guidelines for fdi in real estate in india

Guidelines for FDI in Real Estate in India

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Foreign Direct Investment (FDI) is now recognized as an important driver of growth in the country. The

Central India is, therefore, making all efforts to attract and facilitate FDI investment from Non Residents

including Overseas Corporate Bodies that are owned by them.

Thus, FDI is permitted under the following forms; namely through:

1. Financial collaborations.

2. Joint ventures and technical collaborations.

3. Capital markets via Euro issues.

4. Private placements or preferential allotments.

Investment in Development of Integrated Townships and Related Infrastructure

With a view to catalyze investments in development of townships and infrastructure, 100 per cent FDI is

allowed under the automatic route in townships, housing and construction development projects and

hospitality sectors such as residential complexes, shopping centers, malls, multiplexes, Cineplex’s,

commercial offices, hotels/service apartments, resorts, hospitals, educational institutions.

NRIs and OCBs are allowed to invest in the following activities:

1. Development of serviced plots and construction of built up residential premises,

2. Real estate development covering construction of residential and commercial premises,

including business centers and offices,

3. Development of townships,

4. Development of city and region level urban infrastructure facilities including roads and bridges,

5. Manufacturing of building materials and their application,

6. Investment in participatory ventures in (a) to (e) above,

7. Investment in Housing Finance Institutions, which is also open to FDI as an NBFC.

Foreign investors are still barred from acquiring and trading in undeveloped land. The policy has already

attracted several large financial entities and private equity funds to participate in large real estate

projects.

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Significant features

1. Minimum area requirements, in case of

Development of serviced housing plots - 10 hectares.

Construction-development projects - built-up area of 50,000 sq. mts.

A combination project, any of the above two conditions will suffice.

2. Investment

Minimum capitalization for wholly owned subsidiaries - US$ 10 million; for joint ventures

with Indian partners - US$ 5 million, to be brought in within 6 months of commencement of

business.

Original investment cannot be repatriated before a period of three years from completion of

capitalization.

The investor may exit earlier with prior approval from Foreign Investment Promotion Board

(FIPB).

3. Time frame & rules

At least 50 per cent of the project to be developed within five years from the date of

obtaining all statutory clearances.

Investor shall be responsible for obtaining all necessary approvals such as building/layout

plans and developing internal and peripheral areas and other infrastructure facilities

Investor cannot sell undeveloped plots - where roads, water supply, street lighting,

drainage, sewerage and other conveniences are not available.



Procedure for automatic approval

No approval is required under the automatic route and the only requirement is to submit a report to the

Reserve Bank of India for furnishing the details of the amount of consideration brought in for issue of

shares/convertible debentures along with Foreign Inward Remittance Certificate. FDI can take place

after taking necessary regulatory approvals from the State Governments and local Authorities for

construction of building, water supply and environmental clearance, etc.

Source: National Housing Bank

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