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- Govt may free NRIs from farmland purchase restrictions
Non-resident Indians (NRIs) may soon be freed from restrictions on buying farmhouses and small plantations. This piece of good news for overseas Indians, looking to diversify their investment portfolios, is accompanied by the results of an Assocham study which estimates a pumping in of $8bn in the Indian real estate sector this year.
India's Foreign Exchange Management Act (Fema) does not permit NRI or foreign investment in agriculture and farm sector. Farmhouses are categorised as agricultural land and the bar would have to be lifted to allow investment by NRIs in this segment.
Through Press Note 2 of 2005 series, the government allowed FDI up to 100 per cent under the automatic route in construction projects including housing, commercial premises, resorts, educational institutions, recreational facilities, townships. However, such investment is subject to conditions of minimum capitalisation and minimum area development. FDI is not permitted in any other segment of real estate sector.
NRIs, according to Assocham, are investing in immovable property in India. They have been keener in investing in residential properties than commercial Properties. The one very attractive option closed to them so far was farmland and farmhouses.
Now, the department of industrial policy and promotion (DIPP) is considering a proposal to allow NRIs to buy farmhouses and small plantations in India. A final decision on this proposal is expected in a month and minimum requirements for such acquisition may be stipulated.
NRIs from all over the world have been urging the government to permit investments in these segments. According to sources, they are even learnt to have approached various area development authorities and municipal corporations seeking farm lands. While discussions are still on within the DIPP, officials of the finance ministry are of the view that investment in farmhouses cannot be categorised as FDI. The final decision on this issue would depend on the views of the agriculture ministry and the Reserve Bank, apart from the finance ministry and the DIPP. At present, farmhouse purchases by NRIs are taking place through convoluted routes. In the name of relatives and friends, NRIs buy farmhouses and the transactions are through forged titles.
They would certainly be keen to avoid the 'benami' property hassles and make above the board investments in their homeland.CommentQuote0Flag