The government today said foreign investors in the country's real estate sector will have to remain invested for a minimum of three years and rejected industry claims about the policy restricting FDI inflows.
"I do not see the three-year lock-in period as too restrictive. Investors must come with confidence that they are here to stay for more than that (period)," Commerce and Industry Minister Anand Sharma said at a Ficci meet here.
The sector has been seeking a relaxation in this FDI policy on the ground that it was discouraging overseas investors from putting money into the real estate space here.
Speaking at the '7th International Real Estate Summit' organised by the Federation of Indian Chambers of Commerce and Industry (Ficci), Sharma, however, assured that there would not be any increase in the three-year lock-in period either.
"... We are not going to increase the duration of this lock-in period," he said.
The country has attracted about $8.7 billion worth of FDI in the housing and real estate sector since April, 2000.
India allows 100 per cent FDI through the automatic route in townships, housing, built-up infrastructure and construction-development projects, subject to certain conditions.
The original investment cannot be repatriated before a period of three years from completion of minimum capitalisation. However, the investor may be permitted to exit earlier with the prior approval of the government through the Foreign Investment Promotion Board.
Projecting India as an ideal destination for FDI, the minister said the country has taken several steps to liberalise the foreign investment regime since 1991.
Earlier, Ficci Real Estate Committee Co-Chairman Pranay Vakil said the restrictions on FDI in the sector were affecting inflows. He further said that foreign investments in multi-brand retail would lead to the growth of malls in the country.
A high-level government committee has been set up to look into suggestions for opening the multi-brand retail sector for FDI.
On the lock-in period, a joint report by Ficci and E&Y released today said there was no clarity on "whether it is applicable for the minimum capitalisation amount or for the entire sum of the investment".
It also said there is no single window clearance system for different approvals. "In addition, the approval system is not time-bound and could take up to two years," it said.
At the summit, Dean Hodcroft of Ernst and Young said though there were restrictions on FDI in the real estate sector, India is seen as a big market.
As per the report, India ranks fifth in the world in terms of future real estate investment. China, the US and UK top the chart, in that order.
