Foreign money and high-rise living

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: Today’s real estate sector in India is witnessing a wide spectrum of change that is slowly but surely expected to make India a preferred destination for real estate activity. The sector has always attracted investors all over the world, be it private or institutional players. The policy of allowing foreign direct investment (FDI) in real estate has boosted India’s image worldwide. The investment would be in integrated townships, which would include housing, commercial premises, hotels and resorts, while the urban infrastructure would comprise roads and bridges, mass rapid transit systems and manufacture of building materials.

Although the initial real estate boom was concentrated in places such as Bangalore and the national capital region of Delhi (Noida & Gurgaon), it has spread outward, since. India’s southern states and the capital area continue to attract the majority of IT/ITES and BPO investments, but cities such as Chandigarh, Indore, Kochi and Kolkata are now emerging as prime destinations.

For decades, India was closed to FDI in real estate in any form. Under the Foreign Exchange Management Act, 1999, the ‘real estate business’ means buying and selling of real estate or trading in transferable development rights excluding the development of townships, construction or residential/commercial premises, roads or bridges. ‘Transferable development rights’ mean certificates issued for any category of land acquired for public purpose either by the central or state government in lieu of land-surrender by the owner without monetary compensation, which are transferable.

The decision to liberalise FDI norms in the construction sector is perhaps one of the government’s most significant decisions. In the past, only NRIs and PIOs were allowed to invest in the housing and the real estate sectors. Foreign investors other than NRIs were allowed to invest only in development of integrated townships and settlements either through a wholly-owned subsidiary or through a joint venture (JV) company along with a local partner.

Further, 100% FDI under the automatic route is allowed by recent government guidelines (Press note 2 of 2005) in townships, built-up infrastructure, housing and construction projects which would include but not to be restricted to housing, commercial premises, hotels, resorts, hospitals, educational institutions, recreational facilities, city and regional level infrastructure projects, subject to the following conditions: