FDI in Indian Realty Sector falls to 1.94 percent

The FDI in the real estate sector between April 2009 and December 2011 has declined by a drastic 92 percent, primarily due to global financial crisis. According to a survey conducted by Knight Frank, FDI in real estate declined by 92 percent and its share in total FDI shrunk from 16.83 percent to 1.94 percent during this period.

The bursting of the US housing bubble in 2008 caused the values of securities tied to the US real estate pricing to crash, damaging financial institutions globally which eventually had ripple effects on the Indian economy impacting the Indian real estate sector the most, it said. However, 2011 witnessed a phenomenon of high property prices, high interest rate and low sales, the report said.


Due to stressed balance sheet and slowing sales developers resorted to selling land, TDR and non-core assets and some even resorted to pledging promoter equity. Private equity (PE) and high net worth individuals (HNI) money also salvaged the position of the industry. Fate of fund flow through IPOs, QIP and PE is also similar. As a result, all hope is stemmed on revival in sales, which is imminent on either a robust economy or lower property price," it said. 


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