By way of a press release dated 29 October, the cabinet approved amendments to the foreign direct investment (FDI) policy for the construction and development sector. The amendments were implemented through press note 10 of 2014, dated 3 December. The changes include:
Minimum area: The minimum area threshold for construction development projects has been reduced from 50,000 to 20,000 square metres. While previously a minimum built-up area of 50,000 square metres was required, the threshold now is a minimum floor area of 20,000 square metres.
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Minimum capitalization: The investee company is required to bring in a minimum of US$5 million in FDI within six months of commencement of the project. It has been explained that “commencement of the project” means the “date of approval of the building plan/layout plan by the relevant statutory authority”. Subsequent tranches can be brought in up to 10 years from the commencement of the project or on completion of the project, whichever is earlier.
Previously, the minimum capitalization requirement was US$10 million for wholly owned subsidiaries and US$5 million for joint ventures with Indian partners. The funds were to be brought in within six months of the commencement of business of the company. There were no specifications for subsequent tranches.
Exits: The investor will be permitted to exit from the project either on development of trunk infrastructure (including roads, water supply, street lighting, drainage and sewerage), or on completion of the project.
Repatriation of funds: Repatriation of FDI or transfer of a stake by a non-resident investor to another non-resident investor would require prior approval by the Foreign Investment Promotion Board.
Selling of plots: Only developed plots are permitted to be sold. Developed plots are those where trunk infrastructure is developed, including roads, water supply, street lighting, drainage and sewerage.
Approvals: The Indian investee company will be responsible for obtaining all approvals required for the project.
Minimum area and minimum capitalization requirements will not apply to projects which commit 30% of the total project cost for low-cost affordable housing. Projects using 40% or more of the floor area ratio/floor space index (FAR/FSI) for dwelling units with a floor area of 140 square metres or less will be considered affordable housing for the purposes of the amendment. Further, out of the total FAR/FSI reserved for affordable housing, at least 25% should be for housing units with a floor area of 60 square metres or less.
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