Review of the policy on foreign Direct Investment (FDI) in Construction Development Sector - Clarification on Press Note 10 of 2014 dated 03/12/2014 - FEMA - Press Note

Government of India Ministry of Commerce Industry Department of Industrial Policy Promotion Press Note No. 4 (2015 Series) Sl. No. Issue Clarification/ Comment 1. Whether FDI can be brought if the minimum capitalization was not completed within the period of six months of the commencement of the project? No new FDI can be brought in the project if the minimum capitalization of US $ 5 million has not been achieved within six months of commencement of the project. If such minimum capitalization was achieved, FDI can be brought in till the period of 10 years or the completion of the project, whichever is earlier. 2. Whether period of six months from the commencement of project means first approval of the building plan/ layout plan or subsequent approvals also? Reckoning date would be the commencement of the project which is the date of approval of the building plan/lay out plan by the relevant statutory authority. Further approvals are just addendum/modification to the first approval. 3. Whether exit is permitted under automatic route after completion of three years without completion of project or trunk infrastructure? Exit is permitted with FIPB approval on case to case basis even before completion of the project or development of trunk infrastructure. 4. Is the exit in residential/commercial projects only after completion of project? The exit is allowed automatically after the completion of project. However, in case of any project if trunk infrastructure, which is clearly defined as development of roads, water supply, street lighting, drainage and sewerage, is developed first, the investor is automatically permitted to exit thereafter. 5. Whether the past investments made as per the earlier FDI policy on the sector will be adversely impacted? Press Note 10 of 2014 which provides more liberal FDI regime supersedes the earlier FDI policy on Construction Development sector contained in the FDI Policy Circular of 2014 . 6. Who will certify the completion of trunk infrastructure? A certificate from an architect registered with Council of Architecture certifying the completion of development of trunk infrastructure would be sufficient to prove that trunk infrastructure development is complete. 7. Whether exit is permitted on earlier of the completion of project or after development of trunk infrastructure? Exit is permitted on completion of project or after development of trunk infrastructure, whichever is earlier. 8. Whether NR to NR transfer is under automatic route? Transfer of stake from one non-resident to another non-resident before completion of the project or before completion of trunk infrastructure is through the FIPB route. 9. Definition of Business Centre Business centre includes where multiplicity of businesses of same or different nature are being carried out from a particular building. 10. Whether Construction Development companies with FDI are allowed to dispose unusable/ idle parcels of land? FDI policy mandates exit on the completion of the project or completion of trunk infrastructure. If the unused land is part of the project and trunk infrastructure has not been developed, then exit can take place with prior approval of FIPB. 11. Whether minimum capitalization is company specific or project specific? Minimum capitalization condition is project specific, not company specific. 12. Whether foreign investor can acquire possession of the completed projects in townships, malls, shopping complexes and business centres? FDI is permitted in completed projects for operation and management of townships, malls/ shopping complexes and business centres as long as they do not get into the realm of real estate business. Definition of Real Estate Business for the purposes of FDI policy is as provided in FEMA Notification No. 1/2000-RB dated May 03, 2000 read with RBI Master Circular i.e. dealing in land and immovable property with a view to earning profit or earning income therefrom 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.