Govt. Efforts to Stifle FDI

May 11, 2007	(Be the first to rate this story!)  Loading ...
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In an effort to incorporate foreign direct investments (FDI) norms in Indian Real estate, the government is entangling itself in micro-regulation that runs the risk of curtailing the flow of such investments.

The restrictions including minimum project size concerning the area and a lock-in-period were imposed to keep out speculative foreign capital. However, they overlooked the fact that real estate companies could be listed. The government has now decided to bar construction companies from issuing depository receipts (ADRs or GDRs).

All foreign investments coming through the route of GDRs and ADRs will be regarded as FDI. Such an investment amount will be liable to a three year lock in, in the case of real estate companies.

There is a need to balance the requirement for large investments in real estate sector and the fear of an asset price bubble. These fears are baseless if it is a case of large and experienced listed companies. This is because the foreign money is never closely identified with a project here.

Also, such companies are an agglomeration of different projects, some follow the FDI norms while others do not or may find it difficult to comply with the stringent eligibility conditions.

News Published Under:   Foreign Direct Investment in India |

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