Conditions on FDI in Construction Development, Industrial Parks & Satellites

In part one of the article I discussed Sector Specific Conditions on FDI in Broadcasting, Print Media and Civil Aviation. In this article I have discussed Sector Specific Conditions on FDI in Construction Development: Townships, Housing, Built-up Infrastructure, Industrial Parks, Satellites- Establishment, and Operation. In my next article I will discuss Sector Specific Conditions on FDI in Private Security Agencies, Telecom Services, Trading and Railway Infrastructure.

Read: Conditions for FDI in Broadcasting, Print Media & Civil Aviation

Here is the List of Services in which FDI is permitted

1. Broadcasting

2. Print Media

3. Civil Aviation

4. Construction Development: Townships, Housing, Built-up Infrastructure

5. Industrial Parks

6. Satellites- Establishment, and Operation

7. Private Security Agencies

8. Telecom Services

9. Trading

10. Railway Infrastructure

We already discussed about points 1 to 3 in the previous article. Here we will discuss points 4 and 6 and next in the next part of the Article.

4. CONSTRUCTION DEVELOPMENT: TOWNSHIPS, HOUSING, BUILT-UP INFRASTRUCTURE

Conditions

Each phase of the construction development project would be considered as a separate project for the purposes of FDI policy. The investment will be subject to the following conditions:

A.(i) The investor will be permitted to exit on completion of the project or after the development of trunk infrastructure i.e., roads, water supply, street lighting, drainage and sewerage.

(ii) Notwithstanding anything contained at (A) (i) above, a foreign investor will be permitted to exit and repatriate foreign investment before the completion of the project under the automatic route, provided that a lock-in-period of three years, calculated with reference to each tranche of foreign investment has been completed. Further, the transfer of stake from one non-resident to another non-resident, without repatriation of investment will neither be subject to any lock-in period nor to any government approval.

B. The project shall conform to the norms and standards, including land use requirements and provision of community amenities and common facilities, as laid down in the applicable building control regulations, bye-laws, rules, and other regulations of the State Government/Municipal/Local Body concerned.

C. The Indian investee company will be permitted to sell only developed plots. For the purposes of this policy “developed plots” will mean plots where trunk infrastructure i.e. roads, water supply, street lighting, drainage and sewerage, have been made available.

D. The Indian investee company shall be responsible for obtaining all necessary approvals, including those of the building/layout plans, developing internal and peripheral areas and other infrastructure facilities, payment of development, external development and other charges and complying with all other requirements as prescribed under applicable rules/byelaws/ regulations of the State Government/Municipal/Local Body concerned.

E. The State Government/Municipal/Local Body concerned, which approves the building/development plans, will monitor compliance of the above conditions by the developer.

NOTE

(i) 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 (TDRs).

“Real estate business” means dealing in land and immovable property with a view to earning profit there and does not include the development of townships, construction of residential/ commercial premises, roads or bridges, educational institutions, recreational facilities, city and regional level infrastructure, and townships. Further, earning of rent/ income on lease of the property, not amounting to transfer, will not amount to real estate business.

(ii) Condition of lock-in period at (A) above will not apply to Hotels &Tourist Resorts, Hospitals, Special Economic Zones (SEZs), Educational Institutions, Old Age Homes and investment by NRIs.

(iii) Completion of the project will be determined as per the local bye-laws/rules and other regulations of State Governments.

(iv) It is clarified that 100% FDI under automatic route is permitted in completed projects for operation and management of townships, malls/ shopping complexes and business centers. Consequent to foreign investment, transfer of ownership and/or control of the investee company from residents to non-residents is also permitted. However, there would be a lock-in period of three years, calculated with reference to each tranche of FDI, and transfer of immovable property or part thereof is not permitted during this period.

(v)“Transfer”, in relation to FDI policy on the sector, includes—

• • the sale, exchange or relinquishment of the asset; or
  • the extinguishment of any rights therein; or
  • the compulsory acquisition thereof under any law; or
  • any transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882 (4 of 1882); or
  • any transaction, by acquiring shares in a company or by way of any agreement or any arrangement or in any other manner whatsoever, which has the effect of transferring, or enabling the enjoyment of, any immovable property.

(vi)Notwithstanding anything contained above, it is clarified that real-estate broking service does not amount to real estate business and 100% foreign investment is allowed in the activity under automatic route.

5. INDUSTRIAL PARKS

Conditions for Industrial Parks

1.1 (i) “Industrial Park” is a project in which quality infrastructure in the form of plots of developed land or built-up space or a combination with common facilities, is developed and made available to all the allottee units for the purposes of industrial activity.

(ii) “Infrastructure” refers to facilities required for functioning of units located in the Industrial Park and includes roads (including approach roads), railway line/sidings including electrified railway lines and connectivities to the main railway line, water supply, and sewerage, common effluent treatment facility, telecom network, generation and distribution of power, air conditioning.

(iii) “Common Facilities” refer to the facilities available for all the units located in the  industrial park, and include facilities of power, roads (including approach roads), railway line/sidings including electrified railway lines and connectivities to the main railway line, water supply and sewerage, common effluent treatment, common testing, telecom services, air conditioning, common facility buildings, industrial canteens, convention/conference halls, parking, travel desks, security service, first aid center, ambulance and other safety services, training facilities and such other facilities meant for common use of the units located in the Industrial Park.

(iv) “Allocable area” in the Industrial Park means-

• • in the case of plots of developed land- the net site area available for allocation to the units, excluding the area for common facilities.
  • in the case of built-up space- the floor area and built-up space utilized for providing common facilities.
  • in the case of a combination of developed land and built-up space- the net site and floor area available for allocation to the units excluding the site area and built up space utilized for providing common facilities.

(v) “Industrial Activity” means manufacturing; electricity; gas and water supply; post and telecommunications; software publishing, consultancy and supply; data processing, database activities and distribution of electronic content; other computer related activities; basic and applied R&D on bio-technology, pharmaceutical sciences/life sciences, natural sciences and engineering; business and management consultancy activities; and architectural, engineering and other technical activities.

1.2 FDI in Industrial Parks would not be subject to the conditionalities applicable for construction development projects etc. spelt out in para 5.2.10 of Chapter 5 of this Circular, provided the Industrial Parks meet with the under-mentioned conditions:

(i) it would comprise of a minimum of 10 units and no single unit shall occupy more than 50% of the allocable area;

(ii) the minimum percentage of the area to be allocated for the industrial activity shall not be less than 66% of the total allocable area.

6. SATELLITES- ESTABLISHMENT, AND OPERATION