India Delays Easing FDI Guidelines for Real Estate Sector
The Government of India has postponed its decision to relax Foreign Direct Investment (FDI) guidelines in the real estate sector. This delay affects proposed easements, including the exit conditions for foreign investors before the mandatory three-year lock-in period.
Key Proposed Amendments
- Reduced Minimum Build-Up Area: A suggested amendment to lower the minimum build-up area requirement from 50,000 sq mts to 20,000 sq mt for FDI in construction projects.
- Adjusted Capitalization Requirements: A proposal to decrease the minimal capitalization from USD 10 million to USD 5 million for both joint ventures and wholly owned arms with Indian partners.
- Less Stringent Land Requirements: A demand to reduce the land requirement for housing projects from 10 hectares to 5 hectares, addressing the challenges of land scarcity and high costs.
Current FDI Regulations
- Approval and Funding Timeline: Foreign investors must bring in the entire investment amount within six months of the project's commencement, marked by the approval of the building plan by regulatory officials.
- Investment Routes: Currently, 100% FDI is permitted through the automatic route, encompassing the development of:
- Townships
- Housing units
- Commercial premises
- Hotels
- Hospitals
- Educational institutions
- Regional constructions in the realty sector
Decision Background
The Urban Minister, Kamal Nath, presented the case for delaying the proposal in front of the cabinet, leading to the postponement of the decision on easing FDI guidelines in the real estate sector.
