New Delhi, February 03, 2018: The retail and real estate segments have much to cheer about following the government’s recent announcement to grant them 100% FDI (foreign direct investment). Industry players anticipate more job opportunities, ease of doing business and better funds. Here’s how the move impacts the two sectors:
Already going strong across major cities, the sector has witnessed sharp growth in the last couple of years. The current announcement to further liberate the retail segment by giving automatic approval to single brand retailers has helped consolidate the government’s intend to remove all concerns of international retailers thehindu.com
In addition, the removal of the 30% ‘local sourcing criteria’ for the initial five years, is an attractive offer for international retailers, who are eager to invest or expand operations in India. A Shankar, National Director, JLL India, says, “As there is limited organised and quality retail space for international retailers to occupy, we expect the move to have a positive impact on rental rates.” There are, however, concerns that encouraging international investments may overlook local manufacturers and negatively impact the Make In India movement. Addressing these issues, Shankar says, the relaxation on 30% local sourcing is only done to ensure that retailers start operations smoothly. “Once they establish themselves and post the completion of the five-year term, they will be mandated to source locally made produce thehindu.com.
Not only will a 100% FDI in single brand retail bring in better products, competitive pricing will come in to play and reduce prices further. We will now see many international brands such as Amazon and Walmart set up shop in India. The latest technological development they will bring along is a bonus. Pointing out how the initiative will open up jobs for both, skilled and unskilled labour, Chandrakant Kankaria, Director, Olympia Group, says international investments will translate into larger stores and better manpower. “If we see the economic prospects, the approval will allow large scale employment, benefit farmers by linking them to large retail outlets and also reduce large scale tax evasions,” he explains.
Grade-B mall owners will now get a chance to infuse fresh investments into their property and refurbish them to attract tenants. Investors may also be looking at buying-out struggling retail assets for refurbishment using fresh investments.
As per the announcement, ‘real-estate broking service does not amount to real estate business and is therefore, eligible for 100% FDI under automatic route.’ What does this mean for the realty industry? Experts explain that international companies having subsidiaries in India through their partners/other channels will now be allowed to invest further in real estate projects. This will also mean that only the few RERA registered brokerage houses/individual broking companies will be able to take advantage of the policy.
Ramesh Nair, CEO & Country Head, JLL India, says that now, establishing and growing large real estate firms 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 is a step towards an organised 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 market,” he says.
The Indian market is unorganised and fragmented to a large extent, but with RERA in force, all brokerage firms will now have to register themselves under the regulator. They will have to effectively declare themselves accountable for their business activities and practices, adds T Chitty Babu, Chairman and CEO, Akshaya.