Investment in Real Estate sector in India

1
Investment in Real Estate sector in India

• Multiple Buildcon Pvt Ltd
• Delhi

2
Investment Scenario - India

• 2 ways of investment in Real Estate Housing
  sector
• Direct Route
• RBI Approval Route or Alternate Route

3
Direct Route of Investment in Real Estate
Housing Sector - 1

• What does this mean
• No approvals required
• Indian company can well receive funds from their
  foreign partner through proper banking channels
• Who is allowed
• Only NRIs (Non resident Indians) are allowed to
  invest upto 100 in the real estate housing
  project
• Pls refer pg 6 of presentation for alternate
  means of investment and fully legal

4
Direct Route of Investment in Real Estate
Housing Sector - 2

• What is the definition of Real Estate Housing
  Project under legal parlance
• Development of serviced plots and construction of
  built up residential premises
• Investment in real estate covering construction
  of residential and commercial premises incl
  business centres and offices
• Development of townships
• City regional level urban infrastructure
  facilities, incl both roads bridges
• Investment in manufacture of building materials
• Investment in participatory Ventures in a c
  above
• Invetsment in Housing Finance Institutions which
  is also opened to FDI (Foreign Direct Investment)
  NBFC (Non Banking Finance Co)

5
Direct Route of Investment in Real Estate
Housing Sector - 3

• What is the definition of Real Estate Housing
  Project under legal parlance
• Development of serviced plots and construction of
  built up residential premises
• Investment in real estate covering construction
  of residential and commercial premises incl
  business centres and offices
• Development of townships
• City regional level urban infrastructure
  facilities, incl both roads bridges
• Investment in manufacture of building materials
• Investment in participatory Ventures in a c
  above
• Investment in Housing Finance Institutions which
  is also opened to FDI (Foreign Direct Investment)
  NBFC (Non Banking Finance Co)

6
Direct Route of Investment in Real Estate
Housing Sector - 4

• Under recent guidelines in 2006 (further to IEM
  Regulations 2005 dt 19-7-2005), 100 of FDI is
  allowed under Townships, Housing, builtup
  infrastructure and construction development
  projects. The sector would include but not
  restricted to housing, commercial premises,
  hotel, resorts. Hospitals, educational
  institutions, recreational facilities, city and
  regional level infrastructures SUBJECT to
  following guidelines
• Min area to be developed under each project shall
  be as below
• Development of serviced housing plots 5 Ha
• Construction Development project 50000 sq Mtr
• In case of combination, any one of the above 2
  conditions

7
Direct Route of Investment in Real Estate
Housing Sector - 5

• The investment shall be subject to following
  conditions
• Min capitalisation of USD 10 mil for wholly owned
  subsidiary and USD 5 mil for JV with Indian
  Partners. The funds would have to be brought in
  within 6 months of commencement of business of
  the company
• Original investment can not be repatriated before
  a period of 3 years from completion of min
  capitalisation. However, investor may be
  permitted to exit earlier with prior approval of
  Govt through FIPB (Foreign Investment promotion
  Board)

8
Alternate Route of Investment in Real Estate
Housing Sector-1

• To have humble beginning in the real estate
  housing sector we propose the following proposal
  
• A Foreign investor can become a shareholder in an
  Indian co specifically formed for working in real
  estate sector
• Equity of foreign investor may be from 51 to 74
• For becoming equity partner, single window
  clearance from RBI is reqd wherein detailed
  project shall have to be submitted with basic
  details (normal time consumed for approval is max
  2 months)
• No min cap on the investment from foreign
  investor (it shall be Project specific)
• Funds transfer for purchasing equity through
  banking channels
• Remittance to Foreign director under regular
  dividend remittance route through RBI approval

9
Alternate Route of Investment in Real Estate
Housing Sector-2

• Benefits of our proposal
• No min cap on investment Even USD 1 mil can be
  invested
• To experience Indian Real estate market
• Proper documentation of funds transferred through
  banking channels complete accounting/accountabil
  ity
• Various smaller size project opportunities may be
  tapped like conversion of underdeveloped/developed
  industrial plots in NCR (national capital
  region) into offices for IT/ITES or big export
  houses

10
Alternate Route of Investment in Real Estate
Housing Sector-3

• Fall outs of our proposal
• RBI approval for inward outward remittances
• Project can be started only once funds are
  received
• Real Estate business is high return high risk
  and prone to various economic factors
• Our plans to overcome fall outs
• Lawyer Chartered accountant to be hired
  specifically for the RBI approval documentation
• RBI approval to be applied well in advance with
  basic project reports even the prior investment
  may done by Indian co. after scenario analysis
• Investment in Housing sector may be avoided upto
  Oct,07 as little slowdown whereas industrial
  commercial sector may be tapped for regular
  better returns

11
Conclusion

• NRI permitted to freely invest in real estate
• RBI approval reqd for smaller investments by
  foreign investors but in normal conditions it may
  be through
• Inward outward remittance of funds may be
  through proper banking channels
• Indian real-estate sector is all set to grow
  drastically in next 10-15 years you may partner
  us in benefitting alongwith the growth
• This is Food for thought.