<div><strong>BW Online Bureau</strong></div><div> </div><div>The changes announced in the FDI norms for the construction sector is set to give a fillip to low cost housing in a big way and bring in the much needed foreign investments in the sector experts said. The government has eased rules for foreign investors to exit and repatriate their investments. It also said that each phase of the project would be considered as a separate project for the purpose of FDI policy.</div><div> </div><div>Making "radical changes" in FDI regime in the construction development sector, the government said: "Conditions of area restriction of floor area of 20,000 sq meters in construction development projects and minimum capitalisation of $5 million to be brought in within the period of six months of the commencement of business, have been removed".</div><div> </div><div>Although 100 per cent foreign direct investment was allowed in townships, housing and built-up infrastructure and construction developments since 2005, the government had imposed certain conditions.</div><div> </div><div>The government had relaxed the FDI norms for construction sector in October last year. Now, it has further eased the norms as realty sector is facing demand slowdown leading to liquidity crunch and delay upto 5 years in completing project.</div><div> </div><div>"A foreign investor will be permitted to exit and repatriate foreign investment before the completion of project under automatic route, provided that a lock-in-period of three years, calculated with reference to each tranche of foreign investment has been completed," the government said.</div><div> </div><div>Moreover, the transfer of stake from one non-resident to another non-resident without repatriation of investment will neither be subject to any lock-in-period nor to any government approval.</div><div> </div><div>"Nonetheless, exit is permitted at any time if project or trunk infrastructure is completed before the lock-in-period," it added.</div><div> </div><div>The condition of lock-in-period would not apply to hotels and tourist resorts, hospitals, special economic zones (SEZs), educational institutions, old age homes and investment by NRIs.</div><div> </div><div>The following changes have been made to the FDI norms: </div><div> </div><div>Two crucial conditions have been relaxed. These include area restriction of 20,000 sq. mtrs in construction development projects and minimum capitalization of US $ 5 million to be brought in within the period of six months of the commencement of business have been removed. Now each phase of the construction development project would be considered as a separate project for the purposes of FDI policy.</div><div> </div><div>As per the changes, a foreign investor will be permitted to exit and repatriate foreign investment before the completion of project under automatic route, provided that a lock-in-period of three years, calculated with reference to each tranche of foreign investment has been completed. Further, transfer of stake from one non-resident to another non-resident, without repatriation of investment will neither be subject to any lock-in period nor to any government approval. “Nonetheless, exit is permitted at any time if project or trunk infrastructure is completed before the lock-in period,” the DIPP circular in this regard said.</div><div> </div><div>The changed norms have brought in more clarity on the definition of what constitutes real estate business. As per the amendments made, Real Estate Business will now mean ‘dealing in land and immovable property with a view to earning profit therefrom. This will not include development of townships, construction of residential/ commercial premises, roads or bridges, educational institutions, recreational facilities, city and regional level infrastructure, townships. “Further, earning of rent/ income on lease of the property, not amounting to transfer, will not amount to real estate business,” the DIPP circular said. </div><div> </div><div>The government has also said that condition of lock-in period will not apply to Hotels &Tourist Resorts, Hospitals, Special Economic Zones (SEZs), Educational Institutions, Old Age Homes and investment by NRIs. The government has also permitted 100% FDI under automatic route in completed projects for operation and management of townships, malls/ shopping complexes and business centres. Consequent to foreign investment, transfer of ownership and/or control of the investee company from residents to non-residents has also been permitted. “However, there would be a lock-in-period of three years, calculated with reference to each tranche of FDI, and transfer of immovable property or part thereof is not permitted during this period,” it said. </div><div> </div><div>The government has also clarified that "Transfer", in relation to FDI policy on the sector will now include the sale, exchange or relinquishment of the asset ; or the extinguishment of any rights therein ; or the compulsory acquisition thereof under any law ; or any transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882 (4 of 1882) ; or any transaction, by acquiring shares in a company or by way of any agreement or any arrangement or in any other manner whatsoever, which has the effect of transferring, or enabling the enjoyment of, any immovable property.</div><div> </div>
