The Department of Industrial Policy and Promotion (DIPP) has recommended relaxation in foreign investment rules in the real estate sector in a bid to facilitate cash-strapped realtors get overseas funds.
The DIPP is backing changes in rules to facilitate foreign direct investment (FDI) in real estate projects that are not FDI-compliant, according to sources.
DIPP members who are part of the Foreign Investment Promotion Board (FIPB), in a meeting held on January 22, were of the view that in light of the current liquidity crunch, some leeway was required for the sector. The DIPP has directed that the matter be examined expeditiously.
At present, FDI in the sector is allowed only in partially completed and greenfield projects. There are also area specifications that developers have to comply with.
The DIPP is also examining the approach to be adopted in case of requests for receiving FDI by real estate companies that are engaged in various projects, not all of which are FDI-compliant according to Press Note 2 (2005) and which cannot be hived off.
Unitech has approached the FIPB for raising up to Rs 5,000 crore through global depository receipts. Unitech’s 10 per cent projects are not FDI-compliant. If the DIPP allows real estate companies to get FDI in non-compliant projects, it will help Unitech raise money without difficulty.