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Understanding FDI in retail, print media and construction development

This discussion will cover three sectors in which foreign investment is under the approval route, or which despite being under the approval route require the foreign investor to comply with additional conditions (sometimes referred to as performance linked conditions). 

1. FDI in Retail:

Single brand retail
- FDI in retail has been a hotly debated issue – since it is apprehended by some to adversely affect the local grocery store businesses. Until recently, investment up to 51% in single brand retail was permitted under the approval route. FDI in multi-brand retail was prohibited.


Currently, 100 percent FDI is permitted in single-brand retail with approval of FIPB, subject to certain conditions and upto 49 percent under automatic route. For example, where investment is over 51 percent, at least 30 percent of the value of the products sourced must be sourced from India, preferably from micro, small and medium enterprises and local artisans or craftsmen.


Interestingly, a fresh approval is required if any new products are proposed to be sold under the brand name. For example, consider that Adidas AG of Germany obtains permission for selling footwear through stores owned by a 100 percent subsidiary of the company in India. Now, consider Adidas AG has launched a range of watches which it intends to sell globally, including in India. Adidas will need to obtain a fresh permission from FIPB to sell those watches through its subsidiary in India.

Multi brand retail
- FDI in multi-brand retail has been permitted up to 51% under the approval route subject to fulfilment of certain conditions - for example, the minimum investment brought in by the investor must be USD 100 million, and the retail sales outlet must be only within cities which have a population of 10 lakhs or more (or within 10 kilometres of such cities) or in any such city in the discretion of the State government. Further, at least 30 percent of the value of inputs must be sourced from small industries (as per the policy, ‘small industries’ refers to Indian suppliers who have invested less than USD 1 million in their business). In addition 50 percent of the FDI must be invested in backend infrastructure (excluding land and rentals).


State governments and union territory administration are permitted to take their own decision on implementation of the government’s policy. Until 4 July 2013, 12 states and union territories have conveyed their assent (listed in Annex B).

FDI in Print Media:

Any foreign investment in a company engaged in publishing newspaper and periodicals (in the news and current affairs segment) requires FIPB approval. Further, only investment of up to 26% is permitted, as per the FDI Policy. The FIPB Policy also states that it is subject to the guidelines issued by the Ministry of Information & Broadcasting (MIB) on 4th December 2008.

As per the MIB guidelines, approval of the MIB is also required. In addition, the approval is subject to compliance with the following conditions:

  • The largest Indian shareholder must hold at least 51% of the equity
  • At least 50% of the investment must be through induction of fresh equity, and only the balance may be through transfer of fresh equity.
  • MIB permission would be conditional on at least ¾ of the Directors on the Board of Directors of the company and all key executives and editorial staff being resident Indians.

 Construction development sector (Townships, Housing, Built-up infrastructure):

In certain sectors, there are specific conditions stipulated by the FDI Policy. Even though 100% foreign investment is permitted under the automatic route in construction development, the FDI Policy imposes the following conditions:

  • In case of construction-development projects, a minimum built-up area of 50,000 sq.mts, or in case of development of serviced housing plots, a minimum land area of 10 hectares
  • A minimum capitalization of US$10 million is required for investment in wholly owned subsidiaries and US$ 5 million for joint ventures with Indian partners. The funds would have to be brought in within six months of commencement of business of the Company.
  • Original investment cannot be repatriated before a period of three years
  • At least 50% of each such project must be developed within a period of five years from the date of obtaining all statutory clearances. The investor/investee company would not be permitted to sell undeveloped plots.

The restrictions above are not applicable to Hotels & Tourism, Hospitals, Special Economic Zones (SEZs), Education Sector, Old age homes and investment by NRIs.



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