The Department for Promotion of Industry and Internal Trade (DPIIT) in its recent press note changed the existing definition of the real estate business to provide more clarity in the FDI policy for the real estate sector. As per the press note, FDI is not permitted in a firm that is engaged or seeks to engage in real estate business, farmhouse construction, or trading in transferable development rights.
Real estate business has been defined as businesses that deal in land and immovable property for the purpose of profit, and excludes township development, construction of residential/commercial premises, roads or bridges, educational institutions, recreational facilities, city and regional level infrastructure, townships and REITs registered and regulated under the SEBI (REITs) Regulations 2014.
Further, earning of rent/income on lease of the property, not amounting to transfer, will also not amount to real estate business. FDI investments that lead to speculation in real estate have long been discouraged by the government, while favouring investments that lead to development. While no changes are made, the press note provides greater clarity on the current policy.