Department of Industrial Policy and Promotion
("DIPP"), by way of a
Press Note ("Press Note"), listed
the reforms to the existing
Consolidated Foreign Direct Investment Policy, 2015
("FDI Policy"). As per the information
released by the DIPP, the World Bank has improved India's
ranking by 12 places in the "2016 Study of Ease of Doing
Business" and several global institutions have projected India
as the leading destination for Foreign Direct Investment
("FDI") in the world. Further, it
mentions that FDI has gone up by 40%. The reforms to the FDI Policy
are intended to simplify and further liberalise the FDI Policy in
order to attract more FDI in India. Briefly, the reforms include,
amongst others, increase in sectoral caps, bringing more activities
under the automatic route, opening up of new sectors for FDI,
Set out below are the key developments provided in the Press
1. Construction Development Sector
a) The condition on the investee company to bring minimum FDI of
USD 5 million within 6 months of commencement of the project has
b) The foreign investors are permitted to exit and repatriate
the foreign investment before the completion of project
under the automatic route1subject to a lock-in period of 3
years2. However, foreign investors may
exit any time (even before the lock-in period) if the project or
truck infrastructure is completed.
c) The transfer3 of stake from non-resident to
another non-resident without repatriation of investment is not
subject to lock-in period and doesalso not require
approval from the government4.
d) The definition of "real estate business" clarifies
that earning of rent/income on lease of the property not amounting
to transfer will not amount to "real estate
1 This government approval for repatriation before
the completion of project was required under the FDI
2 Lock-in period will not apply to hotels and tourist
resorts, hospitals, special economic zones, educational
institutions, old age homes and investment by non-resident
3 "Transfer" in relation to the FDI Policy on
the sector, includes: (a) the sale, exchange or relinquishment of
the asset; or (b) the extinguishment of any rights therein; or (c)
the compulsory acquisition thereof under any law; or (d) 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; or (e) 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.
4 This government approval was required under the FDI
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