New Delhi, Dec. 25: Moves are afoot to let realtors use foreign funds to buy agricultural land. The government plans to hold inter-ministerial talks to relax FDI norms for the purchase of agricultural land in construction development projects. A proposal to bring down the minimum area and capital required for serviced housing projects is also on the agenda.
Officials said the ministers of urban development, finance and commerce & industry are likely to meet to discuss if FDI norms can be amended to remove the ambiguity over the use of foreign funds to purchase farm land for construction.
Foreign investment rules allow real estate developers to raise money overseas and invest it in the construction and development of property but they are not permitted to buy agricultural land with the funds. The rules are aimed at preventing speculative buying at arbitrary rates from poor farmers.
In fact, the policy allows 100 per cent FDI under the automatic route in townships, housings, built-up infrastructure and construction projects but does not permit the use of funds to buy farm land.
A proposal to relax FDI guidelines for construction was taken up by the cabinet late last month only to be deferred because of a lack of consensus on a few issues, including the purchase of farm land.
As most of the land available for township projects is agricultural in nature, the government is planning to tweak the norms.
Earlier this year, the Enforcement Directorate slapped a Rs 8,600-crore fine on realty giant Emaar MGF for diverting FDI money to buy agricultural land.
The proposed amendment also seeks to bring down the minimum area and capital required for serviced housing projects and construction development projects.
The minimum area for serviced housing is proposed to be reduced to 5 hectares from 10 hectares. For construction development, the minimum built-up area will be cut to 20,000 square metres from 50,000 square metres.
However, the relaxation will come with a rider. A developer will have to complete the entire project within five years of getting all the clearances. Earlier, at least 50 per cent of a project had to be developed within five years.
The lock-in period for repatriation of FDI will be three years or on completion of the project, whichever is earlier. At present, the lock-in period is three years or upon the completion of minimum capitalisation, whichever comes later.
The minimum capitalisation for both wholly owned subsidiaries and joint ventures with Indian partners will also be reduced to $5 million from $10 million. However, companies will need to bring in the entire amount within six months of getting approval for a building plan.