The urban affairs ministry's proposal to allow 100 per cent foreign investment in housing and integrated town development has hit roadblocks with both the finance and industry ministries opposing it.
The finance ministry is against allowing foreigners to hold 100 per cent equity in housing ventures. It prefers only minority equity stake for them. The industry ministry has opposed the move because "it will have practical problems at the implementation level".
The finance ministry is also opposed to automatic approval for foreign investment in these sectors.
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According to ministry officials, the housing sector is very sensitive and there is need for "checks and balances" on foreign investment.
The industry ministry has agreed on automatic approval. Domestic companies in these sectors are, however, against it.
Views of both ministries have been sent to the urban affairs ministry. The urban affairs ministry will finalise its proposal after incorporating views of the all the ministries concerned and then submit it to the cabinet.
The urban affairs ministry had recommended opening up the building material and construction sectors for 100 per cent foreign investment. The ministry felt this would aid much-needed modernisation of the construction industry.
The ministry had also recommended automatic approval to all foreign investment proposals in these sectors. It also favoured allowing foreign individuals, companies or institutions to invest in these sectors.
The ministry favours removing the 60 per cent cap on equity holding by non-resident Indians (NRIs) and overseas corporate bodies (OCBs) in housing and urban infrastructure ventures. NRIs and OCBs are now recommended for holding 100 per cent equity in them.
The ministry recommended a three-year lock-in for repatriation of original investment by foreign companies. The lock-in is to ensure that only companies that have long-term investment plans in the country will enter these sectors. The ministry, however, suggested no cap on repatriation of profits, subject to payment of taxes.
The ministry also recommended that all foreign ventures in housing, integrated township and real estate development should be subjected to the condition that 10 per cent of houses and plots in the projects be reserved for economically weaker sections.