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In a growing economy, the Real Estate sector invites a lot of attention from all quarters, including foreigners. India has a policy for non-residents which encourage them to invest in this sector. In the year 2005, Reserve Bank of India (RBI) issued a notification and the township, housing, construction development project sector and built up infrastructure was opened for 100% FDI with specific terms and conditions.
The Foreign Direct Investment (FDI) route has involved overseas investor’s interest in this sector because of the ban on the infusion of funds into this sector by any other modes. Moreover, using External Commercial Borrowings (ECBs) and Foreign Currency Convertible Bonds (FCCBs) to raise finances for investment into real estate has been completely barred. Hence, FDI in the real estate sector gains importance.
FDI in Real Estate Sector in India is governed by:
Currently, 100% FDI is allowable through automatic route for any construction development project which would include:
We can study FDI in Real Estate sector into two parts:
100% FDI under automatic route is allowable in construction-development projects, which includes:
FDI is not allowable in an entity which is involved or proposed to be involved in:
Following conditions should be taken care of:
There is no minimum land requirement in case of development of serviced housing plots. However, a minimum floor area of 20,000 square meters is required in case of construction-development projects.
A minimum FDI of USD 5 million is required within six months of commencement of the project. Please note that the commencement of the project will be the date of approval of the building plan/layout plan by the relevant legal authority.
The investor is allowable to depart from the investment on the completion of the project or development of roads, water supply, drainage, sewerage and street lighting.
The project shall be acceptable to the norms and standards, including land use requirements and terms of community facilities and shared facilities, as laid down in the applicable building control regulations, bye-laws, rules and other regulations of any government authority.
The Indian investee company will be allowable to sell developed plots only. Under this policy, developed plots will mean scenarios where roads, water supply, street lighting, drainage and sewerage, has been made accessible
The Indian investee company shall be accountable for securing necessary permissions including those of building/layout plans, developing internal and peripheral areas and other infrastructure facilities, payment of development, external development and additional charges, and complying with all other requirements prescribed under applicable rules, bye-laws and regulations of the state government/municipal/local body concerned.
The concerned state government/municipal/local body which approves the building/development plans will monitor compliance of the conditions mentioned above by the developer.
RBI has been regularly improving the real estate sector for FDI, which will hold great potential for formation of employment and generation of income. Furthermore, considering the urgent need to enhance the affordable housing stock, the government has provided definite relaxations to conditions for FDI in Real Estate sector. It also clarified that real estate broking services do not amount to real estate business and are, therefore, eligible for 100 per cent FDI under the automatic route.
Enterslice helps and offers advice on over all categories of foreign direct investment in real estate business in India, through the Governmental and Automatic Routes. Our services for FDI in Indian Real Estate, fundamentally deal with all Central and State Laws governing the real estate transactions and investments in India, Property Taxation, and Stamp Duty applicable.