Lok Sabha Question No. 3810 (UNSTARRED), answered on 2017-08-09
Subject: FDI in Construction Sector
Ministry: HOUSING AND URBAN AFFAIRS
Asked by: BHOLA SINGH

## GOVERNMENT OF INDIA

## MINISTRY OF HOUSING AND URBAN AFFAIRS

## LOK SABHA

UNSTARRED QUESTION NO.  3810

TO BE ANSWERED ON AUGUST 9, 2017

## FDI IN CONSTRUCTION SECTOR

No. 3810 DR. BHOLA SINGH:

Will  the  Minister  of  HOUSING  AND  URBAN  AFFAIRS  be pleased to state:

- (a) whether  the  Union  Government  has  recently relaxed rules for allowing Foreign Direct Investment (FDI) in the construction sector including housing;
- (b) if so, the details thereof;
- (c) whether relaxation of FDI norms for construction,  real  estate  sectors  will  have  any
- effect on the prices of houses; and
- (d) if so, the details thereof?

## ANSWER

THE MINISTER OF STATE IN THE MINISTRY OF HOUSING & URBAN AFFAIRS

## (RAO INDERJIT SINGH)

- (a) & (b): The Government had last reviewed the Foreign Direct Investment (FDI) Policy vide Press Note 12(2015)  dated 24.11.2015, incorporated in 'Consolidated FDI Policy Circular 2016'.  Copy of relevant extract is annexed.

…………..contd./-

- (c) & (d) :  Liberalization in this sector is expected to result in enhanced inflows into the Construction Development  sector  consequent  to  easing  of sectoral  conditions  and  clarification  of  terms used in the Policy. It is likely to attract investments in new areas and encourage development  of  plots  for  several  housing  given the shortage of land in and around urban agglomerations as well as the high cost of land. The measure  is also expected to result in creation  of  much  needed  low  cost  affordable housing in the country.

*******

## Annexure in reply to Lok Sabha Unstarred Question No. 3810 for 09.08.2017 regarding 'FDI in Construction Sector'  vvvv

## Annexure

## 5.2.10 Construction Development: Townships, Housing, Built-up Infrastructure

| Sector/Activity   | %%of Equity/ FDI Cap   | Entry Route   |
|-------------------|------------------------|---------------|
| 5.2.10.1          | 100%                   | Automatic     |

## 5.2.10.2

Each  phase  of  the  construction  development  project  would  be  considered  as  a separate project for the purposes of FDI policy. Investment will be subject to the following conditions:

- (A) (i)  The  investor  will  be  permitted  to  exit  on  completion  of  the  project  or  after development of trunk infrastructure i.e. roads, water supply, street lighting, drainage and sewerage.
- (ii)Notwithstanding anything contained at (A) (i) above, 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.

- (B)    The  project  shall  conform  to  the  norms  and  standards,  including  land  use requirements and provision of community amenities and common facilities, as laid down  in  the  applicable  building  control  regulations,  bye-laws,  rules,  and  other regulations of the State Government/Municipal/Local Body concerned.

(C) The Indian investee company will be permitted to sell only developed plots. For the purposes  of  this policy 'developed  plots' will  mean  plots  where  trunk infrastructure i.e. roads, water supply, street lighting, drainage and sewerage, have been made available .

- (D) The Indian investee company 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.
- (E)  The  State  Government/Municipal/Local  Body concerned, which  approves the building/development plans, will monitor compliance of the above conditions by the developer.

## Note:

- (i) It  is  clarified  that  FDI  is  not  permitted  in  an  entity  which  is  engaged  or proposes  to  engage  in  real  estate  business,  construction  of  farm  houses  and trading in transferable development rights (TDRs).

'Real estate business' means dealing in land and immovable property with a view  to  earning  profit  there  from  and  does  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.

- (ii) Condition of lock-in period at (A) above will not apply to Hotels &Tourist Resorts, Hospitals, Special Economic Zones (SEZs), Educational Institutions, Old Age Homes and investment by NRIs.
- (iii) Completion  of  the  project  will  be  determined  as  per  the  local  byelaws/rules and other regulations of State Governments.
- (iv)  It  is  clarified  that  100%  FDI  under  automatic  route  is  permitted  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  is  also 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.
- (v) 'Transfer", in relation to FDI policy on the sector, includes,-
- (a)  the sale, exchange or   relinquishment of the asset ; or
- (b)  the extinguishment of any rights therein; or
- (c)  the compulsory acquisition thereof under any law ; or
- (d) 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
- (e)  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.