The Government plans more inter-ministerial consultations on allowing foreign direct investment (FDI) for purchase of agricultural land for construction development projects. Discussions likely
The Ministers of Urban Development, Finance and Commerce & Industry are likely to meet to examine the matter in the light of Foreign Exchange Management Act (FEMA) regulations and see if they can be incorporated in the amended FDI policy for the construction development sector, an official from the Department of Industrial Policy & Promotion (DIPP) told Business Line.
The Finance Ministry had earlier warned that use of foreign money to purchase agricultural land for non-agricultural use may be in violation of FEMA provisions.
A proposal to relax FDI guidelines for the construction development sector taken up by the Cabinet late last month was deferred as there was no unanimity between Ministries and Departments on a few issues including purchase of farm land.
The Urban Development Ministry had sought to remove ambiguity on the legality of using FDI for purchasing farm land for construction purposes by incorporating it in the FDI policy.
"We are not sure whether the FEMA allows it. It has to be examined before the FDI policy for construction development is amended. The Ministers from the three ministries will look at it," the official said.
Interestingly, earlier this year realty giant Emaar MGF was sent a notice for a Rs 8,600-crore fine by the Enforcement Directorate for diverting FDI money to buy agricultural land in violation of FEMA and FDI rules.
The proposed amendment to the FDI policy for construction development also seeks to bring down minimum area and capital requirement for serviced housing plots and construction development projects in order to attract more investments.