FDI boost for realty

BHUBANESWAR: The Union government's announcement in Budget 2014-15 of relaxed norms for foreign direct investment (FDI) in the real estate sector will give a huge boost to housing projects in tier II cities like Bhubaneswar, real estate developers here believe.
The Centre eased criteria for FDI by reducing the minimum size of projects from 50,000 square metres to 20,000 square metre and investment amount from at least US$ 10 million in a project to US$ 5 million.
"Bhubaneswar is a potential real estate market as it is coming up as an alternative to Kolkata in eastern India and because of big ticket industrial projects such as Posco within a 200-km radius. But the real estate sector here is facing funds crunch. Most projects were not eligible for FDI due to small sizes. The changed criteria would ensure many projects bag FDI," said D S Tripathy, a city-based developer and joint secretary of the Confederation of Real Estate Developers' Association of India (Credai).
Till date, fewer than five projects in the state capital had attracted FDI before the latest revision in norms as a project size of 50,000 square metres built-up area is rare. "The changed norms would help Bhubaneswar and other such tier II and tier III cities. It is now for potential investors to weigh if the market here has enough investment potential. Things will also depend on activities in other sectors such as steel and mines in the state," said Anup Mohapatra, another developer.
Builders are upbeat about FDI prospects because these would be mostly in the form of equity investments, ensuring easier flow of funds at lower interest rates. "Such investors look for profit in investments as partners, not in interests of their funds, unlike banks. In case of bank loans, the interest rates are higher. Since bank loans have to repaid in a short period of time, developers are apprehensive about relying too much on banks, because of what would happen if they failed to sell the project within the stipulated time period," Mohapatra said.
Association for Odisha Real Estate Developers' president Umesh Patnaik said some of the FDI would translate into profits sooner than later. "Many non-resident Odias would invest. Some of the pending projects progressing at slow pace due to fund crunch would be completed soon," he said.