Foreign funds are playing a big role in fuelling the real estate boom in the country. “Foreign funds which are sitting on huge money are pumping dollars into the realty sector. This is a major reason for the sustained rise in real estate prices in metros,” says HDFC chairman Deepak Parekh.

“There’s too much money in the real estate market... now the situation is that too much money is chasing shrinking real estate in the country. Prices were rising because of the surplus liquidity,” he told The Indian Express. Realty prices had risen by 100-300 per cent in metros across India in the last two years.

According to Parekh, foreign funds found are bringing a huge money for investing in real estate projects. “These funds don’t want to miss the action in India which is witnessing a high growth rate,” he said. However, retail investors are yet to participate in the realty sector as an investment option as the Sebi has not allowed funds to come out with schemes which will allow them to invest.

Parekh says the high prices are unlikely to sustain for a long time. “Personally speaking, prices cannot sustain at high levels for a long time,” he said, hinting at a correction. The new FDI rules have attracted a host of foreign investors and real estate companies are hogging the limelight on the stock exchanges. Concerned over the massive inflow of money into the realty segment, the Reserve Bank of India (RBI) tried to bring some sanity by restricting the flow of money. However, foreign funds are circumventing this by opting for the FDI route.

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