In the past last decade or so, the real estate industry in India has witnessed a phenomenal rise. This sector is worth a current running aggregate of US$50 million, employs around 40 million people& contributes about 6% to the GDP. Earlier the industry was highly regulated & Foreign Direct Investment (FDI) was confined to four areas: hospitality, technology parks, intergrated townships, SEZs (Special Economic Zones) along with their acreage requirements. In the year 2005, the Department of Industrial Policy & Promotion (DIPP) permitted FDI up to 100% under automatic route in townships, housing, built-up infrastructure & construction development projects. The acreage requirements, in addition to property taxes have been relaxed.

The following requirements would prove to be informative for any potential foreign investors:

The minimum area to be developed under each project would be as follows:

Serviced housing plots –10 hectares

Construction development projects – 50,000sq.mts.

The minimum capitalization norm shall be

For a wholly owned subsidiary – US$10 million

For a joint venture – US$5 million.

The original investment cannot be repatriated before a period of three years from the completion of minimum capitalization; though the investor may be permitted to exit earlier with the prior approval of government through Foreign Investment Promotion Board (FIPB).

Development of at least 50% of the integrated project has to be completed within a period of five years from the date of obtaining all requisite clearances

The 100% FDI in the automatic route, apart from speeding up investment in vital infrastructure sector, is likely to have a multiplier effect on the economy by boosting construction activities of all kinds.