The
real estate market in India is undoubtedly booming with local
demand for housing and office space incredibly intense; but
the market has to be considered as an emerging market by investors
because the laws relating to foreign direct investment into
the real estate market in India are so restrictive that profiting
from India’s property sector is far from straightforward.
If you’ve read around this site you
know that we always try and present a potential property investor
with the buying process for each country we cover, but when
it comes to how to buy investment real estate in India we
do not have the definitive answer! We have however collated
certain facts and figures that we hope will be of assistance
to anyone hoping to enter the property market in India.
First things first there were well publicized
changes made to the laws relating to foreign direct investment
into the real estate sector back in February 2005 that now
mean that non-resident Indians (more commonly referred to
as NRIs) and Overseas Corporate Bodies (OCBs for short) can
invest up to 100% in the housing sector.
Furthermore the aforementioned groups of people
can also invest up to 100% in ventures relating to the construction
and real estate industry. For a foreign company to be considered
an Overseas Corporate Body and be eligible for direct real
estate investment in India they have to have at least a 60%
NRI holding.
The Government of India also has certain rules
in place that allow foreign investors to purchase commercial
property in India if that real estate is to be used by the
company for business purposes.
The majority of projects where FDI is allowed
have a tie in investment period of a minimum of 3 years to
prevent speculative investing, but the good news for companies
or NRIs wishing to get into the investment property market
in India is that investing in smaller projects is now a real
possibility. Before FDI was only allowed on projects on sites
in excess of 100 acres, this has been reduced to 25 acres.
For individuals wishing to enter the property
market in India the easiest way is to buy into an investment
fund. The changes to the laws relating to FDI and also the
real estate sector in general that were announced back in
2005 saw investment fund rules relaxed to the point where
many experts believe a real estate investment trust (REIT)
sector could now emerge.
In the meantime there are a number of attractive
and transparent funds available from reputable investment
houses that allow individuals hassle free entry into the real
estate market in India.
In terms of the state of the property market
in India care must be taken when acquiring any land or real
estate because the title deed registration process is not
up to date and independent legal advice should be taken at
every stage of the property buying process.
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