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Accommodation Times - - News -

“The Real Es­tate Reg­u­la­tory Act will catch you only

for your prom­ises you make.” - M. Venka­iah Naidu, Hous­ing & Ur­ban Poverty

Avi­a­tion Min­is­ter.

The gov­ern­ment is plan­ning to fur­ther re­lax norms for FDI pol­icy in real es­tate sec­tor. The decision is taken in or­der to achieve gov­ern­ment’s goal of ‘ Hous­ing for all by 2020’. Their plan is to make exit easy for for­eign in­vestors by do­ing away with the con­di­tion of three year lock-in pe­riod. Gov­ern­ment has taken this decision fol­low­ing the steep in for­eign in­vest­ment re­ceived within last few years. The sec­tor had re­ceived about $22 bil­lion in 2000-2013, almost 11 per cent of the to­tal for­eign di­rect in­vest­ment into the coun­try. As a re­sult, for­eign in­vest­ment in the sec­tor has slowed dras­ti­cally since 2012. It fell from $3.1 bil­lion in 2011-12 to $1.3 bil­lion in 201213 and $1.2 bil­lion in 2013-14. Dur­ing April-Au­gust of the cur­rent fi­nan­cial year, $446 mil­lion has flowed into the sec­tor. As per the ear­lier rules, the gov­ern­ment had al­lowed 100 per­cent FDI in real es­tate de­vel­op­ment but with strict rid­ers, in­clud­ing a lock-in pe­riod of three years dur­ing which the in­vest­ment can­not be repa­tri­ated. Ac­cord­ing to the new rules, the min­i­mum built area for projects in which for­eign in­vest­ment is al­lowed will be re­duced to 20,000 square me­tres from 50,000, the gov­ern­ment said in a state­ment. For “ser­viced plots”, there is no min­i­mum land re­quire­ment now, com­pared to 10 hectares ear­lier, while the min­i­mum cap­i­tal in­vest­ment by for­eign com­pa­nies has been cut to $5 mil­lion from $10 mil­lion. Sources said, that “Gov­ern­ment will per­mit in­vestors to exit after de­vel­op­ing the lump sum in­fra­struc­ture”. The Cab­i­net has de­bated over the is­sue and come to the con­clu­sion that the lockin pe­riod is in­con­se­quen­tial. As such if the trunk in­fra­struc­ture is be­ing de­vel­oped, the is­sue of lock-in does not arise be­cause de­vel­op­ing such in­fra­struc­ture takes two-three years. How­ever, by keep­ing this con­di­tion, in­vestors be­come ap­pre­hen­sive and wary of in­vest­ing. Ac­cord­ing to the new rules, the min­i­mum built area for projects in which for­eign

in­vest­ment is al­lowed will be re­duced to 20,000 square me­tres from 50,000, the gov­ern­ment said in a

state­ment. Presently, gov­ern­ment has per­mit­ted in­vestors to exit on com­ple­tion of the project or after three years from the date of fi­nal in­vest­ment, but after de­vel­op­ing trunk in­fra­struc­ture, like roads, wa­ter sup­ply, street light­ing, drainage and sew­er­age. Later, rules ex­plain­ing the re­lax­ation done in the FDI pol­icy on the sec­tor will be re­leased within a week.

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