However, the benefits of 100% FDI will be only for a limited number of players in the real estate broking services sector
Real estate market may see merger and acquisitions (M&As) with the Union Cabinet approving 100% foreign direct investment (FDI) in realty broking services.
On Wednesday, the government clarified that "real estate broking service does not amount to real estate business and is therefore, eligible for 100% FDI under the automatic route."
On the decision, Anuj Puri, chairman of Anarock Property Consultants said, "Earlier, there was 100% FDI through approval route but, around five years ago it was discontinued. Now, it has been allowed by way of automatic route."
Big players, including JLL India, Knight Frank and Cushman & Wakefield entered India as a result of the earlier FDI regime.
However, the benefits of 100% FDI will be only for a limited number of players in the real estate broking services sector.
Bhairav Dalal, partner - real estate tax, PricewaterhouseCoopers, said, "This is a welcome clarification, especially given the number of start-ups in this space offering innovative broking products."
In other words, the newer venturers for example, Puri's Anarock Property Consultants, housing.com, makaan.com, magicbricks.com, etc. would benefit from the decision, as private equity and venture capitalists would bet on such firms.
"Few years down the line, we may even see consolidation and acquisitions happening because the FDI door has been opened," Dalal said.
But, in the next few years there would be joint ventures or global players will have a wholly owned presence in the India realty's broking space.
Ramesh Nair, chief executive officer & country head of JLL India, said, "The opening up of FDI for real estate brokers is a strong signal of institutionalisation of the services rendered towards real estate in India. With this, establishing and growing large real estate services firm will become more feasible, making it easier to raise capital for such services."
"The decision adds significance to real estate broking and consultancy business and prophesies the government's determination to advance the same into an exceedingly organised, structured and transparent market. Coupled with last year's reforms as well as India's emerging status as one of the fastest growing economies in the world, this decision will play a key role in global players exploring further avenues in the Indian real estate market," Nair said.
In 2017, with the introduction of the Real Estate (Regulation and Development) Act, 2016, brokers have to compulsorily register with the respective state authority. This move too is part of the larger measures undertaken by the government to make real estate an organised market.
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