Union Commerce and Industry Minister Anand Sharma on Thursday ruled out any change or flexibility in the three-year minimum lock-in period for foreign direct investment (FDI) flows in the realty sector.
Virtually rejecting the claim of the real estate industry at a real estate summit organised by the Federation of Indian Chambers of Commerce and Industry (FICCI) here, Mr. Sharma said: “I do not see the three-year lock-in period as too restrictive. Investors must come with confidence that they are here to stay for more than that period.''
The real estate sector had been seeking a relaxation in this FDI policy on the ground that it was discouraging overseas investors from putting money into the real estate space here.
Mr. Sharma, however, said no move was afoot to increase the three-year lock in period. The country had attracted about $8.7 billion worth of FDI in the housing and real estate sector since April, 2000.
India allows 100 per cent FDI through the automatic route in townships, housing, built-up infrastructure and construction-development projects, subject to certain conditions.
The original investment cannot be repatriated before three years from completion of minimum capitalisation. However, investors may be permitted to exit earlier with the prior approval of the government through the Foreign Investment Promotion Board.
On the lock-in period, a joint report by FICCI and Ernst &Young said there was no clarity on whether it was applicable for the minimum capitalisation amount or for the entire sum of the investment.
It also said there was no single window clearance system for different approvals.
Dean Hodcroft of Ernst and Young said that though there were restrictions on FDI in the real estate sector, India was seen as a big market. As per the report, India ranks fifth in the world in terms of future real estate investment. China, the U.S. and the U.K. top the chart, in that order.
Mr. Sharma said the Indian real estate sector emerged from the crisis because its focus shifted to affordable housing projects, the demand for which remains strong in the country. He said the real estate sector was the second largest employer after agriculture.