Private equity inflows into Indian retail realty double

V Nagarajan, Gulf Today

India’s liberalised FDI policies – 51 per cent FDI in multi-brand retail and 100 per cent foreign direct investment (FDI) in single-brand retail under the automatic route (against the previous 49 per cent) — has attracted major global PE funds to double their investments in the Indian retail sector.

As per Anarock’s Private Equity in Indian Real Estate report, the total private equity (PE) inflows in the Indian retail sector between 2015 and 2018 stood at $ 1.84 billion. Of this, nearly $ 1.2 billion were pumped in between 2017-2018 alone.

US and Canada-based private equity (PE) funds together invested more than $1.13 billion into the retail sector, bestowing their faith on an industry riding on increasing consumerism which is pegged to rise to $ 3,600 billion by 2020.

 Tier 2 & 3 cities were high on the radar of the PE investors, who in the last four years infused almost half of their total investments into the retail sector in cities like Amritsar, Ahmedabad, Bhubaneshwar, Chandigarh, Indore and Mohali.

US-based funds like Blackstone and Goldman Sachs invested more than $ 1 billion funds into the Indian retail sector between 2015 and 2018. Of this, more than $ 700 million went into Tier 2 & 3 cities; just $ 300 million came to cities like Pune and MMR. Evidently, large PE funds have recognised the potential of smaller cities which continue to have a shortage of organised retail despite the rising disposable income and aspiration-driven consumption appetite being generated there.  

PE investors from UAE, Singapore and Netherland also showed interest in Indian retail during the period and invested close to $ 800 million into it.

Anarock data reveals that around 39 million sq. ft. of organised retail space is expected to enter the market between 2019 and 2022. Of this supply, approximately 71 per cent is expected to come up in Tier I cities, and the remaining 29 per cent in Tier 2 & 3 cities.


Q: I have invested in two apartments and both are self-occupied in Bengaluru. Now I am planning to invest in a larger unit and may dispose one of the units to reinvest in the new property? How do I minimise tax liability while seeking capital gains exemption. If I seek home loans is it allowed for the third property? Please advise. Narendran, Sharjah.
Generally, there are no restrictions under the tax laws or general laws on the number of houses which an NRI can invest. The capital gains exemption for investment in residential houses can be claimed under two categories i.e. under Section 54 for LTCG on sale of a residential house and under Section 54F in respect of long-term capital gains on sale of any other asset other than a residential house.

The central government’s interim budget 2019 has increased the limit for self-occupied house to two but the overall limit of interest which can be claimed remains at Rs 2 lakh whether you occupy one to two houses for self-occupation.

The benefit for deduction of repayment of principal amount of home loan can be claimed within the overall eligible limit of Rs 1.50 lakh.

Q: My family owns land in Hyderabad and we are planning to give it to a developer for joint venture for affordable housing development? Does the transfer of land attract GST and what is the rate of GST for affordable housing? Murtaza, Dubai.
As per para 5 of Schedule III of CGST Act, 2017, sale of land is neither supply of goods nor supply of service. You are not liable to pay GST on transfer of land to the developer for affordable housing development under joint venture.

The rate of GST for affordable housing is 1 per cent (no ITC) effective April 1, 2019. Affordable housing project means a residential house/ flat of carpet area of 90 sqm in non-metropolitan cities and 60 sqm in case of metropolitan cities, of which value does not exceed Rs4.5 million.

Q: I was allotted a plot by a developer but did not get the possession even after five years. When I complained, the developer wants me to take an alternate plot on extra payment. Am I compelled to take it? Prakash Dhorda, Dubai.
No. Prima facie there is a deficiency of service in your case. In a similar incident, the consumer redressal forum has held that non-allotment of plot and escalation of cost which was not based on any calculation, was liable to be set aside.

The court has directed the developer to recover the loss, if any, from those staff who were responsible for denying the possession of the plot. You have a valid case to represent to the appropriate authorities in the consumer court depending on the value of the property.