FDI Story In Real Estate To Get More Leg Room
Source: The Economic Times
Deepshikha Sikarwar & Rajat Guha
new delhi
T HE government is planning to liberalise foreign direct investment norms in real estate. The Department of Industrial Policy and Promotion (DIPP) has circulated a Cabinet note proposing waiver of two conditions, a three-year lock-in on foreign investment and the requirement that the investment be at least $ 5 million in case of a joint venture or $10 million in case of a wholly-owned venture.
The waiver has been sought for real estate projects that include hotels, according to a government official. The proposal has been justified on the ground that it would boost tourism and hospitality, sectors identified by the government as vital job creators.
At present, 100% FDI is permitted in hotels and tourism as well as in real estate. However, real estate FDI faces a three-year lock-in the investor cannot sell his stake for that period. If he wishes to repatriate the investment before the completion of three years, he will have to take permission from the Foreign Investment Promotion Board (FIPB). There are also the stipulations for development of at least 10 hectares of land, and completion of at least 50% of the scheduled construction within five years of obtaining statutory clearances, in addition to the minimum capitalisation norm. These conditions do not apply to the hospitality sector.
The proposal, however, may not go down well with the Reserve Bank of India and the finance ministry. In fact, the RBI wants curbs imposed on FDI in real estate and had written to the finance ministry asking it to make FIPB approval mandatory for foreign investment in the sector. At present, FDI in real estate comes through the automatic route and does not require FIPB approval. Moreover, the DIPP's move to exempt foreign investment prior to an initial public offer from the three-year lock-in has met with stiff resistance from both RBI and the finance ministry. The proposal, which was a part of an overall FDI review, was not cleared by the Cabinet.
Deepshikha Sikarwar & Rajat Guha
new delhi
T HE government is planning to liberalise foreign direct investment norms in real estate. The Department of Industrial Policy and Promotion (DIPP) has circulated a Cabinet note proposing waiver of two conditions, a three-year lock-in on foreign investment and the requirement that the investment be at least $ 5 million in case of a joint venture or $10 million in case of a wholly-owned venture.
The waiver has been sought for real estate projects that include hotels, according to a government official. The proposal has been justified on the ground that it would boost tourism and hospitality, sectors identified by the government as vital job creators.
At present, 100% FDI is permitted in hotels and tourism as well as in real estate. However, real estate FDI faces a three-year lock-in the investor cannot sell his stake for that period. If he wishes to repatriate the investment before the completion of three years, he will have to take permission from the Foreign Investment Promotion Board (FIPB). There are also the stipulations for development of at least 10 hectares of land, and completion of at least 50% of the scheduled construction within five years of obtaining statutory clearances, in addition to the minimum capitalisation norm. These conditions do not apply to the hospitality sector.
The proposal, however, may not go down well with the Reserve Bank of India and the finance ministry. In fact, the RBI wants curbs imposed on FDI in real estate and had written to the finance ministry asking it to make FIPB approval mandatory for foreign investment in the sector. At present, FDI in real estate comes through the automatic route and does not require FIPB approval. Moreover, the DIPP's move to exempt foreign investment prior to an initial public offer from the three-year lock-in has met with stiff resistance from both RBI and the finance ministry. The proposal, which was a part of an overall FDI review, was not cleared by the Cabinet.
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