FOREIGN DIRECT INVESTMENT IN REAL ESTATE, INDIA

Reserve Bank of India vide its A.P. (DIR Series) Circular No. 07 dated 17th August 2005 has confirmed the Press Note 2 (2005) dated 3rd March 2005 permitting FDI upto 100 per cent under the automatic route, in townships, housing, built-up infrastructure and construction development projects (which would include, but not be restricted to, housing, commercial premises, hotels, resorts, hospitals, educational institutions, recreational facilities, city and regional level infrastructure). Accordingly, Foreign Exchange Management (Transfer or issue of Security by a Person Resident outside India) Regulations 2000 notified vide Reserve Bank Notification No. FEMA 20/2000-RB dated May 3, 2000, has been amended vide Notification No. FEMA 136/2005-RB dated July 19, 2005 [Foreign Exchange Management (Transfer or issue of Security by a Person Resident outside India) (Third Amendment) Regulations 2005 permitting the Foreign Direct Investment in Construction Development Sector. The salient features of the amendment is given below:

Sector

Townships, housing, built-up infrastructure and construction – development projects.

The sector would include, but not be restricted to, housing, commercial premises, hotels, resorts, hospitals, educational institutions, recreational facilities, city and regional level infrastructure.

Investment Cap

100%

Description of Activity / Items / Conditions

The investment shall be subject to the following guidelines :

1. Minimum area to be developed under each project shall be as under :

1. In case of development of serviced housing plots – 10 hectares.

2. In case of construction development project - 50,000 sq.mtrs.

3. In case of combination project, any one of the above two conditions.

2.The investment shall be subject to the following conditions:

Minimum capitalization of US$10 Million for wholly owned subsidiaries and US $ 5 Million for joint ventures with Indian Partners. The funds would have to be brought in within six months of commencement of business of the company.

Original investment cannot be repatriated before a period of three years from completion of minimum capitalization. However, the investor may be permitted to exit earlier with prior approval of the Government through the FIPB.

3. At least 50% of the project must be developed within a period of five years from the date of obtaining all statutory clearances. The investor shall not be permitted to sell undeveloped plots.

4. The project shall conform to the norms and standards, as laid down in the applicable building control regulations, bye-laws, rules, and other regulations of the State Government / Municipal / Local Body concerned.

5. The investor shall be responsible for obtaining all necessary approvals, including those of the building / layout plans, developing internal and peripheral areas and other infrastructure facilities, payment of development, external development and other charges and complying with all other requirements as prescribed under applicable rules / bye-laws / regulations of the State Government / Municipal / Local Body concerned.

6. The State Government / Municipal / Local Body concerned, which approves the building / development plans, shall monitor compliance of the above conditions by the developer.

Note: For the purpose of these guidelines, "undeveloped plots" will mean where roads, water supply, street lighting, drainage, sewerage, and other conveniences, as applicable under prescribed regulations, have not been made available. It will be necessary that the investor provides this infrastructure and obtains the completion certificate from the concerned local body / service agency before he would be allowed to dispose of serviced housing plots. contact for further details - Law Firm Delhi India

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