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May 12, 2016

After the largest developer in China signed an MoU with Haryana earlier this year, more developers from China & other countries expected to follow suit

Given Prime Minister Narendra Modi’s focus on improving India’s stature amongst the global investment community, there has been a big shift in India’s image as a business and economic hub. And, with 100 percent foreign direct investment (FDI) now allowed into the real estate industry, it was only a matter of time before foreign developers made big announcements.

One of China’s most prominent developers recently signed a memorandum of understanding (MoU) to develop an industrial township in India’s northern state of Haryana. The US$10 billion investment, phased out over the next decade, is a landmark outlay by any Chinese company in India.

Another MoU signed between China Fortune Land Development Company Private Limited (CFLD) and Haryana will bring large format industrial parks to the state while Chinese construction company, Gezhouba, has in-principle agreed to invest INR 10,000 Crores in irrigation projects in Telangana state.

Other Chinese developers are interested in India and many are likely to follow suit and further larger deals expected throughout the rest of the year with more investment opportunities. With China experiencing its own domestic slowdown, local developers are keen to benefit from India’s growth story.

“This latest investment by China’s biggest developer will be one of its biggest so far, and significant even in the wider context of recent Chinese outbound investment. Even for the Indian real estate industry, it will be among the biggest investments in the residential and retail asset classes by a foreign developer,” says Ashutosh Limaye, Head of Research, JLL India.

Increased participation by foreign players is expected to help in the development of quality projects, which will benefit end-users and simultaneously create opportunities for Indian investors. But, this capital flow coming from overseas will need to employ innovative strategies in a bid to compete with local and well-established players and capitalise on India’s opportunities.

“Funds and realty players across the world are looking more confidently at investing in India. Chinese developers are keen to explore strategic partnerships and enter into joint ventures with Indian builders, and are particularly interested in large residential projects. There is likely to be an inflow of at least US$ 3-4 billion (or INR 198-264 billion) in investments from China into the Indian real estate market over the next three years,” says Shobhit Agarwal, Managing Director Capital Markets, JLL India.

Shobhit Agarwal,
Managing Director Capital Markets, JLL India

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