Investors may escape lock-in

Foreign direct investment (FDI) in the real estate sector may no longer be subject to the statutory three-year lock-in period. The Department of Industrial Policy and Promotion of the Ministry of Commerce and Industry has circulated a draft note to the Cabinet Committee on Economic Affairs proposing to remove the imposition of a minimum period before the original foreign investment may be repatriated.

Under current FDI rules, 100% foreign investment through the automatic route is permitted in townships, housing projects, built-up infrastructure and construction-development projects. Regulated by Press Note 2 of 2005, these investments are subject to minimum capitalization norms and conditions prescribing a minimum area which needs to be developed. Press Note 2 also stipulates that the original investment cannot be repatriated within three years from the completion of minimum capitalization, except with prior government approval. Investments in special economic zones, hotels and hospitals, however, are exempt from these and other investment conditions stipulated in Press Note 2.