In a recent news release, the Department of Promotion of Industry and Internal Trade (DPIIT) amended the previous definition of real estate business to provide more clarity in the sector’s FDI policy.
FDI is not allowed in a firm that is engaged or aspires to engage in real estate business, farmhouse building, or trading in transferable development rights, according to the notice.
It went on to say that generating rent/income on a property lease that does not amount to a transfer is not considered real estate enterprise.
“Real estate business” is defined as “dealing in land and immovable property with the intention of profiting from it,” according to the note. “It does not include development of townships, construction of residential/commercial premises, roads or bridges, educational institutions, recreational facilities, city and regional level infrastructure, townships…
According to the press release, FDI is restricted in the real estate market and the construction of farm dwellings.
“Township development, construction of residential/commercial premises, roads or bridges, educational institutions, recreational facilities, city and regional level infrastructure, townships, and REITs registered and regulated under the SEBI (REITs) Regulations 2014 have been defined as businesses that deal in land and immovable property for profit.” Furthermore, receiving rent/income on a property lease that does not amount to a transfer will not be considered real estate business,” stated Shishir Baijal, Chairman and Managing Director, Knight Frank India.
The government has historically discouraged FDI investments that lead to real estate speculation, favoring investments that lead to development. While no modifications are made, he adds that the press release clarifies the present policy.