fdi: the government clarifies its policy on FDI in the real estate sector

NEW DELHI: In order to clarify its FDI policy for the real estate sector, the government on Monday “amended and aligned” the existing definitions of real estate business.
According to the Department of Promotion of Industry and Internal Trade (DPIIT) press note issued on Monday, it is specified that FDI is not allowed in an entity that carries on or proposes to carry out real estate activities, construction of farms and commercialization of transferable development rights.
He added that earning rent/income on the rental of a property, not constituting a transfer, will not constitute a real estate business.
Real estate business means dealing in land and real estate with a view to profit and does not include the development of townships, the construction of residential/commercial premises, roads or bridges, educational institutions , recreational facilities, infrastructure at the level of the city and the region, cantons…”, said the note.
FDI is prohibited in real estate business and construction of farms, according to the press release.
In addition, the DPIIT has also made changes to the standards relating to the acquisition of shares under a merger/demerger/merger regime.
The merged or new entity “may issue capital instruments to existing shareholders of the transferring company residing outside India,” the note said.
“Where a plan of compromise or arrangement or amalgamation or amalgamation of two or more Indian companies, or a reconstruction by way of division or otherwise of an Indian company … the transferee company or the new company, as the case may be, may issue equity instruments to existing shareholders of the surrendering company residing outside India,” he said.
This will be subject to certain conditions, he added.

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