The Department for Promotion of Industry and Internal Trade (DPIIT) in its recent press note has changed the existing definition of the real estate business to provide more clarity in the FDI policy for the sector.
As per the note, FDI is not permitted in a firm that is engaged or seeks to engage in real estate business, farmhouse construction, or 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 farm houses, according to the press note.
“Real estate business has been defined as businesses that deal in land and immovable property for the purpose of profit, and excludes 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. Further, earning of rent/income on lease of the property, not amounting to transfer, will also not amount to real estate business,” said Shishir Baijal, Chairman and Managing Director, Knight Frank India.FDI investments that lead to speculation in real estate have long been discouraged by the government, while favoring investments that lead to development. While no changes are made, the press note provides greater clarity on the current policy, he added.