HDFC to raise Rs 3240 cr from FDI

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They say, "When it pours, it pours heavy". It is indeed pouring
heavily in India. Apart from the torrential rains the FDI is also
pouring into the country, which is expected to quadruple in the next
seven years. Gone are the days when the government was reluctant in
allowing foreign companies to enter the Indian market. These days
India and China are branded as the best places to invest for at
least another 25 years and no surprises foreign organizations are
competing big time to be a part of this FDI spree. The latest
participator is the housing finance leader HDFC. The proposal of
HDFC o invest a staggering Rs 3240 crore ($720 mn) into the Indian
real estate business has been a given an affirmative nod by the
Cabinet Committee on External Affairs.

India is currently holding the position, which was
formerly held by the US (in the post war years) as the best place to
invest thanks to the burgeoning economy and scrupulous economic
planning. The Real Estate Market of the country deserves a special
mention, which is expected to grow from the current $12 bn market
position to an Himalayan $90 bn in the next decade, courtesy Merrill
Lynch. May be that will be an eye opener for those who wonder at the
reason behind giants Farallon Capital Management, Morgan Stanley,
Merrill Lynch and GE Commercial Finance Real Estate craving to
dominate the Indian real estate space, needless to mention the local
players. Now HDFC has forayed into the market by registering India
Offshore Real Estate Investments, a fund raising company in
Maurtius, which will invest in the Indian real estate. Its inviting
International Banks, Financial Institutions and high network
Individuals to invest in the fund for a minimum period of three
years.

This investment plan of HDFC has direct implications on
1) Its own revenue
2) The "home country" economy and
3) The market capitalization of local players

HDFC has made many smart moves in the past, joining hands with SBI,
being one such and this investment plan is another strategic move,
every economic pundit would say. The Indian government has signed a
treaty not to tax the Mauritius investors, which will directly
benefit HDFC. The stock value has already increased by 3.07% in BSE
and the future looks really rosy for the organization.

The liberalization and the globalization binge have benefited
the country largely with its economy growing at a breakneck speed.
This approval by CCEA will attract other international players to
pour in investments and thereby adding to the FDI revenue. It's a
win-win situation and surely India would cash in by making use of
these opportunities.

The real problem is for the Indian players who with their
already fragile investment now should meet this external pressure
from the foreign investors as well. If only they stand tall in this
competition, it would make the market positions more exciting and
the investors more interested. Companies like UB group of Vijay
Mallaya have the financial cushion and they can offer stiff
challenge to HDFC and only time will decide the winner.

Harish Krishnan