funds dedicated for the Indian market, plans to continue its investments through the indirect route.

“It is a challenge for the overseas real estate firms to invest in Indian realty firms. Besides the regulatory issue, there is hardly any exit route due to poor capital market and non-availability of the real estate investment trust,” said Yogesh Kapur of Enam Securities. PE funds primarily invest in residential projects, which are self-liquidating at completion.

India Based Pacific Real Estate Development Plans to foray into Dubai Real Estate

India-based Pacific Real Estate Development has announced its first property venture in Dubai, the 28-storey luxury tower at Tecom Media City.Announcing the launch, Parvez Khan, founder, Pacific Real Estate Development said, “We are very positive about the real estate market here. Everywhere in the world, the business environment is currently going through upheavals, but we are confident that Dubai will remain a key investment hub for serious property investors who will appreciate the value of a Pacific Waterfront property.” According to Khan, Pacific Real Estate is sufficiently capitalised and has the necessary resources to complete projects it has started.

“By 2015, we would have completed our first luxury property development in Dubai, and it will be first of many projects we envision for this market and the rest of the Mena region as newer projects on tourism, education and healthcare are announced and completed which will open up anew a demand for residential and commercial development,” he stated. “It makes more business sense to position ourselves now than later when the market is bound to pick up again,” Khan said. In addition to its plush amenities and sophisticated design, Pacific Waterfront will be a mixed use luxury development that utilises solar technology for most of the buildings energy requirements.

“It will be the lowest maintenance residential luxury apartment to invest in. Everything starting from the walkways to the gyms to the lights in the building will be maintained through solar technology hence the residents will not be paying a heavy maintenance that they do otherwise for most constructions here or in India,” Khan explained. Pacific Real Estate, he said, has a track record of completing similar projects in India, and as a result has earned a sterling reputation in developing luxury properties known for high quality and eco-friendly features.

According to the latest Ernst and Young report, 2013 will see an additional 60,000 units to Dubai Dubai’s property market, which currently has a residential supply of around 300,000 units. Pacific Real estate development is also in the process of acquiring new projects in the upcoming Business bay area and Dubai sports city along side Pacific Waterfront in Tecom, he added.

51% FDI in Retail: Govt Looks for Support from Allies

The Prime Minister will meet leaders from key ally parties this morning in Parliament to gauge their support ahead of a possible vote on his new policy to allow 51% foreign ownership of store that stock different brands. The Congress must have the DMK and Mamata Banerjee on board – both parties have 18 Lok Sabha MPs each. While the DMK has agreed to support the government, Ms Banerjee’s party, the Trinamool Congress, has not changed its mind. Senior TMC leaders like Dinesh Trivedi said this morning that they cannot support a move that will allow international super-chains to sell directly to Indian consumers.

As the government does its math, lakhs of traders are on strike across the country. And Parliament remains paralysed. Both Houses have been adjourned till noon – the eighth day with no business being transacted in Parliament. The government has to either face a vote, or suspend its decision on FDI.

The vote on Foreign Direct Investment or FDI in retail is what the opposition has been pushing for- the BJP’s Sushma Swaraj has said the government does not have the confidence of the House on its reforms in retail. The BJP now wants the vote to follow a debate on an adjournment motion of its choice -the text of which asks for a “rollback” of the government’s policy. Last night, Finance Minister Pranab Mukherjee called BJP leader LK Advani and offered a one-line adjournment motion; because it did not refer to a revocation of the FDI policy, Mr Advani rejected it. He said the draft of the adjournment motion placed by the BJP is “non-negotiable.” But Mr Mukherjee told Mr Advani that the Prime Minister is not in favour or reversing his decision.

The DMK has already said it will support the government in a vote. Now, the Congress needs to win over Ms Banerjee, the Chief Minister of West Bengal. So far, she has said she wants the PM to ban any FDI in retail because the livelihood of thousands of farmers and traders is at stake.

The Congress has backed the Prime Minister and said there is no question of changing its stand to allow FDI in the retail sector.”The PM has made it clear that it is a well thought-out decision and the party supports it,” said Congress spokesperson Manish Tewari. Commerce Minister Anand Sharma told NDTV, “There is no question of a rollback.”

The half-way mark in the Lok Sabha is 272. With the TMC and the DMK, the government manages 282 votes. Without either of those parties, it drops to 264 votes – which means it loses the confidence of the House on the issue of FDI in retail. The government would then have to withdraw its reforms in FDI; the loss of moral authority would be hugely damaging.

Read more at: http://www.ndtv.com/article/india/fdi-row-showdown-set-to-worsen-after-advani-rejects-pranab-s-offer-154305&cp

Around 50% UAE NRI’s Planning to Buy Property in India

Nearly half of non-resident Indians (NRIs) plan to buy property in India for investment purposes, according to a survey released by Sumansa Exhibitions. Conducted amongst 15,000 NRIs across the UAE, the survey revealed that Mumbai and Delhi grabbed the top spots as the extremely viable options for property investments since the cities continued to be the most robust real estate markets in the country.Pune, Gurgaon and Noida have emerged as hotspots for investments making it to the top five list of favourable cities. The study further indicates that NRI’s are not necessarily looking at their hometowns for investments.

Sunil Jaiswal, CEO of Sumansa Exhibitions, organisers of Indian Property Show, said: “The survey result is not surprising as Mumbai and Delhi are the most promising markets as far as RoI (return on investment) and net profitability is concerned. Both these cities enjoy commercial prominence, location advantage and increasing wealth, as such the growth momentum either has continued or is stable even if the world markets have experienced economic crisis. Factoring all the advantages these cities have, the scene will not change in near future. NRI does still consider that investing in these cities will be profitable. Pune, Gurgaon and Noida are in the top 5 as they enjoy the advantage of being in close proximity of the main cities.”

Honey Katiyal, CEO, Investors Clinic, India’s leading real estate consultancy, said: “NRIs are choosing other cities apart from their hometowns and especially Mumbai, Delhi, Pune, Gurgaon and Noida, which reflects the sentiments that the investors are looking for good investment options for increasing their wealth. These cities are favourable as investors can make good profit as the real estate prices in past few years have spiraled enormously and will witness upward trend in future, barring 10-15 per cent correction in some parts of these cities, plus the cities give good rental income. Home loans and other facilities from Banks & Builders can also be availed quickly, all this makes them good options for investment. We as one of the India’s largest real estate management consultancies have seen this trend and expect the same to continue in foreseeable future”.

Katiyal said NRIs stand to gain from the sharp slide in rupee over last two weeks. The rupee has depreciated more than 16 per cent against the US dollar since July 2011. This has made homes in India increasingly cheaper in dollar price terms, an attractive proportion specially at a time the real estate sector in the developed markets remain depressed. Little wonder then, NRI’s have been looking at the homes back home with renewed interest.

Uproar in Parliament over Govt’s Decision to allow FDI in Retail

The Lok Sabha and the Rajya Sabha were adjourned till noon, minutes after the two Houses gathered on Monday, as a united opposition created uproar over government’s decision to allow FDI in retail. The opposition members were up on their feet shouting slogans against the government.

In Lok Sabha, plea for calm by Speaker Meira Kumar fell on deaf ears. In the Rajya Sabha also the members refused to listen to the Chairman. Several parties are expected to move adjournment motion over the issue in both the Houses.
The opposition parties had given a clear indication to disrupt proceedings to raise the matter of FDI in retail.

The govt if also facing fire from some of its key allies who have openly opposed the move to allow FDI in retail. The opposition parties are trying to rope in these parties to isolate the govt.