Companies with FDI can lease surplus real estate to firms within group: DIPP

New Delhi: Companies with foreign direct investment (FDI) in them are now free to lease out surplus real estate to other companies within the group, without violating the FDI policy on real estate.

Earlier, such sub-letting was considered as real estate business and barred. Real estate is among the sectors where FDI is not permitted.

The Department of Industrial Policy and Promotion (DIPP) on Tuesday said it has received certain references on the issue as to whether entering into facility-sharing agreements through leasing or sub-leasing arrangements within group companies for the larger purpose of business activities will be considered as real estate business.

“Facility-sharing agreements between group companies through leasing/sub-leasing arrangements for the larger interest of business will not be treated as ‘real estate business’ within the provisions of the consolidated FDI policy circular 2015, provided such arrangements are at arm’s length price in accordance with Income Tax Act 1961, and annual lease rent earned by the lessor company does not exceed 5% of its total revenue,” DIPP clarified

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