Friday, October 5, 2007

Real Estate in India: A Survival Guide by Peter R. Russell, Jr., Senior Manager, Jones Lang LaSalle Meghraj, Hyderabad

A relatively young democracy – celebrating its 60th year of independence this year – India is still maturing economically and politically, and a thorough due diligence is required when considering India from an occupier or investor perspective.

Local developers are still responsible for the majority of new supply in most markets and their reliability on timelines and construction quality varies.

State governments play a key role in the viability of any particular market and a shift in power can cause major changes in the growth patterns of a city.

Furthermore, the economic vehicles created for IT companies are a source of much debate.

STPI, or Software Technology Parks of India, is a longstanding government agency, which provides tax benefits until 2009, and the extension of these benefits is unclear.

The result of this is that the majority of new requirements are looking at Special Economic Zones, or SEZs, which allow for up to 15 years of tax holidays for both occupiers and developers.

However, frequent changes in SEZ policy require companies to create a customized strategic plan with their tax consultant before commitment and occupancy.

Likewise, there is no clearly defined exit strategy for SEZs and developers are currently required to adopt a long-term hold strategy on these assets.

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