DIPP proposes further relaxation of FDI for realty

The Department of Industrial Promotion and Policy (DIPP) under the Ministry of Commerce and Industry has proposed further relaxation of the foreign direct investment (FDI) norms for the real estate sector.

The department has proposed the removal of the lock-in of three years on original investment made into integrated township development and other construction development projects.

Currently, FDI in construction and real estate sectors can be repatriated before the stipulated three years only after securing special approvals on a case to case basis from the Foreign Investment Promotion Board (FIPB).

The department wants to remove the condition of minimum period for repatriation of the original investment. The proposal, being discussed with other ministries, is aimed at boosting FDI flow into the housing and real estate sector.

Housing and real estate ranked fourth among the FDI-attracting sectors. It brought in Rs 32,502 crore of investments over the past nine years (April 2000–August 2009). During April–August period this year, the inflow into the sector was Rs 8,719 crore.

According to sources, DIPP prepared a draft proposal last week to further liberalise the FDI policy in townships, housing, built-up infrastructure and construction.

The proposal, after discussions with the ministries of finance and urban development, and the Prime Minister’s Office and the Planning Commission, may be put up before the Cabinet Committee of Economic Affairs.

Real estate players welcomed the DIPP move. “If the government takes out the three-year lock-in stipulations for FDI, the investments will be cheaper. Today, cost of the investments are calculated considering a three-year period. If there is liquidity, then one can work out better deals, bringing down the cost of funding and thereby the project cost,” said Pradeep Jain, chairman and managing director of Parsvnath Developers Ltd.