FDI in real estate becomes more transparent and flexible
The government on Tuesday removed the minimum restriction of 20,000 sqm for FDI as also the minimum investment of $5mn in real estate.
Nov 11, 2015
Source : Toi


MUMBAI: The centre has streamlined FDI in real estate, made it more transparent and offered greater flexibility to foreign investors to invest in India's property market, as part of a move to open up the economy even further. 

The government on Tuesday removed the minimum restriction of 20,000 sqm for FDI as also the minimum investment of $5mn in real estate. New rules mandate that a foreign investor will be permitted to exit and repatriate foreign investment before the completion of project under an automatic route. This is provided that a lock-in-period of three years, calculated with reference to each tranche of foreign investment has been completed. Exit will be permitted at any time if project or trunk infrastructure is completed before the lock-in period. 

Welcoming the announcements, Adi Godrej, chairman, Godrej Group said the foreign investment was allowed in large projects but it can now get foreign investment in smaller projects as well. "For Godrej Properties, we will be open to foreign investment in some of the projects,'' he said. 

Solicitor Parimal Shroff, who specialises in real estate, said the minimum restriction of 20,000 sq m in construction development projects and minimum investment of USD 5 million had created obstacles for foreign investors. "Now there is no bar regarding the project size and investment amount,'' he said. 

There will also now be no lock-in period for FDI investments into hotels and resorts, hospitals, SEZs, educational institutions, old age homes and NRI investments, Anuj Puri, chairman & Country Head, JLL India said. ``This will allow for greater and smoother flow of FDI into all these categories. It will encourage developers to get into SEZ assets in a bigger way, and simultaneously allow for greater NRI investments into Indian real estate''. Since FDI can now be brought into the construction sector in any amount and for any size, it will have a huge positive impact on the housing sector, and more so on the affordable segment, which was so far not a beneficiary of FDI in any significant manner, he said. 

FDI will, however, not be allowed in an entity engaged in real estate business, construction of farm houses and trading in transferable development rights (TDRs). ``Real Estate Business will mean as 'dealing in land and immovable property with a view to earning profit therefrom and does not include development of townships, construction of residential/ commercial premises, roads or bridges, educational institutions, recreational facilities, city and regional level infrastructure, townships. Further, earning of rent/ income on lease of the property, not amounting to transfer, will not amount to real estate business,'' the note said. 

100% FDI under automatic route will now be permitted in completed projects for operation and management of townships, malls/ shopping complexes and business centres. 

Though appreciative in principle, Pranay Vakil of Praron Consultants, however, said there is unlikely to be any "windfall effect".

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