According to a recent report, the country’s developers may soon be able to get financial investment from abroad to complete their projects and provide homes to the buyers. Fast fact developers who are in the process of developing large integrated townships and affordable housing projects are expected to benefit the most.
If reports are anything to go by, government, along with the Reserve Bank of India (RBI), are set to ease the external commercial borrowings (ECB), for the real estate sector, in a bid to give a boost to the economy and the sector, in particular. Once these norms are eased out, REITs and InvITs will be allowed to access rupee denominated borrowings from other countries.
Speaking about the how the development will impact the real estate industry, Sanjay Dutt, managing director, India, Cushman & Wakefield, says, “The draft guidelines have been modified to make the Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs) eligible to issue rupee denominated bonds to foreign investors. In India, since the REIT market is yet to take off, the impact of eased ECB norms will not be visible. Once India’s maiden REITs get launched, the proposed guidelines would provide an impetus to the cash strapped sector. Developers who are in the process of developing large integrated townships and affordable housing projects are expected to benefit the most from the modified ECB guidelines.”
On the other hand, the guidelines also include a negative list which would exclude a few from raising funds through this route. Those that will not be able to benefit from the eased norms include real estate activities other than the development of integrated townships affordable housing projects, investments in the capital market and using the proceeds in the domestic market among others.
Prashant Malhotra, an independent financial analyst, says, “As the proposed ECB guidelines do not permit domestic firms engaged in a real estate activity from borrowing through the ECB route, it would become difficult for the developers to raise funds through issue of rupee denominated bonds to foreign investors until they list REITs in India.” With the present government being focused on opening the Indian market to the world, ECB definitely seems a logical step to boost the stagnant real estate sector in the country, which is in dire need of help.