Wednesday, 9 October 2013

Curbs on realty foreign direct investment under 50 percentage may continue

curbs on realty foriegn direct investment
Curbs on realty foreign direct investment under 50 percentage may continue
The government may decline the urban development ministry's proposal to scrap all restrictions on foreign straight investment below 50% in real estate on the grounds that there can be no exemptions on rules such as lowest area norms.

The suggestion was incorporated in recommendations drawn up by the Department of Industrial Policy and Promotion, part of the Ministry of Commerce and Industry, in order to give confidence for overseas investment in real estate, which has been hit by a weak economy and elevated interest rates.

The ministry had also recommended that minimum carpet area be used in place of the current measure of built-up area. "Foreign investment up to 49% should be free from condition to draw foreign capital providers, which do not have long-term interest in construction assets," the urban development ministry had said in July.

"This will also allow real estate players to raise foreign capital at competitive rates and decrease dependency on the already strained domestic financial institutions."

The recommendations are expected to be considered by the Cabinet soon, said an official. Apart from suggesting a cut in the minimum land area necessary for developing housing plots to 5 hectares from 10 hectares, the proposals said the requirement for apartment complexes should be lowered to a minimum total carpet area of 20,000 sq metres from 50,000 sq metres of built-up area.

The note had also proposed a least capitalization of $5 million, down from $10 million for wholly-owned projects and said the whole amount will have to be brought in within six months of commencement of the project. "The minimum capitalization requirement is proposed to be reduced to $5 million and made uniform for wholly-owned subsidiaries as well as JVs," the note said.


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