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Foreign Direct Investment in Real Estate Sector

Foreign Direct Investment in Real Estate Sector. Naved Qureshi. Background.

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Foreign Direct Investment in Real Estate Sector

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  1. Foreign Direct Investment in Real Estate Sector Naved Qureshi

  2. Background Prior to 2005, only NRI's and PIO's were allowed to invest in the housing and the real estate sectors. Foreign investors other than NRIs were allowed to invest only in development of integrated townships and settlements either through a wholly-owned subsidiary or through a joint venture (JV) company along with a local partner. India fully opened doors for FDI in real estate in 2005.

  3. FDI permitted 100% under Automatic Route • Projects Allowed • Townships • Housing • Built-up Infrastructure • Construction Development which would include but not limited to housing, Commercial Premises, Hotels, resorts, Hospitals etc

  4. Guidelines for FDI Application in Indian Real Estate

  5. Minimum Area • In case of development of serviced housing plots, 10 hectares (25 acres) • In case of construction-development projects, built-up area of 50,000 sq m. • In case of a combination project, any of the above two conditions

  6. Investment • Minimum capitalization -for wholly owned subsidiaries - US$ 10 million -for JV with Indian partners - US$ 5 million (to be brought in within 6 months of commencement of business ) • Original Investment cannot be repatriated before a period of three years from completion of capitalization. • The investor may exit earlier with prior approval from Foreign Investment Promotion Board (FIPB).

  7. Time Frame & Rules • At least 50 per cent of the project to be developed within five years from the date of obtaining all statutory clearances. • Investor cannot sell undeveloped plots - where roads, water supply, street lighting, drainage, sewerage and other conveniences are not available. • Project to conform to the norms and standards of Local Body concerned

  8. Investment by NRI • The Investments made by NRI in any of the Township, Housing, Built Up, infrastructure and Construction Development Projects also does not attract conditions as to Minimum Area of Development, Capitalisation and Time frame

  9. Immovable Property purchase by Foreign Company in India • A foreign company establishing Branch Office or other place of business in India, can  acquire any immovable property in India, which is necessary for or incidental to carrying on such activity. • The payment for acquiring such property to be made by way of foreign inward remittance through proper banking channel. A declaration in form IPI should be filed with Reserve Bank within ninety days from the date of acquiring the property. • On winding up of the business, the sale proceeds of such property can be repatriated only with the prior approval of Reserve Bank.

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