FII, FDI demarcation in realty may net $50 billion

Written by Economy Bureau | New Delhi, Jan 30 | Updated: Jan 31 2008, 09:52am hrs
The governments decision to separate investments by FIIs from FDI in the real estate sector is expected to ease up flow of funds in sector, which is expected to require up to $50 billion by 2010.

The government has also allowed institutional investors to pump in money into the real estate sector, which will be kept outside the purview of FDI in the sector, before and after public offers, without the fear of breaching the FDI cap.

The CCEA has also decided to do away with the policy that makes it compulsory for foreign companies to divest up to 26% equity within five years for foreign companies trading in and marketing petroleum products. This will give a major boost to foreign companies operating in the sector.

In addition, the governments decision to allow FDI up to 26% and FII investment of up to 23% stakes in the commodity exchanges would be positive note for the countrys commodity exchanges.

Under the present norms, commodity exchanges can be set up by Indian promoters as companies under the Forward Contracts (Regulation) Act, 1952 to trade in agriculture products as well as other raw materials and contracts based on them. The government had made exceptions while allowing Fidelity to take stake in the Multi Commodity Exchange (MCX), one of three multi commodities exchanges in the country. Financial institutions, banks and stock exchanges such as National Bank for Agriculture and Rural Development (Nabard), Life Insurance Corporation of India (LIC) and the National Stock Exchange of India (NSE) hold more than 45% (15% each) stake in the National Commodity and Exchange Ltd (NCDEX), a national exchange.

Besides, institutions such as Indian Farmers Fertilisers Corporation (Iifco), Crisil and Canara Bank hold substantial stake in NCDEX. More than 25% of the stake in the MCX is held by Citibank India and Fidelity. The autonomy to the FMC and allowing FDI into commodities exchanges will definitely help boost the commodities trade in the country, said Jigesh Shah, MDand CEO of MCX.