Tuesday, December 12, 2006

India economy: Guidelines for foreign investors in real estate



The Ministry of Commerce and Industry in a press note dated March 3rd issued guidelines for up to 100% foreign direct investment via the automatic route in townships, housing, built-up infrastructure and construction development projects. The ministry's guidelines are:

  • The minimum area to be developed under each project would be 10 hectares.
  • In the case of serviced housing plots, there would be a minimum built-up area of 50,000 sq metres.
  • For construction-development projects, either of the two conditions mentioned would need to be met.
  • Investment in a combination project, however, would be further subject to the following conditions:

(i) Minimum capitalisation of US$10m for wholly owned subsidiaries and US$5m for ventures with Indian partners. The funds would have to be brought into India within six months of start of business.

(ii) Original investment cannot be repatriated before three years from completion of minimum capitalisation.

(iii) At least 50% of the project must be developed within five years from the date of obtaining all statutory clearances.

(iv) The investor would not be permitted to sell undeveloped plots. The guidelines define "undeveloped plots" as those where roads, water supply, street lighting, drainage, sewerage and other conveniences have not been made available.

(v) The project must conform to laid-down norms and standards, including land-use requirements and provision of community amenities.

(vi) The investor must be responsible for obtaining all necessary approvals, including those of building/layout plans, external development and other charges.

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