What is Foreign Direct Investment?

Kishan Thakkar K

Overview

Approximately 13 percent of India’s Gross Domestic Product (GDP) will come from the real estate sector by the year 2025, and the industry is expected to reach 1 trillion US dollars by 2030.

In India, Foreign Direct Investment in the real sector is currently not permitted except for non-resident Indians and foreign corporate entities. The Reserve Bank of India has only recently in 2005, allowed 100 percent foreign direct investment in townships, housing, built-up infrastructure, and construction development projects within the real estate sector.

During the period from 2009 to 2013, foreign equity inflows into the sector were low. Therefore, the government decided to relax the terms and conditions to encourage more foreign investment.

In addition, the cabinet decided in 2018 to relax FDI policies by allowing 100 percent FDI under the automatic route in the construction development segment, including townships, housing, built-up infrastructure, and real-estate broking services.

Routes through which India gets FDI

Automatic route

A company that is not a resident of India or not Indian does not need the RBI’s or the government’s approval to invest.

Govt route

A government approval is required. The company will have to file a single-window application through the Foreign Investment Facilitation Portal, which allows for streamlined clearance. The application is then forwarded to the relevant ministry which approves/rejects it in consultation with the Department for Promotion of Industry and Internal Trade (DPIIT) of the Ministry of Commerce.

Conclusion

This blog has hopefully helped you better understand foreign direct investment. However, if you have any questions or comments, you can reach out to us at info@roodland.com. It would be our pleasure to respond to any concerns or suggestions you might have.

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