“The Real Estate Regulatory Act will catch you only
for your promises you make.” - M. Venkaiah Naidu, Housing & Urban Poverty
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.