Real estate in Chennai

As per a recent notification by India's Ministry of Commerce, Foreign Direct Investment in the Indian real estate sector is now permitted through the "automatic route", i.e., without requiring the additional approval of the Foreign Investment Promotion Board. This implies that the foreign investor may now by-pass some of the previously required approvals, making the investment process less cumbersome.

Within the real estate sector, foreign investment in India is now permitted in construction and project development related to both residential and commercial development in (i) housing townships; (ii) commercial office space; (iii) hotels and resorts; (iv) hospitals; (v) educational institutions; (vi) recreational facilities; and (vii) city and state level infrastructure.

Certain guidelines exist within the reform measures:

Project Conditions

1.In residential development, the minimum land area must be 10 hectares (approximately 25 acres)

2.In commercial development, the minimum land area must be 50,000 square meters (approximately 540,000 square feet)

3.If the project combines residential and commercial development, either one of the above conditions may be satisfied

4.At least 50% of the project must be completed within five years from the date of obtaining all statutory clearances

5.The project must comply with all local land use guidelines

6.The sale of undeveloped land is not permitted, i.e. the developer may purchase undeveloped land but must develop the land before selling it further

In addition to the above project conditions, the following financial conditions must be satisfied:

Financial Conditions

1.Minimum capitalization requirement of US$10 million for wholly-owned subsidiaries of foreign companies and US$5 million for joint ventures with an Indian partner

2.Capital must be brought into India within six months of incorporation of the subsidiary or joint venture

3.Holding period of three years on repatriation of any of the initial investment unless with the prior approval of the Foreign Investment Promotion Board.