Ambiguities deter FDI in real estate

Norms on underdeveloped plots need change

Special Correspondent

NEW DELHI: Real estate developers feel that ambiguities in the revised guidelines for foreign investment in this sector and the absence of time-bound project clearances have hampered a surge in FDI inflows.

According to a country-wide survey of real estate developers carried out by the Federation of Indian Chambers of Commerce and Industry (FICCI), foreign investors foreign investors are not looking for special incentives or fiscal concessions.

They are instead seeking access to a consolidated document (such as a handbook or a ready reckoner) that clearly specifies all the clearances required with details on all the agencies concerned and the procedures.

This would enable them to be clear on the legal requisites before they make a commitment on funds.

The respondents to the survey were unanimous in their view that foreign direct investment (FDI) in real estate would make the sector more organised, increase professionalism and create a healthy and competitive market environment for both domestic and foreign players.

They felt that it would also lead to superior technology and construction techniques and design and also improve the quality of construction.

Among the ambiguities that have been pointed out in the guidelines is the term "commencement of business.'' It needs to be clarified whether this refers to the date of signing the agreement for development activities in India or the date of incorporating a company, as the case of may be. This, it is felt, need to be clarified through either legislation or administrative notices.

Minimum area

Besides, the definition of minimum built-up area of 50,000 sq. metres in case of construction development projects does not clearly state whether it is inclusive of areas like basement, common areas, service areas, lifts and balcony.

Those surveyed agreed with Clause that 50 per cent of the project should be completed within five years of obtaining all statutory clearances.

However, they felt that in the case of large projects planned to be developed in phases, the provision should allow the builder the flexibility of developing the different phases only when he perceives adequate demand for the project.

The FICCI survey finds that most developers feel that the Clause pertaining to sale of underdeveloped plots needs to be amended. This Clause stipulates that the developer has to obtain the completion certificate before disposing of the serviced housing plots.

Since obtaining the completion certificate often takes two or three years, it is suggested that sale should be allowed after sanction of the scheme, otherwise investments involved in completion of the project will be extremely high and will make many projects unviable.

Recommended for you