News Roundup: Relaxed Foreign Investment Norms To Developers Asking Government To Cancel SEZs

22 developers have asked the government to cancel their SEZs ​(Photo credit: commons.wikimedia.org)

The Union Cabinet has removed certain provisions in the Foreign Exchange Management Act (FEMA) on May 7, 2015, to allow more investment in real estate in India.

Here are the other real estate news stories of the day:

According to ICRA Limited, a rating agency, the demand for cement in India would grow by 6.5-7% during the FY16. Twenty-two developers have asked the government to cancel their SEZ projects, and 27 developers want the government to extend the time they need to complete their projects.

Now, let us go into the details of these stories:

1.      The Union Cabinet has relaxed the rules for foreign funds to invest in real estate investment trusts (REITs). Earlier, certain provisions in the FEMA have impeded investment in real estate in India because they prohibit investment in completed, rent-yielding assets. REITs invest largely in retail and office space. Earlier, foreign investment was possible only in under-construction property in India. The government had earlier eased the Minimum Alternate Tax (MAT) norms to allow the formation of REITs in India. The FEMA governs transactions from across the border.

2.      According to ICRA Limited, the demand for cement is likely to improve when the economy, investment cycle and infrastructure improve. ICRA estimates that the demand would grow by 6.5-7% during FY16. Cement production in India grew by 5.6% in FY15 while it was 3% in FY14. According to ICRA, the operating margins of cement companies declined from 15.4% in the second quarter of FY15 to 14.1% in the third quarter of the FY15.

22 developers have asked the government to cancel SEZs. Of these 22 SEZs, 19 are from information technology (IT) or IT-enabled services (ITeS) sector. A few months ago, the government had canceled 56 SEZs. The decision on the applications submitted by these developers will be taken by a Board of Approval chaired by the Commerce Secretary, Rajeev Kher. Twenty-seven developers had asked the government to extend the time to complete their projects. After the government imposed MAT and dividend distribution tax, SEZs have lost much of their appeal.