Recovery likely to be slow
The fund-starved real estate sector is yet to fully recover despite many positive growth impulses in the economy. Analysts have said this sector is still bogged down by weak demand and muted sales. They say the delayed reforms continue to…

The fund-starved real estate sector is yet to fully recover despite many positive growth impulses in the economy. Analysts have said this sector is still bogged down by weak demand and muted sales.

They say the delayed reforms continue to take a toll on the business sentiment, and it may take long before the sector gets stabilised with healthy long-term sustainable growth.

According to credit rating agency Crisil, India’s top 25 developers, making up for 95 per cent of the sector’s capitalisation, face the risk of refinancing Rs.3 billion($452 million) of debt.

These fund woes, besides delayed regulatory permissions, were responsible for large scale project delays and resultant cost escalations, badly affecting the sentiment of property buyers and investors.

Reports have said out of the total space of 3.2 billion square feet under construction across 25 cities, about 34 per cent of the space valued at Rs.1650.64 billion (1.32 per cent of GDP) was delayed by over a year.

On the investment front, it was a year of record inflow of foreign direct and private equity investments, with the funds by the latter touching a record high of $14 billion till October, 2015.

For the fund- starved sector, there was a foreign equity bonanza, waiver of entry and exit barriers, raising of approval limit for foreign investment limit from Rs.30 billion to Rs.50 billion.

Regulations have also shown doing away with area restrictions of 20,000 square metres and capitalisation of $5 million, besides allowing investment repatriation before project completion with three-year lock-in.

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