100% FDI IN INDIAN REAL ESTATE
Facing severe liquidity crunch and demand shortage, Indian Government is exploring the open of allowing 100% FDI in completed housing projects.
The Department for Promotion of Industry and Internal Trade (DPIIT) is eyeing the possibility of throwing open foreign investments in completed housing projects to a 100%. This move comes at a time when the housing sector is combating severe liquidity crunch and dip in demand charts. Complicated procedure of securing funding from government funds was giving realtors a hard time.
Present FDI Rules
100% FDI via the automatic route currently is allowed only for under construction projects- townships, residential and commercial buildings, roads, bridges, hotels, resorts, hospitals, educational institutions, recreational facilities and city and regional-level infrastructure.
FDI in real estate sector is subject to undermentioned conditions
1. Minimum Area
|Serviced Housing Plots||Minimum 10 Hectares|
|Construction Development Projects||Minimum Built-up Area of 50,000 Sq.mts.|
|Combination of Above Two||Either One of the Above Two Conditions|
2. Minimum Capitalisation
|Wholly Owned Subsidary||US $ 10 million|
|Joint Ventures With Indian Partners||US $ 5 million|
* Transaction of Funds Needs to Be Performed Within Six Months of Project Commencement.
3. Investment by a foreign player cannot be refunded before a period of three years from completion of minimum capitalization.
4. Within a period of five years from the date of obtaining all statutory clearances, 50% of the project has to be completed.
How is FDI faring?
India recorded a record $49.97 billion FDI in FY20, a 13% increase from $44.36 and FDI in real estate business rose to billion rose to $617 million in FY20 from $213 million in FY19. DPIIT is also looking to obtain cabinets nod for allowing up to 74% FDI in defence manufacturing sector under the automatic route.
Trends suggest a strong interest of foreign players in housing projects.
Experts suggest a 3-year lock-in period to place restraint on any uncertainty arising due to the new relaxations if granted. Revenues generated from taxes are not expected to pick up anytime soon thus FDI seems even more promising than ever.