Guiding Principles Issued for FDI Norm Changes
The Indian government has released guiding principles for significant transformations to the Foreign Direct Investment (FDI) norms, as decided by the Union Cabinet on January 30. However, the announcement notably omits clarification on changes to FDI rules in the real estate sector.
Silence on Real Estate FDI Rule Updates
The government's silence on this aspect is speculated to stem from concerns over potentially larger capital inflows into the real estate market. This lack of clarity contrasts with expectations that the delinking of FDI provisions from investments by Foreign Institutional Investors (FII) in real estate, under the portfolio investment scheme, would enhance activity in real estate stocks.
Expected Impact on Real Estate Market
The move to differentiate FII investments from FDI, thereby placing them outside the purview of Press Note 2 (2005), was anticipated to have a positive impact on the real estate market. This expectation was further reinforced by a background note circulated by the government on the day of the Cabinet meeting, which indicated approval for distinguishing FII investments from FDI.
Department of Industrial Policy and Promotion (DIPP) Suggestions
The conditions for delinking FDI and FII norms were proposed by the Department of Industrial Policy and Promotion (DIPP), highlighting the regulatory body's efforts to streamline and refine investment policies in India.
Official Statement
An official, on condition of anonymity, expressed uncertainty regarding the Cabinet's decision not to approve the proposal for delinking FDI and FII norms in the real estate sector, stating, 'It is not clear why the Cabinet has not cleared the proposal.'