Commerce and industry minister Anand Sharma is likely to meet finance minister P Chidambaram and urban development minister Kamal Nath early next week to iron out contentious issues in further liberalisation of FDI regime in the construction sector. This is a part of the governments last-ditch efforts to attract foreign investment in the country,as the Lok Sabha elections near.
The main issue to be taken up by the three ministers next week is whether FDI can be used for buying agricultural land for construction development projects,which is currently in contravention of FEMA rules, an official told The Indian Express. According to the Foreign Exchange management Act (FEMA) provisions,foreign investment is not allowed to buy agricultural land for non-agricultural purpose,the official said. Earlier,the urban development ministry had asked for clarity on purchase of farm land for construction purposes.
At present,the government allows 100 per cent foreign direct investment (FDI) under automatic route in townships,housing,commercial premises,hotels,resorts,hospitals,educational institutions,recreational facilities,city and regional level built-up infrastructure. Liberalising the policy,the government proposes to bring down minimum area and capital requirement for serviced housing plots and construction development projects in order to attract more investments.
The other major issue is that of transfer of shares to other jurisdiction by the investor during the lock-in period and if yes,then the time frame and the amount, the official said. The current lock-in period is three years and the government has proposed to relax it in housing and townships. The official said that it needs to be clear if the investment can be repatriated before the lock-in period.
As such,the draft note proposes reduction in the minimum capitalisation to $5 million from the present $10 million for wholly-owned subsidiaries and a cut in the minimum built-up area of 50,000 sq mts in case of construction development projects to 20,000 sq mts of carpet area for FDI. The proposal also says that the developers can exit only after obtaining completion certificates from the local authority while 50 per cent of the project will have to be developed before completion of five years of obtaining all statutory clearances.