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Foreign investors avoiding Indian real estate market

PUNE: Foreign investment funds are avoiding the Indian real estate market due to lack of regulation and political stability.

“The new government has the opportunity to make Indian real estate more investment-friendly and attractive by introducing a revised tax code. Until [there are] vital changes to overcome the tax hurdles, real estate investment trusts (REITs) — which can be a life-saver for Indian real estate — cannot take off,” Anuj Puri, Jones Lang LaSalle (India) chairman and country head told The Edge Financial Daily recently.

Anuj commented on India’s real estate’s expectations from Union Budget 2015 to 2016. The Union Budget is the Indian government’s annual financial statement that estimates the receipts and expenditure for the fiscal year from April 1 to March 31.

 According to Anuj, the upcoming Union Budget needs to provide tax incentives for renting out residential properties. To date, rental income is treated as a taxable income.

“Providing tax breaks specific to rental income will give a significant boost to the rental housing segment in the country, and help increase rental supply in the metros (major cities such as Mumbai, New Delhi and Chennai),” Anuj said.

He said the Union Budget should also provide more incentives to consumers of sustainable real estate in the country due to the greater need for stakeholders in the residential real estate sector to go green. He notes that most home buyers in India are reluctant to pay a premium for a green residential project.

Developers are unable to keep green development costs at par with non-green spaces due to low demand for green housing projects.

The Union Budget is expected to enable developers to get faster project approvals. This allows developers to beef up the supply pipeline, help bring property prices down and ensure that real estate remains viable as a business.

 

This article first appeared in The Edge Financial Daily, on February 6, 2015.

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