FDI relaxation to boost investment
The government’s decision to allow 100% Foreign Direct Investment(FDI) under automatic route in the real-estate broking services is expected to boost the segment as this would enable international brokerage companies to invest in Indian counterparts and also set up their own subsidiaries here.
The move, according to experts, would help in formalizing the largely unorganized segment, create more jobs and offer professional services to property buyers.
“The Cabinet, through an amendment to the FDI policy has clarified that Real Estate broking services would not be classified as Real Estate business. Accordingly, companies undertaking such activities are eligible for 100% FDI under automatic route. This is a welcome clarification especially given the number of startups in this space offering innovative broking products,” said Bhairav Dalal, Partner – Real Estate Tax, PwC India.
According to ANAROCK Property Consultants’ Chairman Anuj Puri, the 100% FDI route had existed in previous years, allowing various multi-national property consultancies to enter India without local partners. Then, the route was closed down without notice or explanation.
However, he is of view that players who can benefit from opening up of FDI are limited, considering that only between 10-20% of property brokers and brokerages have registered themselves under RERA so far.
“As such, this is historically not a new provision, but the timing of its re-introduction is certainly right, with RERA now deployed and looking to have nation-wide coverage…While RERA registration will be the primary lodestone against which foreign investors will measure potential consultancies, they will also look at the level of corporate governance, reputation for transparent dealings and customer-centric culture,” Puri said.