In what could dampen sentiments of foreign investors in real estate, the department of industrial policy and promotion (DIPP) has said a three-year lock-in on overseas money will apply to each tranche of investment.
As per Indian law, there is a lock-in period only on foreign direct investment (FDI) in the real estate sector. “The lock-in-period of three years will be applied from the date of receipt of each instalment/tranche of FDI, or from the date of completion of minimum capitalisation, whichever is later,” DIPP said.
“This is going to be definitely retrograde,” said Akash Gupt, executive director of consultancy firm PricewaterhouseCoopers Llp. “Locking every tranche of investment does not make any business sense (for foreign investors).”
The government allows foreign investment up to 100 per cent in townships, housing, built-up infrastructure and construction and development projects.
Minimum capitalisation of $10 million (Rs.48.5 crore) is required to set up wholly owned subsidiaries and $5 million for joint ventures with Indian partners.
DIPP also said original investments cannot be repatriated before three years from completion of minimum capitalization.
However, investors are permitted to exit earlier with the government’s approval through the Foreign Investment Promotion Board (FIPB).
Previously, it was understood that original investment meant initial investment. DIPP has clarified it implies total investment.
DIPP made this clarification in a revised version of the consolidated FDI policy released on Wednesday. The department has made it customary to revise the policy document every six months. The first such circular was issued on 1 April.
