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FDI in real estate vague: FICCI survey
By agencies
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Friday, 15 July 2005, 19:30 IST
NEW DELHI: A survey carried out by Federation of Indian Chambers of Commerce and Industry (FICCI) revealed that ambiguities in the revised FDI guidelines for township, housing, built-up infrastructure, construction-development projects and absence of time-bound project clearances are some of the major impediments for FDI inflows.
Foreign investors are keen for an access to a consolidated document that specifies all the clearances required with details on all the agencies and the procedures concerned, so that they are clear on the legal requisites before they make a commitment on the funds, reveals survey.
The respondents to the survey were unanimous in the view that FDI in real estate would make the sector more organized, increase professionalism and create a healthy and competitive market environment for both domestic and foreign players. It would also bring in superior technology, construction techniques and designs as also improve the quality of construction.
It suggested that at present, foreign investors are also deterred by the ambiguity generated by certain clauses in the guidelines, which need to be clarified.
According to the guidelines, the funds would have to be brought in within six months of commencement of business of the company. It is felt that the government should clearly spell out the term `commencement of business.' They said that it needed to be clarified whether the `date of commencement of business' is the date on which the joint venture agreement is signed or the date of incorporation of a company in subsequent legislations or administrative notices.
Respondents also pointed out that the definition of minimum built-up area stipulation of 50,000 sq. m in case of construction of development projects is inadequate and does not clearly imply whether it is inclusive of basement, common areas, service areas, lifts, balcony etc.
Respondents agreed with the clause that 50 percent of the project should be completed within five years of obtaining all statutory clearances. However, they felt that in the case of large projects that are going to be developed in phases, the provision should allow the builder flexibility to develop the different phases only when he perceives demand for the project.