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Indian Real Estate News
DIPP circulates Cabinet note on relaxing FDI norms for housing
Source: The Economic Times Sep 16, 2013
The Commerce and Industry Ministry has circulated a draft Cabinet note on relaxing FDI norms for the housing sector, which proposed easing the three-year lock-in period among other things.

"The draft note has proposed easing the three-year lock-in period for FDI in housing and townships, besides it has sought reduction in the minimum capitalisation to USD 5 million from the present USD 10 million for wholly-owned subsidiaries," a senior official in the ministry told PTI.

The proposal to ease the FDI guidelines for the sector was mooted by the Ministry of Housing and Urban Poverty Alleviation.

The note has also suggested a cut in the minimum built-up area of 50,000 sq mts in case of construction development projects to 20,000 sq mts of carpet area for FDI.

The official said there is also a need to define the word 'completion' in the current policy on the matter of reducing three year lock-in period.

As per the current FDI policy, the lock-in period of three years applies to every tranche of investment brought in by a foreign player from the date of receipt or from the date of 'completion' of minimum capitalisation whichever is later.

The main objective of relaxing the provisions is to attract more FDI and provide houses at affordable prices to the people, the official added.

The DIPP has sought views on its proposal from various ministries including Finance, Home Affairs and the Planning Commission.

During April 2000 and June 2013, construction development including townships, housing and built-up infrastructure, in the country has received FDI worth USD 22.24 billion or 11 per cent of the total FDI attracted by India during the period.

Overall FDI during April-June this fiscal stood at USD 5.39 billion.

Press Note 2 (2005) of the DIPP allows FDI up to 100 per cent in townships with conditions.

The DIPP which deals with FDI related matter, issues provisions in the form Press Notes or consolidated circulars.

Although 100 per cent foreign direct investment is allowed in townships, housing and built-up infrastructure and construction developments, the government has imposed conditions.

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