India Investment Property

Real estate companies, who are bound by strict conditions for bringing in foreign direct investment (FDI), can now look forward to a breather.

Companies developing several projects simultaneously are likely to get a waiver on meeting FDI conditions on some if majority of the projects are FDI-compliant. Realty companies are subjected to conditions such as three-year lock-in period and a minimum development of 10 hectares for bringing in FDI.

The move will particularly benefit real estate companies that take up expansion plans from time to time. Under the proposed waiver, such expansion schemes would be eligible to get foreign funds even if they do not comply with the required conditionally separately on their own.

A senior Government official said that many a time, the developer faces difficulty to hive off projects that are not FDI-compliant. The industry’s main grouse is that if some of the projects are taken in isolation it negates the purpose of the whole project.

Officials in the department of industrial policy and promotion said that some developers have sought permission to retain projects that do not comply with FDI guidelines laid down under Press Note 2 even after infusing foreign investment. The department is in discussion with the foreign investment promotion board (FIPB) to firm up new guidelines for easing investments in such projects. A meeting on the issue is expected next month.

Experts are of the view that the government’s move would help real estate developers mobilize FDI. Many of these firms are otherwise left in lurch due to non-FDI compliance in one or two projects.

The real estate industry has also urged the government to waive the condition of three-year lock-in period for pre-IPO investment by overseas entities and treat them as portfolio investment rather than FDI. The matter is also under active consideration of the DIPP.