Position and holding of Foreign Investments in the Real Estate Market

According to surveys, the valuation and amount of foreign investment in Indian real estate
market has been escalating at a 30 percent rate over the previous few years. Approximately 80%
of the real estate produced in India is domestic and for residential purpose, with the remainder
consisting of corporate spaces, retail centers, resorts, hotels, lodges and even hospitals. The
offshoring industry, which includes advanced tech consulting and software engineering homes, is
primarily responsible for this phenomenal rise. The real estate market in India has struck an all-
time high in the market. This industry has always been one of the most dynamic industries
which provides for 7% of the country's GDP and serves as one of the most effective and vital job
and employment generators.

FI in Indian Real Estate Industry Analysis

In that fashion at which India is rapidly growing, where cities and metropolitan sectors are
growing exponentially, real estate and infrastructure have become critical development elements.
By 2025, the real estate industry is expected to contribute for 13% of India's GDP, and by 2040,
it is expected to expand to $9.3 billion from ballpark $1.72 billion in 2019.1 The government has
also increased the foreign direct investment (FDI) quota for metropolitan and community
development projects to an even 100 percent. FDI is also allowed in real estate developments
within Special Economic Zones (SEZ). Between April 2000 and June 2021, FDI in the industry,
which includes all real estate functions, totaled $51.5 billion.

In March 2021, $497 million was invested in real estate, accounting for 35% of all FPI inflows.
The real estate sector received the most capital inflows in the second half of March. While
foreign portfolio investors (FPIs) have been dumping Dalal Street stocks in recent months owing
to concerns about earnings downgrades as a result of Covid 2.0, inflows into the real estate sector
have remained steady. In April, real estate stocks received $213 million in net inflows, compared
to $710 million in March.

According to a report in the Economic Times, India received USD 7.5 billion in foreign direct
investment (FDI) in the fiscal year of 2006- 2007. During the initial half of 2006, real estate
received a record amount of foreign direct investment (FDI) of USD 3 billion. The Emaar Group,

1
Indian Real Estate Industry Report ( November 2021).
located in Dubai, brought in the most money, with USD 850 million invested during the first part
of 2006.

As for capital inflows from foreign investment, this market found gold and witnessed a hike in
the years 2007 and 2008 when equity investment lead up to 14 billion USD.

However, a bearish trend followed due to restricted exit alternatives after 2008, most money left
from India. As a result, just $3.4 billion in FDI was invested in the real estate industry in 2009-
14, the six years that followed.

The 5 fiscal years preceding 2020, saw a staggering surge of 16.6 Billion USD. Singapore-based
funds were the first to invest after 2014, trailed by investors from the United States and Europe.

The Colliers- FICCI report

 According to the Colliers- FICCI report, ballpark 64 per cent of the total investments in
Indian real estate came from foreign investors during the 2012-21 period.
 When compared to the preceding five years, foreign capital flows into Indian real estate
increased by more than thrice to USD 23.9 billion in 2017-21 and made up around 80%
of the same.
 In terms of FDI inflow however, infrastructure and construction industry has been
declared the third biggest market surpassing the residential sector.
 Residential assets' proportion of overall foreign investments has dropped to 11% in 2017-
2021, falling from 37% in the previous five years.
 Apart from corporate and blended properties, investors from the United States and
Canada continue to actively investigate the industrial segment.
 Correspondingly, the commercial, industrial, and logistical sectors get the majority of
Asian investments.

For the last seven years, India has garnered record FDI inflows, thanks to the government's many
investor-friendly programmes. They include the following:

 Defense, building development, pensions, pharmaceuticals, and civil aviation all have
major FDI policy revisions and reforms.
  The 'Make in India' project was launched to encourage foreign investment in India's
manufacturing sector.
 With the exception of a few specific sectors, 100 percent FDI is permitted via the
automatic route in industries such as construction, vehicle manufacturing, and food
processing.

Residential space accounts for over 80% of all real estate in India, with office space, retail malls,
hotels, and hospitals accounting for the remaining 20%.

Except for non-resident Indians and Persons of Indian origin, foreign direct investment in the
real estate industry was formerly prohibited in India. The Reserve Bank of India only allowed
100 percent FDI in the township, housing, built-up infrastructure, and building development
project sectors in 2005. This was, without a doubt, one of the biggest turning point policy
choices made by the Union Government during that period. Following a period of low FDI
equity inflows in the industry from 2009 to 2013, the government decided to modify these rules
and requirements in strategy to garner more foreign investment.

Further relaxing FDI rules, the government agreed in 2018 to allow 100% FDI through the
automatic route in the construction industry development segment, which includes townships,
housing, built-up infrastructure, and real-estate brokerage services. The automatic route denotes
regulation that is less restrictive or more liberalized. The foreign investor or Indian firm does not
need the Reserve Bank or the Government of India's approval to invest via the Automatic Route.

FPIs (equities, shares and debt instruments)

Required Documents to register as an FPI in order to invest in equities, debentures

 Proof of the Applicant's Address-