India 5th best country for real estate investment: report

India is ranked as the fifth most attractive destination for future real estate investments in a list topped by China, according to a latest report of FICCI and Ernst and Young.

In the list of top nine attractive destination for real estate investments, China is followed by the US, UK and Singapore.

"India ranks fifth on the overall index, as it scores better on the country economy development index and the real estate market index, but fairly low on the regulatory index," the report released here said.

As per the report, there is no single clearance system for approval of investment in real estate sector in India. "In addition, the approval system is not time-bound and take up to two years," it said.

On China, it said: "Even amid cautious market sentiments and tightening of government policy, China remains attractive as an investment destination primarily due to its impressive economic growth record and favourable demographics."

However, India has the potential to even overtake the Chinese attractiveness, "if government allows real estate investment trust (REIT) and real estate mutual funds (REMF)," said Dean Hodcroft, E&Y's Head of Real Estate for India, Europe, Middle East and Africa here.

Globally, REITs and REMFs have contributed significantly to the real estate finance and developers overseas have capitalised on the growth potential of the sector, the report said.

"However, this source of finance has not seen a similar response in India primarily due to policy issues and lack of clarity on government's intention to promote such alternative source of funding," it noted.

 Hodcroft observed that while global investors are wary of investing in China as they are concerned that Beijing can change the policy anytime, New Delhi should strive to make regulations more investment-friendly.

"India has a strong macro economic story which needs to be supported by some regulatory changes like availability of liquid vehicle for investment such REMFs and REITs," he added.

Hodcroft said as much as $200 billion private equity fund is waiting to be invested globally and India has a chance to get more than its fair share.