The Cabinet will meet today in the evening to take a call on relaxing riders for foreign direct investments (FDI) in the construction development sector. The move comes as FDI in the realty sector declined by 57% in 2012-13 year-on-year.
At present, 100% FDI is permitted thorugh automatic route in the real estate sector which includes townships, housing, commercial premises, hotels, resorts, hospitals, educational institutions, recreational facilities, city and regional level built-up infrastructure.
Now, the proposal is to relax conditions attached to the FDI in this sector.
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The proposal, moved by the Department of Industrial Policy and Promotion, sought easing conditions for exit for foreign players before the three-year lock-in period. They can exit on receipt of occupancy and or completion certificate issued by the competent local authority or by way of sale to another non-resident investor subject to a lock-in period of three years from the date of the purchase by the other foreign investor, the proposal said. However, the transfer from foreigner to another will be permissible only once, with no possibility of waiver of the fresh lock-in period.
The proposal also sought to reduce a minimum carpet area of 20,000 square metre in all class-1 cities that has a population of more than one lakh, against the requirement of 50,000 square metre built up area at present. As such, the built-up area is sought to be replaced with carpet area as the latter can be objectively measured.
DIPP asked for reducing the minimum requirement for land for a serviced housing project from 10 hectares to just 5 hectares as there is shortage of land in urban areas and cost of land is too high.
Besides, the DIPP proposed that the minimum paid-up capital in wholly owned subsidiary of foreign parterns be reduced to $5 million, from $10 million at present. In case of joint ventures, $5 million minimum capital is required even now. Companies would, however, need to bring the entire amount within six months of commencement of the project. The commencement of the project will be the date of building plan approval by the statutory authority. There is no clarity at present as to when the commencement of the project be counted from.
