Dubai: Opinions have been sharply divided over it inside and outside of the Indian Parliament, but the planned Land Acquisition Bill could be a force of good for the country’s real estate sector, analysts say.
It “has wide implications for urban infrastructure and real estate development — the 2013 version mooted by the (previous) UPA government had several clauses that are difficult to implement”, said Ashutosh Limaye, National Director — Research at JLL India.
“There is a need to relax (a) few measures related to the 70 per cent ‘consent clause’, social impact assessment clause, and compensation structure. Also, as the (present) NDA government has suggested that for purposes related to defence, infrastructure and other projects of national importance, relaxation of clauses must be made.
“If these changes are accepted, it could act as a game-changer for real estate sector in India.”
The principal opposition to the Bill relates to concerns that it would be loaded in favour of ‘big business’ interests at the expense of the existing small land owners. And that the latter would not be fairly compensated for the land bought from them, with the government getting to call the shots.
While the Land Bill is still in legislative limbo, the Indian Government has already pushed through some big-ticket reforms to ease the flow of funds into Indian property markets.
These are:
The minimum area requirement that overseas investors can take in a project in India has been dropped to 20,000 square metres from 50,000 square metres;
The minimum capital requirement has come down from $10 million to $5 million; and
While earlier, foreign developers were not allowed to take out the invested amount before three years from completion of minimum capitalisation, today, they can take their money out or transfer their stake to another non-resident company before completing the project. (But this will require government approval.)
These reforms are at the heart of the decision by ArthVeda Fund Management to launch its Star Fund II, which targets overseas investors to get into Indian realty. “For sure, it (the reform) has greatly facilitated small-sized projects and mid-income housing, particularly after the reduction of minimum investment quantum and project area,” said Bikram Sen, CEO of ArthVeda. “And traditionally we are focused on these segments.
“(Foreign investor) interest did go down over the last four to five years — but we are seeing signs of a renewal of interest, particularly after the formation of the (current NDA) government.”
Incidentally, just this week, it was confirmed Goldman Sachs will invest $150 million for a minority stake in Piramal Realty, the development arm of Piramal Group. Founded in 2011, Piramal Realty has over 10 million square feet of commercial and residential projects under development in prime areas of Mumbai.
“As one of the leading investors in global real estate, Goldman Sachs has helped develop some of the world’s finest buildings, such as 15 Central Park West in New York and 16 Colleyers Quay in Singapore,” said Anand Piramal, Executive Director at Piramal Group.
“Their experience and expertise will further inspire us to build world-class developments in India.”
Since 2006, Goldman Sachs has channelled more than $2.5 billion into India. Globally, it is a dominant player in real estate with investments of around $43 billion.
“The (Indian) Government’s focus on simplifying regulation and boosting economic growth will kick start investment and consumption,” said Ankur Sahu, Co-head of Private Equity at Goldman Sachs in Asia. “Under such a cyclical recovery the demand for high-quality, modern housing and office space from a proven ... developer will serve to create a significant leader in Indian real estate.”
