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India permits 100% FDI in township development

The Indian government said on Friday that it would permit 100 percent foreign direct investment in integrated township development.

The government feels that foreign direct investment in the housing sector will help provide good, planned townships with modern amenities and proper sanitation. Already, several foreign real estate developers such as Singapore-based Jurong Township Development, Malaysia-based Renong and US-based Cramelcrow are poised to enter India.

During the Budget in February 2001, Niranjan Hiranandani, chairman of the FICCI national committee on housing and managing director of Hiranandani Constructions Ltd, had said that "FDI is welcome. But the government should enforce a lock-in period of three to five years as we would not like hot money to come in as in happens in the stock markets."

Chartered accountant Subhash Chandra Mutha of the S C Mutha & Company, however, said that the government really has no alternative but to allow FDI into real estate.

Those statements seem to have come true now. FDI could come in alone or in joint ventures to develop a minimum of 100 acres to include township housing, commercial premises, hotels, resorts, city and regional level urban infrastructure facilities such as roads and bridges, mass rapid transit systems and manufacture of building materials, says a government notification.

"The minimum capitalisation norm shall be $10 million for a wholly owned subsidiary and $5 million for joint ventures with Indian partner. The funds would have to be brought in upfront," the government notification specifies.

A targeted time frame for project implementation and a minimum lock-in period of three years are among norms laid down.

The 2001-2002 Budget, however, had only offered some tax benefits and tax exemptions to the housing sector. Even the industry status, which was one of the long-standing demands, was not accorded.
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