Review of Foreign Direct Investment (FDI) policy





Press Note No. 10 (2014 Series) - Review of Foreign Direct Investment (FDI) policy on the Construction Development Sector-amendment to ‘Consolidated FDI Policy Circular 2014’



1.0        Present position:



Paragraph 6.2.11of the ‘Consolidated FDI Policy Circular of 2014’, effective from 17th April, 2014, relating to Construction Development Sector, presently reads as below:

Sl. No.
Sector/Activity
% of Equity/ FDI Cap
Entry Route
6.2.11
Construction Development: Townships, Housing, Built-up infrastructure
6.2.11.1
Townships, housing, built-up infrastructure and construction-development projects (which would include, but not be restricted to, housing, commercial premises, hotels, resorts, hospitals, educational institutions, recreational facilities, city and regional level infrastructure)

100%
Automatic
6.2.11.2
Investment will be subject to the following conditions:
(1) Minimum area to be developed under each project would be as under:
(i)     In case of development of serviced housing plots, a minimum land area of 10 hectares.
(ii)   In case of construction-development projects, a minimum built-up area of 50,000 sq.mts.
(iii) In case of a combination project, any one of the above two conditions would suffice.
(2) Minimum capitalization of US $10 million for wholly owned subsidiaries and US $ 5 million for joint ventures with Indian partners. The funds would have to be brought in within six months of commencement of business of the Company.
(3) Original investment cannot be repatriated before a period of three years from completion of minimum capitalization. Original investment means the entire amount brought in as FDI. The lock-in period of three years will be applied from the date of receipt of each installment/tranche of FDI or from the date of completion of minimum capitalization, whichever is later. However, the investor may be permitted to exit earlier with prior approval of the Government through the FIPB.
(4) At least 50% of each such project must be developed within a period of five years from the date of obtaining all statutory clearances. The investor/investee company would not be permitted to sell undeveloped plots. For the purpose of these guidelines, “undeveloped plots” will mean where roads, water supply, street lighting, drainage, sewerage, and other conveniences, as applicable under prescribed regulations, have not been made available. It will be necessary that the investor provides this infrastructure and obtains the completion certificate from the concerned local body/service agency before he would be allowed to dispose of serviced housing plots.
(5) The project shall conform to the norms and standards, including land use requirements and provision of community amenities and common facilities, as laid down in the applicable building control regulations, bye-laws, rules, and other regulations of the State Government/Municipal/Local Body concerned.
(6)The investor/investee company shall be responsible for obtaining all necessary approvals, including those of the building/layout plans, developing internal and peripheral areas and other infrastructure facilities, payment of development, external development and other charges and complying with all other requirements as prescribed under applicable rules/bye-laws/regulations of the State Government/ Municipal/Local Body concerned.
(7) The State Government/Municipal/Local Body concerned, which approves the building/development plans, would monitor compliance of the above conditions by the developer.
Note:
(i) The conditions at (1) to (4) above would not apply to Hotels & Tourism, Hospitals, Special Economic Zones (SEZs), Education Sector, Old Age Homesand investment by NRIs.
(ii) FDI is not allowed in Real Estate Business.
 2.0      Revised position:

The Government of India has reviewed the FDI policy in this regard. Paragraph6.2.11 of ‘Consolidated FDI Policy Circular of 2014’ will now read as under:
Sl. No.
Sector/Activity
% of Equity/ FDI Cap
Entry Route
6.2.11
Construction Development: Townships, Housing, Built-up infrastructure
6.2.11.1
Construction-development projects (which would include development of townships, construction of residential/commercial premises, roads or bridges, hotels, resorts, hospitals,  educational institutions, recreational facilities, city and regional level infrastructure, townships)
100%
Automatic
6.2.11.2
Investment will be subject to the following conditions:
(A) Minimum area to be developed under each project would be as under:
                     i.            In case of development of serviced plots, no minimum land area requirement.
                   ii.            In case of construction-development projects, a minimum floor area of 20,000 sq. meter.
(B)   Investee company will be required to bring minimum FDI of US$ 5 million within six months of commencement of the project. The commencement of the project will be the date of approval of the building plan/lay out plan by the relevant statutory authority. Subsequent tranches of FDI can be brought till the period of tenyears from the commencement of the project or before the completion of project, whichever expires earlier.
(C)(i) The investor will be permitted to exit on completion of the project or after development of trunk infrastructure i.e. roads, water supply, street lighting, drainage and sewerage.
(ii)The Government may, in view of facts and circumstances of a case, permit repatriation of FDI or transfer of stake by one non-resident investor to another non-resident investor, before the completion of project.  These proposals will be considered by FIPB on case to case basis inter-alia with specific reference to Note (i).
(D) The project shall conform to the norms and standards, including land use requirements and provision of community amenities and common facilities, as laid down in the applicable building control regulations, bye-laws, rules, and other regulations of the State Government/Municipal/Local Body concerned.
(E) The Indian investee company will be permitted to sell only developed plots.  For the purposes of this policy “developed plots” will mean plots where trunk infrastructure i.e. roads, water supply, street lighting, drainage and sewerage, have been made available.
(F) The Indian investee company shall be responsible for obtaining all necessary approvals, including those of the building/layout plans, developing internal and peripheral areas and other infrastructure facilities, payment of development, external development and other charges and complying with all other requirements as prescribed under applicable rules/bye-laws/regulations of the State Government/ Municipal/Local Body concerned.
(G) The State Government/ Municipal/ Local Body concerned, which approves the building / development plans, will monitor compliance of the above conditions by the developer.
Note:
(i)             It is clarified that FDI is not permitted in an entity which is engaged or proposes to engage in real estate business, construction of farm houses and trading in transferable development rights (TDRs).
“Real estate business” will have the same meaning as provided in FEMA Notification No. 1/2000-RB dated May 03, 2000 read with RBI Master Circular i.e. dealing in land and immovable property with a view to earning profit or earning income therefrom and does not include development of townships, construction of residential/ commercial premises, roads or bridges, educational institutions, recreational facilities, city and regional level infrastructure, townships.
(ii)             The conditions at (A) to (C) above, will not apply to Hotels & Tourist resorts; Hospitals; Special Economic Zones (SEZs); Educational Institutions, Old Age Homes and Investment by NRIs.
(iii)          The conditions at (A) and (B) above, will also not apply to investee/joint venture companies which commit at least 30 percent of the total project cost for low cost affordable housing.
(iv)          An Indian company, which is the recipient of FDI, shall procure a certificate from an architect empanelled by any Authority, authorized to sanction building plan to the effect that the minimum floor area requirement has been fulfilled.
(v)           ‘Floor area’ will be defined as per the local laws/regulations of the respective State governments/Union territories.
(vi)           Completion of the project will be determined as per the local bye-laws/ rules and other regulations of State Governments.
(vii)        Project using at least 40% of the FAR/FSI for dwelling unit of floor area of not more than 140 square meter will be considered as Affordable Housing Project for the purpose of FDI policy in Construction Development Sector. Out of the total FAR/FSI reserved for Affordable Housing, at least one-fourth should be for houses of floor area of not more than 60 square meter.
(viii)       It is clarified that 100% FDI under automatic route is permitted in completed projects for operation and management of townships, malls/ shopping complexes and business centres.

3.0        The above decision will take immediate effect.
 ********
Restarting of Mangalore Chemicals & Fertilisers Limited

The Minister for Chemicals & Fertilisers Shri Ananth Kumar told the Karnataka Chief Minister Shri Siddaramaiah that his Ministry will take it up before the Union Cabinet again for a reconsideration of an earlier decision in 2010 that all urea production units including the Mangalore Chemicals & Fertilisers Limited should run only on gas based production process. This came up when he called on Shri Ananth Kumar in New Delhi today. The Chief Minister had pleaded as the gas pipeline infrastructure could not be set for this plant yet this should be considered. It was explained to the Karnataka Chief Minister that the subsidy burden arising out of naphtha plants is Rs.40,000 per tonne against Rs.15,000 for gas based production. Shri Ananth Kumar also asked the Chief Minister to waive off the VAT on naphtha to reduce the subsidy burden to the extent of the VAT, with an objective of maintaining the indigenous production and supply of urea.

Other things like setting up of another fertilizer unit in Northern Karnataka, a Petroleum chemicals & Petrochemicals Investment region (PCPIR), a National Institute of Pharmaceutical Education and Research (NIPER) and a Vocational training & Plastic Testing Agency under CIPET in the state were also discussed. It was felt that after the ensuing assembly session in the State, the officers of the Karnataka Government will work with the Ministry for Chemicals and Fertilisers, Government of India to augur industrial development in the state for promoting huge employment opportunities.
***
Inter-Ministerial Committee to fast-track investment proposals from USA in India



An Inter-Ministerial Committee has been constituted under the Chairmanship of Secretary, Department of Industrial Policy & Promotion to fast-track investment proposals from USA and to address the issues related to implementation. The Committee will have the following composition:



i)         Secretary, Department of Industrial Policy & Promotion – Chairman

ii)        Joint Secretary (Incharge - USA), Department of Industrial Policy & Promotion –Convener

iii)       Representative from Department of Economic Affairs,

iv)       Representative from Ministry of Environment, Forest & Climate Change,

v)         Representative from Ministry of Power,

vi)       Representative from Ministry of Road Transport & Highways,

vii)      Representative from Ministry of Railways ,

viii)     Representative from Department of Electronics and Information Technology,

ix)       Representative from Department of Defence Production,

x)         Representative from Department of Revenue,

xi)       Representative from Ministry of Civil Aviation,

xii)      Representative from Department of Pharmaceuticals,

xiii)     Representative from Ministry of Health & Family Welfare,

xiv)     Representative from Department of Telecommunication

xv)       Representative from Department of Commerce, and

xvi)     Representative from Ministry of External Affairs.



The Ministries / Departments listed above will nominate its representative not below the rank of Joint Secretary.



The Terms of Reference (ToRs) of the Committee are as under:



(i)    The Committee will facilitate and fast-track investment from US companies in India.

(ii) The Committee will identify bottlenecks faced by the US investors in the implementation of their investment proposals and address them in consultation with all other agencies and state governments concerned.

(iii)           The Committee will look into areas of concern in sectors of interest to US companies to address them.

(iv)            The Committee will closely monitor and coordinate the process to ensure that investment from USA are put on fast-track in various sectors and opportunities of investment and technology transfer are fully exploited.

(v)  The Committee will interact with US companies, ministries/departments of the Government. of India and the state governments to facilitate US investment.

(vi)             The Committee will initiate action to ensure that the US companies investing in India are given handholding services.

(vii)         The Committee will initiate action to promote an attractive business environment and ease of business for companies to invest in all sectors and manufacturing, in particular.

(viii)       The Committee will encourage such practices that promote investment in manufacturing with special emphasis on green, advanced and smart technologies by US companies in India to increase competitiveness and making Indian manufacturing a significant player in the global supply chain.
***
Two Day India Japan Joint Working Group for Strengthening Cooperation in the Field Information and Communication Technologies begins in New Delhi

The Minister for Communication and Information Technology, Shri Ravi Shankar Prasad has said that there is a need for matching India’s capacities in the field of human resources and IT software skills with Japan’s strength in technology and manufacturing.  Inaugurating India -Japan Joint Working Group meeting for strengthening cooperation in the field of Information and Communication Technology (ICT) in New Delhi today, he said, the two countries had shared civilization moorings and cultural heritage. He said they are expected to be natural partners for technical and industrial cooperation in the years to come. The minister detailing the scope for partnership said that the current government in India plans to connect all panchayats with broadband by 2016, as a part of its ‘Digital India’ programme and also wants to give a big push to electronic manufacturing. He invited Japanese companies to set up manufacturing facilities in India as a part of another prime programme of the present government called- ‘Make in India’.

In his opening remarks the Japanese Vice-Minister for Policy Coordination International Affairs, Ministry of Internal Affairs and Communication (MIC) Shri Yasuo Sakamoto, leading his countries delegation said, Japanese companies are interested and business projects in the ICT sector needs to be promoted. He said the India-Japan statement made after the meeting of the Prime Ministers of the two countries during the recent visit of Shri Narendera Modi to Japan had said the platform for the purpose.

In the area of Telecom, IT and Electronics, the two countries have complementary strengths.  Whereas, Japan has the technology and is excellent in hardware side, India offers market and has great strengths in the area of software development. Together India and Japan can develop Information and Communication Technologies (ICT) for the world market. Japan is a major manufacturing powerhouse, manufacturing about $1 trillion of goods, which constitutes about 20% of its $5 trillion GDP. On the other hand, India is a land of opportunities with a potential of providing 600 million broadband connections in next 5-6 years, which will entail an investment of tens of billions dollar. Considering these factors, India becomes a natural partner for Japan to execute joint projects for manufacturing of electronic and telecom goods and equipment here in India.



The reforms agenda unleashed by the new government, including its ‘Digital India’ programme, provides an opportunity for Japanese companies to invest in India, particularly in the field of ICT where 100% FDI is permitted, besides collaborating with Indian companies for manufacturing of ICT products.

Realizing their complementary strengths, two countries are exploring the possibility of having joint projects in the following areas during the two day Joint Working Group meeting. They would also discuss other matters of mutual cooperation in the field of ICT including -

·        Green ICT

·        ICT for disaster management

·        Cyber and network security

·        ICT applications for Social and Economic challenges leveraging National ID scheme being implemented in India.



The Minister of Communication & IT Shri Ravi Shankar Prasad and Shri Yasuo Sakamoto Vice Minister of International Affairs, Ministry of Internal Affairs and Communication (MIC) had met on the sidelines of ICT Ministerial meeting at Brunei on 09 September 2014 and discussed matters of mutual interest in the field of ICT and decided to hold a Joint Working Group in Delhi in December 2014. This joint Working Group meeting is part of this ongoing process of cooperation.  

Earlier during his visit to Japan from 30 August to 03 September 2014 the Prime Minister Shri Narendra Modi met the Prime Minister of Japan Mr Shinzo Abe and the two  countries decided to cooperate with each other in different fields such as defence, strategic cooperation, healthcare, energy, roads, Railways, art culture, heritage  among others.

Indian side at today’s meeting was represented by Telecom Equipment Manufacturers’ Association, Cellular Operators’ Association of India, ITI among others. The Japanese delegation will have representatives from companies like Hitachi, Toyota, FUJITSU, NAGOYA Electric Works, NEC.

Shri Rakesh Garg, Secretary (Telecom), Shri A.K. Bhargava, Member (Technology) and otrher senior officers from DoT and MIC Japan are participating in the discussions..


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