Govt plans to widen real estate definition in its FDI policy

The foreign direct investment (FDI) policy of the government is in for changes which will define real estate in wider terms as there are plans by the government in this regard. The changes will seek to include real estate specialized services like that of consultants, advisers, valuers and brokers. Real estate experts feel that this move will put restriction on the entry of foreign firms in these services. A draft note has been prepared by the department of industrial policy and promotion (DIPP) which has been sent to various ministries seeking comments on the proposal.

A government official taking part in the discussions said that this move is being taken to explain about all the services that are covered by real estate. The half-yearly update of FDI policy which will be released by the end of March will include a wider definition of real estate. The FDI policy at present does not clarify several issues of real estate. The current policy prevents foreign direct investment in the real estate business however 100% foreign investment for construction and housing development is allowed. There are several riders on FDI in construction and housing which includes a three-year lock-in period. Moreover the minimum capitalisation for wholly-owned subsidiaries is $10 million and in case of joint ventures it is $5 million.