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Clarification on FDI Policy on facility Sharing Agreements between Group Companies.

In relation of Foreign Direct Investment: Real Estate Business falls under the Categories prohibited for accepting FDI.

With regards to the same the department received various queries as to whether Companies entering in Facility Sharing Agreement with it Group Companies for the larger purpose of business fall under the Real Estate Business?

The Department vide clarificatory circular dated 15-09-2015 stated that such agreement will not be treated as real estate business within the provisions of Consolidate FDI Policy Circular of 2015 provided  that the same are at arms’ length price in accordance with the relevant provisions of Income Tax Act, 1961 & annual lease rent earned by the lessor company does not exceed 5% of its total revenue.

The said circular can be accessed at the following link: Clarification relating to FDI policy on facility sharing arrangements between group companies

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