DELHI: The UPA Government has formed a three-member Cabinet committee to examine the possibility of opening up agricultural land to Foreign Direct Investment (FDI), following a Union Urban Development (UD) Ministry proposal on letting foreign realtors buy agricultural land.
The Cabinet committee includes UD Minister Kamal Nath, Union Finance Minister P. Chidambaram and Union Minister for Commerce and Industry Anand Sharma.
At present, FDI is banned in farm land. Further, Indian banking rules disallow loans for the purchase of farm land even for domestic investors – except in the case of large-sized projects –to safeguard against speculative land acquisition and hoarding.
The UD Ministry’s argument is that as farm land is already being acquired for township development, permitting FDI will only help raise more funds for the purpose. Real estate developers will, in any case, be applying for land use change after acquiring farm land, the Ministry has said.
“When the proposal was put forth by the UD Ministry, the department of industrial policy and promotion (DIPP) declined to comment and said the decision rests with the Reserve Bank of India. Thereafter, there were concerns from other Ministries over relaxation of norms, so the Cabinet has decided that a three-member sub-committee will take a call on the issue,” said an official.
Another proposal, on relaxing the FDI regulations for the construction sector has been hanging fire due to lack of consensus on a host of issues, including the policy on purchases of agricultural land.
“As of now banks do not give loans for purchase of land unless it is part of a large development project, which will generate revenue. A common complaint against builders is that they collect money from prospective home buyers and then make them wait, because they then scout for land and apply for change of land use policy, all of which eventually delays projects,” said the official.