I read an article recently giving details of an interview of Urban Development secretary M Ramachandran wherein he is answering a question asked on FDI. The Q & A is as follows:

Q- How will FDI impact the realty sector?

A- Government’s decision to permit FDI in the sector is a shot in the arm for the sector. It would lead to exit of smaller and unorganized players and entry of professional players. Fiscal incentives in the form of direct tax sops, including 100 per cent tax holiday for profits, are available for investors. I believe FDI in realty should be viewed in terms of its overall strengths, weaknesses, opportunities and threats. The strength is that FDI could result in huge influx of capital. This will happen only if the foreign investor finds the process hassle-free. FDI would bring cheap and maintenance-free technology. FDI has led to fall in prices in the telecom, electronics and auto sectors and the same could happen in the realty too.

Here Urban Development secretary is saying that FDI could lead to fall in property prices too. Is this happening. Is FDI really helping in real estate price fall or rise actually? IF you readers have any answer then pls do reply. And If what the secretary says is possible then my question is in which conditions??
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  • How can real estate be compared to -telecom, electronics and auto sectors. Telco, electronic and auto sector produce consumer good and foreign tech can help to bring the cost low and improve the quality.. "the land" can not be re-produced or manufactured - so for sure there will not be price reduction in the real estate sector like we have seen in Telco, electronics & autosector!!!

    Just see the trend in west - while prices have come done in the mentioned sectors there also, real estate prices have invariably increased!!!

    Are you sure a senior government official is making this statement?
    I also see a reference of "maintenance free low cost technology" - what is he referring here? The manufacturing technology or what?

    It will be great to read the complete article, so please do provide the link to original source.. sometime comments can be contextual..
  • It is saying of a govt official only


    I do agree with your point of view. But You can infact read the whole interview in following article published on The Economic Times


  • Thanks Vasu

    Thanks Vasu. Even though we both differ with him on his impact of FDI, his entire interview is encouraging for the industry!
  • but my question remains same... if anybuddy else has got a simple answer?
  • Originally Posted by Vasu
    but my question remains same... if anybuddy else has got a simple answer?

    The world has now started taking notice of India ‘s progress and importance as a global world leader and its contribution to world economy. In the wake of globalization India successfully takes a stand by introducing policies and concentrating on infrastructure development like improving means of transport and communication by introducing easy interstate connectivity in the form of national highways, efficient railways services and world class airport facilities. This has attracted MNC’s from all over the globe to participate in industries such as I.T., Mining, Infrastructure, Integrated township (residential/commercial ) etc. MNC'S are looking to India as outsourcing and production hub for Asian country because of the following reasons
    Due to the growth of real estate industries in Navi Mumbai; property rates of Navi Mumbai has shown growth of 200% to 250% as compare to last year. For example, tenders floated by CIDCO for plots in CBD Belapur area have also fetched bids as high as Rs. 66000/sq.mt against Rs. 27000/sq.mt. Just a year back.

    Same thing is happening in Pune market, the agriculural land in Hinjewadi( the IT hub) was available for Rs.17 to 18 lacs a acre in 2004, which now offered for almost Rs.2 cr. This is just happening due to investment done by FDIs in this belt.

    Thereforem the claim of the Hon.Secretary is not accceptable.

    J.K.Patil and associates