DELHI: Expressing concern over dip in FDI in real estate, Agriculture Minister Sharad Pawar has shot off a letter to the Prime Minister stating that tinkering of policies and agencies hounding entities receiving foreign funds is creating negative sentiments.
The realty sector has a potential to attract FDI of USD 30-40 billion, Pawar said, adding that the government's policy should be stable and investor friendly, and "genuine entities" should not be subjected to "arbitrary and coercive actions".
"Inherent growing demand of housing sector coupled with conducive tax policies of the government had earlier resulted in increased interest of foreign investors in this sector. However, frequent tinkering of the policies and removal of tax benefits midway has definitely affected the sentiments in this sector," he said in the letter to Prime Minister Manmohan Singh.
Pawar noted that tax benefits to SEZ developers and units were significantly marginalised by introduction of Minimum Alternative Tax and Dividend Distribution Tax on them.
"Midway if the tax laws are changed, it affects the entire viability of the project," he observed.
Pawar also mentioned the problems being faced by the real estate companies that have received FDI.
"I am also given to understand that the entities that received FDI investment were subjected to intense scrutiny by the Government Authorities/raids by tax authorities. It is said that almost 80 per cent of the developers that received FDI have been subjected to the above," Pawar said.
"While, there is no denying fact that those who violate the law of the land should be subjected to harsher punishment, we must also honour the genuine entities and avoid arbitrary and coercive actions," he added.
The Agriculture Minister and NCP Chief also said that the country could have accessed funds from overseas for townships development when the global interest rates were low.
"The township projects require significant capital and long-term debt. We could have accessed foreign debt, when the global interest rates were low. However, only a brief window was opened for external commercial borrowings (ECBs) for township," Pawar said.
Drawing PM's attention towards "dwindling FDI in real estate sector", Pawar said that "the potential FDI in this sector can be approximately USD 30 to USD 40 million provided the government policies are stable and investor friendly. I hope the matter will receive your urgent attention".
According to the government data, during April 2000 and May 2013, construction development including townships, housing and built-up infrastructure, the country has received FDI worth USD 22.16 billion or 11 per cent of the total FDI attracted by India during the period.