Government has clarified that the Foreign Direct Investment (FDI) norms for real estate will not be applicable to multinational companies leasing out their assets to group entities. The move will in future help the group companies to expand their business and in optimum utilization of their assets.
The Department of Industrial Policy and Promotion (DIPP) has stated that the facility of sharing agreements within two group companies through leasing/sub-leasing will not be treated as real estate business within the provisions of the Consolidated FDI policy circular of 2015, provided the arrangements are at acting in their own self interest price in accordance with relevant provisions of Income Tax Act 1961 and annual lease rent earned by the lessor company does not exceed 5 per cent of its total revenue. At present FDI is prohibited in real estate business covering leasing and sub leasing.
Besides, government has relaxed FDI norms for medical devices, defence and construction activities sectors. Further, DIPP notified that, government has also permitted foreign investments through partly paid shares and warrants as eligible capital instruments for the purposes of FDI policy, in a move to facilitate FDI in the country, after reviewing the provisions of the extant FDI policy. In order to boost FDI, government is taking various steps. In the first quarter of the current fiscal, FDI grew by 31% to $9.50 billion.