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Our Bureau

New Delhi , Feb. 24

BIG time foreign investment flowing into the real estate sector could soon be reality with the Government today substantially easing the foreign direct investment (FDI) norms in the construction and real estate development sector.

Instead of the earlier restricted norms permitting foreign investments only in integrated townships, the Cabinet Committee on Economic Affairs (CCEA) today decided to permit 100 per cent FDI in all forms of housing, commercial premises, hotels, resorts, hospitals, educational institutions, recreational facilities, city and regional level infrastructure in order to attract higher investments.

The move to expand the scope of FDI in the realty sector has been prompted by the poor response from foreign investors to the earlier norms. The Government has pointed that since 2002, when the norms were announced, only nine proposals have been received so far.

The new conditions for allowing 100 per FDI in other real estate sectors stipulates that the minimum plot size for the construction sector would be 25 acres for serviced housing plots against the earlier requirement of 100 acres.

Simultaneously, the minimum requirement of 2,000 dwelling units has been modified to a minimum built-up area of 50,000 square metres. However, approval of investment proposals would continue to be through the Reserve Bank of India's automatic approval route.

The investment would further be subject to the following conditions — a minimum capitalisation of $10 million for wholly owned subsidiaries and $5 million for joint ventures with Indian partners.

The funds would have to be brought in within six months of commencement of business. Original investment cannot be repatriated before a period of three years from completion of minimum capitalisation.

However, the investor may be permitted to exit earlier with the prior approval of the Government through the Foreign Investment Promotion Board.

Though investments would have to be through the RBI's automatic route, the CCEA also agreed to delegate the power of approving individual construction projects with FDI component to the local Government authorities.

These projects shall have to conform to the norms and standards, including land use requirements and provision of community amenities and common facilities as laid down in the applicable building control regulations, by-laws, rules and other regulations of the State Governments or municipal bodies or local bodiesother concerned.

As of now, all such projects needed mandatory clearance from the Union Government. With the power of approval being vested with the local Government, FDI projects would now be accorded a national treatment on par with local developers, according to an official release.

The Minister for Commerce and Industries, Mr Kamal Nath, told reporters here that to avoid speculation in real estate, the Government has restricted foreign investors from selling undeveloped land and has said that the development has to commence within a specific time-frame.

"The move is expected tohave a multiplier effect on the economy by boosting construction activities of all types," the Minister said and added that it would create employment not only for skilled and unskilled labourers, technicians and artisans but also for engineers, architects and designers.

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