FDI in Indian Real Estate Could Slow Down

With a credit squeeze facing global investors, foreign investment
in Indian real estate may not be so forthcoming, according to some investors. Raising capital for real estate projects could now be an uphill task for foreign investors, though India’s high returns of more than 30% could still attract some investment.

In 2005 the Government relaxed rules for foreign
investment in Indian
real estate. Global players including giants like JP Morgan, Citigroup,
ING and Credit Suisse responded by raising USD 10 billion.

However, legal
and political hurdles have prevented the utilisation of most of these
funds. Almost 90 to 95% of these funds remain unutilized.

The demand for homes and office spaces is overwhelming, and India promises
the highest returns in the world, ranging between 30% to 70 – 80%. Global
investors are banking on the Indian economy’s brisk 8% a year growth and high incomes to bring in the profits no other country can match.

Trinity Capital had raised USD 500 million in 2006, and has invested USD
450 million so far in Indian real estate projects. It plans to invest another
USD 2 to 5 billion over the next 5 years. The fund invests in property
and infrastructure projects.