Easier FDI rules for real estate likely

To ease the flow of foreign direct investment (FDI) into real estate, the government is mulling a proposal that mixed development projects should be exempt from the minimum capitalisation and area development norms.

The changes, proposed by the ministry of commerce and industry, will be discussed by the committee of secretaries set up for the purpose. A mixed development project can include townships, housing, commercial premises, hotels, multiplexes and recreational facilities.

Current rules allow 100 per cent FDI in such a project, provided it has been capitalised at $10 million (Rs 49 crore) or more ($5 million if it’s a joint venture where funds have to be brought in within six months), has in its possession at least 25 acres and proposes minimum built-up area of 50,000 square feet.

Under the proposed policy, the government is seeking to exempt such projects from the $10 million requirement, reduce the project size to 10 acres and cut the minimum built up area to 10,000 square feet. All FDI brought to these projects will continue to have a lock-in of three years after the date of completion of the project.

However, the developers of these projects will have to keep at least 50 per cent of the total built up area for hotel and tourism related activities and ensure the project is regulated by the concerned authority and residential buildings are not misused for non-residential purposes.