GOVERNMENT MAY RELAX FDI NORMS FOR REAL ESTATE SECTOR TO BOOST FUND FLOWS
The government is considering sweeping changes in the Foreign Direct Investment (FDI) norms for the real estate sector to boost fund flows to the cash-strapped sector as well as to bolster the battered Indian currency. The urban development ministry has suggested that real estate firms with less than 50 per cent foreign ownership, be exempted from all current restrictions, including the minimum area norms for development of projects. "Foreign investment up to 49 per cent should be free from condition, to attract foreign capital providers which do not have long-term interest in construction assets. This will also enable real estate players to raise foreign capital at competitive rates and reduce dependency on the already strained domestic financial institutions," said an internal document of the ministry. A similar free run has been suggested for foreign investment in urban renewal and slum redevelopment projects, while major relaxations have been proposed for foreign investors picking up over 50 per cent stake. Some of the proposed relaxations for such investments are: reduction in the minimum land parcel size for plotted development to five acres (two hectares) from 10 hectares now and permission to purchase farmland for FDI-funded firms. In case of construction-development projects, the present requirement of a minimum built-up area of 50,000 square meters will come down to 25,000 sq meters. "In case these proposals materialise, it would be a much-needed shot in the arm for a sector that has the potential to create huge employment opportunities," informs Amit Bhagat, MD and CEO, ASK Realty Fund. "This will be a very positive move for attracting foreign capital to the fundstarved sector. It will help in developing requisite infrastructure for retail and commercial establishments, aiding job creation," he added. The urban development ministry's proposals have been sent to the department of industrial policy and promotion in the industry ministry. "The suggestions/ recommendations made should apply to the present and future investments," the ministry has stressed in its proposal. Besides reducing the minimum areas for plotted and construction development, the urban development ministry has suggested that the non-resident investors in a real estate company be freely allowed to sell their shares to another non-resident investor. The proposal, if accepted, would ease the liquidity problem for foreign investors as there is ambiguity at present on transfer of foreign investment made in this sector by one non-resident investor to another nonresident.
The government is considering sweeping changes in the Foreign Direct Investment (FDI) norms for the real estate sector to boost fund flows to the cash-strapped sector as well as to bolster the battered Indian currency. The urban development ministry has suggested that real estate firms with less than 50 per cent foreign ownership, be exempted from all current restrictions, including the minimum area norms for development of projects. "Foreign investment up to 49 per cent should be free from condition, to attract foreign capital providers which do not have long-term interest in construction assets. This will also enable real estate players to raise foreign capital at competitive rates and reduce dependency on the already strained domestic financial institutions," said an internal document of the ministry. A similar free run has been suggested for foreign investment in urban renewal and slum redevelopment projects, while major relaxations have been proposed for foreign investors picking up over 50 per cent stake. Some of the proposed relaxations for such investments are: reduction in the minimum land parcel size for plotted development to five acres (two hectares) from 10 hectares now and permission to purchase farmland for FDI-funded firms. In case of construction-development projects, the present requirement of a minimum built-up area of 50,000 square meters will come down to 25,000 sq meters. "In case these proposals materialise, it would be a much-needed shot in the arm for a sector that has the potential to create huge employment opportunities," informs Amit Bhagat, MD and CEO, ASK Realty Fund. "This will be a very positive move for attracting foreign capital to the fundstarved sector. It will help in developing requisite infrastructure for retail and commercial establishments, aiding job creation," he added. The urban development ministry's proposals have been sent to the department of industrial policy and promotion in the industry ministry. "The suggestions/ recommendations made should apply to the present and future investments," the ministry has stressed in its proposal. Besides reducing the minimum areas for plotted and construction development, the urban development ministry has suggested that the non-resident investors in a real estate company be freely allowed to sell their shares to another non-resident investor. The proposal, if accepted, would ease the liquidity problem for foreign investors as there is ambiguity at present on transfer of foreign investment made in this sector by one non-resident investor to another nonresident.
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