Government widens meaning of real estate business under FDI policy

The government on Monday widened the meaning of 'Real estate business' under the foreign direct investment (FDI) policy which now includes dealing in land and immovable property to earn profit.

According to a press note of the Department for Promotion of Industry and Internal Trade (DPIIT), it is clarified that FDI is not permitted in an entity which is engaged or proposes to engage in real estate business, construction of farm houses and trading in transferable development rights.

It added that earning of rent/income on lease of a property, not amounting to transfer, will not amount to real estate business.

"Real estate business means dealing in land and immovable property with a view to earning profit there from and does not include development of townships, construction of residential /commercial premises, roads or bridges, educational institutions, recreational facilities, city and regional level infrastructure, townships...," the note said.

FDI is prohibited in real estate business and construction of farmhouses, according to the press note.

Further the DPIIT has also made changes in the norms pertaining to acquisition of shares under scheme of merger/demerger/amalgamation.

The merged or new entity "may issue capital instruments to the existing shareholders of the transferor company resident outside India", the Note said.

"Where a scheme of compromise or arrangement or merger or amalgamation of two or more Indian companies, or a reconstruction by way of demerger or otherwise of an Indian company ...the transferee company or the new company, as the case may be, may issue capital instruments to the existing shareholders of the transferor company resident outside India," it said.

This will be subject to certain conditions, it added.

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