Foreign Direct Investments (FDIs)

Real Estate Business is one of the nine activities where Foreign Direct Investment ("FDI") is prohibited. However, considering that "Housing for all" is one of the key objectives of the Government, an exception has been carved out permitting FDI in Construction-Development projects.

Despite the fact that 100% FDI was permitted under automatic route, this sector was not showing any sign of recovery as the minimum thresholds were suggesting that the FDI was permitted only in new projects and not permitted in the existing projects which were pending because of availability of funds.

However, the Government in November, 2015 has re-looked at the policy and relaxed it. The amended policy broadly provides as follows:-

Applicable Conditions for FDI in Real Estate Sector in India

Following conditions should be taken care of:

Minimum Area Requirement:

There is no minimum land requirement in case of development of serviced housing plots. However, a minimum floor area of 20,000 square meters is required in case of construction-development projects.

Amount of Investment:

 A minimum FDI of USD 5 million is required within six months of commencement of the project. Please note that the commencement of the project will be the date of approval of the building plan/layout plan by the relevant legal authority.

 Exit Route:

The investor is allowable to depart from the investment on the completion of the project or development of roads, water supply, drainage, sewerage and street lighting.

Compliance with other regulatory principles:

The project shall be acceptable to the norms and standards, including land use requirements and terms of community facilities and shared facilities, as laid down in the applicable building control regulations, bye-laws, rules and other regulations of any government authority.

Sale of plots which are developed:

The Indian investee company will be allowable to sell developed plots only. Under this policy, developed plots will mean scenarios where roads, water supply, street lighting, drainage and sewerage, has been made accessible

The responsibility of obtaining approvals:

The Indian investee company shall be accountable for securing necessary permissions including those of building/layout plans, developing internal and peripheral areas and other infrastructure facilities, payment of development, external development and additional charges, and complying with all other requirements prescribed under applicable rules, bye-laws and regulations of the state government/municipal/local body concerned.

Monitoring Authority:

The concerned state government/municipal/local body which approves the building/development plans will monitor compliance of the conditions mentioned above by the developer.

PERMITTED FDI:

100% FDI under automatic route is allowable in construction-development projects, which includes:

    1) Real Estate Investment Trusts (REITs)
    2) Development of townships
    3) Construction of residential/commercial premises
    4) City/regional level infrastructure
    5) Townships
    6) Roads or Bridges
    7) Educational Institutes
    8) Recreational Facilities

NOT PERMITTED FDI :

FDI is not allowable in an entity which is involved or proposed to be involved in:

    Any Real Estate Business
    Construction of farmhouses
    Trading in transferable development rights