PDF: 2962 pages, 5.2 MB - Bay Area Council Economic Institute

Architecture/Urban Planning/Infrastructure
Real estate investment trusts (REITs) floated in Singapore have become popular as a means for landholders
to derive shorter-term returns on their assets in a market with a relatively low cost of capital.
Recent investment has focused on equity stakes in listed or pre-IPO Indian property development
firms rather than specific projects, since the Finance Ministry, Department of Industrial Policy and
Promotion (DIPP) and the Securities and Exchange Board of India (SEBI) clarified rules for foreign
institutional investors (FII) and foreign venture capital funds. To prevent speculation, foreign
investment in development companies is treated as foreign direct investment (FDI) rather than
portfolio investment, with minimum financial commitments and lock-in periods.
Investment has concentrated on 22 realty firms, emphasizing development in housing, retail, and
IT parks. Indian firms such as DLF Ltd., Unitech Ltd., and Oberoi Construction, which are already
holding large portfolios of property bought earlier at favorable prices, are particularly attractive; so
are developers with expertise and reach into Tier 2 and 3 cities. Banks such as HDFC and ICICI,
that are active in the mortgage segment, have formed respective joint ventures with Citigroup and
Portman Holdings, and with U.S. developer Tishman Speyer. Hong Kong, Singapore, Dubai, and
European investors compete aggressively in the market.
Non-resident Indians have more than $3 billion parked in tax-free rupee and foreign currency
accounts with Indian banks. Gradually, as opportunities open up, they are shifting that money to
equities, bonds and property. NRI ownership of non-agricultural property in India—through
purchase, inheritance, or gift—is now allowed without restriction, with sale proceeds and rental
income fully repatriable.
India had a total 110,000 hotel rooms nationwide at the end of 2006, a comparable number to
New York City and a tenth of the rooms available in China. The result—at least until the
November 2008 terrorist attacks at two hotels in Mumbai and the current downturn—has been
fully booked hotels in Delhi, Bangalore, and Mumbai, with rates of $500 per night or more not
uncommon. Many hotels operated at higher than 100% capacity in 2008, at times checking one
guest in within hours of checking another out, and charging both for the same day.
The tourism ministry expects 140,000 more rooms to be added by 2010, although industry estimates
are somewhat lower. Developers have pressed Indian Railways to privatize operation of its
Yatri Niwas budget hotel chain and free up more of its large landholdings for new tourist-related
development. They have also urged government to release more urban public land at auction, to
ease prices in the market.
Special economic zone (SEZ) development has been popular, especially as part of or in combination
with planned communities that offer workers housing and amenities within walking distance
of home. Since the Special Economic Zones Act took effect in February 2006, some 370 zones
have been approved, nearly 260 of them related to IT services and software. The zones offer export-oriented
tenants duty-free treatment for inputs, concessionary loans, and exemption from
income, service, sales, and alternative minimum taxes. Developers receive exemption from customs/excise
duties, income tax, alternative minimum tax, dividend distribution tax, central sales tax
and service tax.
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