FOREIGN DIRECT INVESTMENT IN INDIAN REAL ESTATE REGULATORY EVOLUTION, SECTORAL TRENDS, AND FUTURE PROSPECTS
AUTHOR – ADITI PANDE, STUDENT AT AMITY UNIVERSITY, NOIDA
BEST CITATION – ADITI PANDE, FOREIGN DIRECT INVESTMENT IN INDIAN REAL ESTATE REGULATORY EVOLUTION, SECTORAL TRENDS, AND FUTURE PROSPECTS, INDIAN JOURNAL OF LEGAL REVIEW (IJLR), 5 (7) OF 2025, PG. 719-729, APIS – 3920 – 0001 & ISSN – 2583-2344
Abstract
The real estate sector in India serves as a crucial pillar of economic development, contributing substantially to the national GDP, generating employment, and fostering urbanization. Over the last two decades, India’s policy landscape on Foreign Direct Investment (FDI) in real estate has undergone a significant transformation. Initially characterized by stringent restrictions, the sector gradually witnessed liberalization, aimed at enhancing capital inflow, improving regulatory transparency, and bolstering infrastructural growth. This study critically examines the regulatory framework that governs FDI in India’s real estate sector, tracing its evolution through major policy shifts and reforms.
The research highlights landmark developments, such as the relaxation of sectoral caps, the introduction of Real Estate Investment Trusts (REITs), and the enactment of the Real Estate (Regulation and Development) Act, 2016 (RERA). These reforms have played a pivotal role in building investor confidence and redefining the investment climate. An in-depth analysis of the current regulatory environment identifies both opportunities and structural challenges, particularly in relation to minimum capitalization requirements, exit norms, and sector-specific investment channels.
Furthermore, the paper investigates recent trends and patterns of FDI inflows into different segments of the real estate sector, including residential, commercial, and infrastructure projects. It identifies major source countries—such as Singapore, Mauritius, and the United States—and highlights emerging investment destinations within India. The research also evaluates key factors influencing FDI flows, including economic liberalization, urban expansion, regulatory reforms, and global financial conditions.
Recent policy initiatives, such as easing FDI norms in affordable housing and infrastructure, the Smart Cities Mission, and the increasing formalization of the sector, are analyzed for their long-term implications. The study concludes that while regulatory liberalization has undoubtedly enhanced FDI participation, maintaining policy stability, strengthening governance frameworks, and aligning with global best practices will be critical for sustaining investor interest and accelerating growth in the coming years. Strategic recommendations are offered to ensure that the real estate sector remains an attractive destination for foreign investment.
Keywords: Foreign Direct Investment (FDI); Indian Real Estate Sector; Regulatory Framework; Real Estate (Regulation and Development) Act, 2016 (RERA); Real Estate Investment Trusts (REITs); Commercial Real Estate; Residential Real Estate; Infrastructure Development; FDI Trends; Investment Destinations in India.