Latest Property News on 'Foreign Direct Investment in India'

Foreign Investment in India

The news that in 2009 India produced more Dubai real estate buyers than any other country may not be a big surprise – but it does trigger the question: when will India reciprocate, and allow the rest of the world to easily buy a stake in its real estate? India’s role in Dubai is easy to explain. Firstly, India is an increasingly-wealthy location with plenty of trusts, consortia and individuals wanting to invest, and their demand has always been for high quality and often landmark projects.

Secondly, other markets with long histories of buying in Dubai (chiefly the UK, which produced the second largest group of investors last year) have been hit by their own recessions and credit restrictions. More surprising is that Pakistan and Iran should come third and fourth in terms of nationalities of investors in Dubai. As it stands, a foreign national of non-Indian origin who is resident outside of India cannot buy any ‘immovable property’ (that is, real estate) in India. To be eligible they must be resident for 183 days in a financial year. This figure was chosen as it exceeds the duration of a tourist visa, which is 180 days – and which, incidentally, specifically states you are now allowed to purchase property while in the country under its jurisdiction. Read More »

Finance Ministry Rejects Proposal to drop FDI Realty lock-in

The finance ministry has rejected a proposal by the Department of Industrial Policy and Promotion (DIPP) that had suggested dropping the mandatory three-year lock-in for foreign direct investment in the real estate sector, affecting the prospects of the sector raising funds from overseas. The finance ministry has rejected the proposal from DIPP seeking to remove this (lock-in on FDI) clause, a government official confirmed.

Responding to a draft cabinet note circulated by DIPP in November 2009, the ministry said the lock-in acted as a deterrent, checking speculation and shielding the sector from sudden flight of capital in the time of crisis, such as the global meltdown in 2008 when foreign institutional investors pulled out nearly $5 billion from equity investments between September and October. Read More »

Bangladesh PM Seeking Investment from Indian INCs

Bangladesh Prime Minister Sheikh Hasina is likely to seek investments from India in a host of sectors like power and telecom during her interaction with top Indian business leaders here on Tuesday. India’s business chambers - FICCI, CII and Assocham - would be hosting a luncheon meeting for Hasina and flag issues for enhancing economic cooperation. Hasina, accompanied by business delegation of over 40 people, is arriving here on a day-long visit. While trade has been increasing between the countries over the last several decades, it is only now that the two nations are seeking opportunities for FDI in setting up new plants or through mergers and acquisitions.

Bharti Group, which owns India’s largest mobile telephony brand - Airtel -, is in advanced stage of discussion to buy 70 per cent stake in Warid, a telecom firm of Bangladesh. NTPC, India’s largest power generating firm is also keen to set up joint ventures in Bangladesh. “There is a huge potential for Indian entrepreneurs to invest in Bangladesh,” FICCI said adding “FDI from India to the neighbouring country could increase to USD 1.2 billion in 2012 from the current USD 438 million.” Read More »

FDI India 2009 Hit by global Financial Crisis

The global financial crisis that spilled over into its second year choked flow of foreign direct investments into India in 2009, forcing the government to loosen rules for investments but it kept multi—brand retail off—limits to foreigners. In the first nine months of 2009, FDI dipped by 26 per cent to $21.4 billion from $29 billion a year ago. The total FDI inflow into India since 2001 crossed the $100 billion mark.

Although fund inflow was few and far between, FDI became the cause of confusion over ownership of seven Indian lending institutions, including ICICI Bank and HDFC Ltd. But the banks have maintained that they are Indian as they are controlled by Indian banking regulations, Indian Board and Management. While the Centre simplified norms aimed at attracting more FDI, it has yet to get the Insurance Bill approved by Parliament. Read More »

DIPP Sets Monitoring Cell to Scan End-Use of FDI Raised by Realty Firms

The department of industrial policy & promotion (DIPP) has set up a monitoring cell to investigate the end-use of foreign funds raised by realty firms, according to official sources. Its objective: to ascertain whether companies diverted the money to areas where FDI is banned like buying agricultural land. The development comes at a time when the government is trying to relax the three-year lock-in period on repatriation of investments by foreign partners in real estate projects.

The decision comes after recent raids by the enforcement directorate (ED) on one prominent Delhi-based real estate developer revealed “large-scale” FDI violations in the purchase of land. The company had an around 12,800-acre land bank, of which 8,700 acre is agricultural land. The ED claimed that most of this farmland was acquired through FDI, in contravention of existing rules. Read More »

Govt Approves Rs 4,551-cr FDI Proposals

The government has approved 17 foreign direct investment (FDI) proposals worth Rs 4,551 crore, including that of the Federal Agency for State Property Management of the Russian Federation to buy 20 per cent stake in telecom service provider Sistema-Shyam for Rs 3,051 crore.

PepsiCo’s proposal for infusion of Rs 928-crore equity into its Indian subsidiary has been referred to the Cabinet Committee on Economic Affairs (CCEA), since all proposals involving more than Rs 600-crore FDI have to be referred to CCEA. The proposal of France-based Alstom Power Holdings’, Alstom Power and Switzerland-based Alstom Technology to establish two joint venture companies in India, with 51 per cent equity in one company and 49 per cent in another, has also been referred to CCEA. Read More »

FDI in Real Estate May Get Rid of Three Year Lock-in Period

Foreign investment in the real estate sector may potentially no longer be subject to the statutory three year lock-in period. It is believed that the department of industrial policy & promotion, ministry of commerce & industry, recently circulated a draft note for consideration of the Cabinet Committee on Economic Affairs, where it has proposed to remove the condition of minimum period for repatriation of the original foreign investment.

Under FDI policy as on date, 100% foreign investment, without government approval (automatic route), is permitted in townships, housing, built-up infrastructure and construction-development projects. Regulated by Press Note 2 (2005), these investments are subject to certain minimum capitalisation norms and conditions prescribing the minimum area to be developed. Press Note 2 also stipulates that the original investment cannot be repatriated before a period of three years from completion of the minimum capitalisation, except with prior government approval. It is pertinent to highlight that investments in SEZs, hotels and hospitals are exempt from all, including inter alia, the investment conditions, as stipulated in Press Note 2. Read More »

Govt has approved 190 New FDI Proposals this Year

The government today said that the country has received as many as 238 Foreign Direct Investment (FDI) proposals so far this year. “During the year 2009, (up to November), 238 proposals were received,” Minister of State in the Ministry of Commerce and Industry Jyotiraditya M Scindia said in a written reply to the Lok Sabha.

Out of the 238 proposals, the government has approved 190, while 13 were rejected and 6 were withdrawn or closed. Around 29 proposals are either listed for consideration or to be listed in the fourth session, the minister added. During the last three years, Foreign Investment Promotion Board (FIPB) has received a total of 1,102 FDI proposals, out of which 286 were received in 2006, 393 in 2007 and 424 in 2008, he added. Read More »

Govt may not Consider FDI in Multi-Brand Retail

The government plans to expressly clarify that foreign direct investment (FDI) in multi-brand retail is no-go territory, dashing the hopes of Indian retailers expecting that the new rules announced earlier this year would allow them to bring in overseas partners and capital. The commerce and industry ministry wants to ensure that the liberalised FDI policy does not lead to the unintended opening up of multi-product retail, a sector closed to foreign investment now, an official privy to the ministry’s plan said.

The move is likely to stymie the plans of those such as Pantaloon Retail, which is owned by the Future Group and operates the Big Bazaar, Food Bazaar, Pantaloon and Home Town chains of stores. Pantaloon Retail had initiated steps to restructure itself to take advantage of the new norms for counting FDI in the hope that it would be able to attract foreign investment. It was to have converted the listed Pantaloon Retail into a holding company and distributed assets and operations of the group among two subsidiaries. Read More »

Growing Concern over National Security Forces Govt to Tighten FDI Norms

Growing concerns over national security are forcing the government to tighten the foreign direct investment (FDI) regime, starting with pruning of the automatic route available to foreign investors pumping funds into various sectors. To start with, explosives and chemicals will be taken out of the automatic route, which is handled by the Reserve Bank of India. In the next stage, the government is also likely to introduce a more comprehensive security screening for sectors like refineries, civil aviation, defence production, power and real estate.

“The automatic route for FDI is under review now,” said a government official who asked not to be named. FDI into explosives and chemicals would have to be routed through the Foreign Investment Promotion Board (FIPB) — the nodal agency — once the proposed changes are finalised. The changes in FDI regime, suggested by the National Security Council (NSC) secretariat, follow increasing concerns over not just cross-border threat, but also escalating internal security issues like Naxalism, another official familiar with the situation said. To tackle the menace, the government has set in motion a process that will stress on the overriding importance of national security over others like FDI promotion. The NSC wants to ensure that all proposals in sectors deemed sensitive from the national security angle go through FIPB process for security clearance. Read More »