Wednesday, October 31, 2007

Conditions for Foreign Investment in Real Estate Sector in India

Real Estate Investing in India

Direct Investment in some of the aforesaid areas (not all) is
subject some conditions, some of which are as follows:

  • Develop a minimum
    land area of 10 hectares for serviced housing plots, and a
    minimum built-up area of 50,000 sq m in case of construction
    projects. The policy does not clearly define ‘built-up’, though
    FSI (Floor Space Index)/FAR (Floor Area Ratio) could be used as
    a basis for the same.

  • Fulfill the minimum
    capitalization norm of $10 million for a wholly-owned subsidiary
    and $5 million for JVs. The funds would have to be brought in
    within six months of commencement of business (which needs to be
    defined) of the subsidiary or JV.

  • Complete at least
    50% of the integrated project within five years from the date of
    obtaining all clearances.

  • Do not sell
    undeveloped plots (with no infrastructural backup). Provide
    infrastructure and obtain the completion certificate from the
    concerned local body before disposal. This clause needs
    amendment because certificates are sometimes not issued for
    months on end, even years, an uncertainty which tends to raise
    project cost, often beyond viability.

  • Do not repatriate
    original investment before three years from completion of
    minimum capitalization. Early exits require prior approval of
    the Foreign Investment and Promotion Board.

  • Conform with all
    applicable local and state laws, and abide by all regulations
    and norms.