Why Indian real estate does not land FDI

<div class="section1"><div class="Normal">bangalore: on january 4, the centre announced opening up of real estate to foreign direct investment (fdi). it allowed fdi in developing townships. however, to date, nobody has evinced much interest, and the question is whether the policy is too restrictive to interest fdi. a reading of the policy paper makes it clear that though the red carpet has been rolled out, the red tape has not been loosened yet.entry and exit for foreign capital is seen as not easy, with too many checks and balances. ankur srivastava, senior manager, jones lang laselle, says any foreign investor would prima facie look at three things: the ease of bringing money in, the ease of managing it and returns available, and the ease of repatriating the money. according to industry experts, the new fdi policy does not allow developers to have a free say on the development character. restrictions have been imposed in terms of the areas to be earmarked and handed over (free of cost) for various uses. in addition, there are reservations for npnl (no-profit-no-loss) category and ews (economically weaker sections). the biggest drawback, however, is seen to be that the housing/township sector does not qualify for the infrastructure sector (section 80ia) benefits under the income tax act and unlike other infrastructure projects, it does not get a tax holiday. "the high tax rates, weak currency status, the restrictive clauses, no incentives, high levels of corruption/bureaucracy and obstructions in free flow of capital all contribute to making india a less attractive destination for fdi in real estate," says an expert. according to ramani sastri, president, karnataka ownership apartments promoters'' association and managing director of sterling developers, the fdi policy in housing is a step in the right direction. "but right now, it will show no effect. it is a non-starter. the lack of necessary infrastructure is the biggest hurdle," he says. a township is expected to be self-sufficient, with everything to meet the needs of its denizens, including shops, schools and offices. however, as the investor has to come through a government agency, it is feared that the choice of the investor may not be given much weightage. investors are also worried that critical things like electricity and water, which are the government''s responsibility, may not come through speedily enough. despite all this, hope still reigns among real estate developers hit by the slowdown. "it is a good sign for the market and the buyers because they will be assured a good product and there will be synergy between the domestic and foreign investors," says girish puravankara, business manager, puravankara constructions. the general belief is that pressures from potential investors and real estate experts would move the government to ease many restrictions. <span style="" font-weight:="" bold="">what the policy says</span> * in the guidelines of the department of industrial policy and promotion, the minimum capitalisation norm will be $10 million for a wholly-owned subsidiary and $5 million for joint ventures with indian partners. * the minimum area to be developed by a company will have to be 100 acres. * the company intending to invest will have to be registered as an indian company under the companies act, 1956, and will be allowed to take up land assembly and development. * all cases will be processed by the fipb upon the recommendation of the union ministry of urban development and poverty alleviation and others. the company will have to achieve milestones enumerated. </div> </div>