FDI in Real Estate in India: Policy, Regulations, Scope and Recent Updates in 2025

FDI in real estate allows global investors to participate in India’s construction and infrastructure sectors, boosting modernisation and employment. It is permitted in housing, township, and infrastructure development projects, but restricted in agricultural land and real estate trading. Foreign investment in real estate in India is governed under the Foreign Exchange Management Act (FEMA), 1999, and regulated by the Department for Promotion of Industry and Internal Trade (DPIIT)  and the Reserve Bank of India (RBI), ensuring transparency and compliance. 

Is FDI in Real Estate Prohibited in India?

FDI in Real Estate in India is not completely prohibited, but is restricted in certain areas. It follows strict laws and regulations to ensure fair and transparent investment. The points below will explain things in a better way:

• FDI is prohibited in buying and selling of land or real estate trading under FEMA (Foreign Exchange Management Act), 1999 [1]
• Investment is allowed only in construction development projects, including housing, township, and infrastructure, under DPIIT guidelines.
• Under FDI-restricted sectors in India, agricultural land, farmhouses, and plantation properties are not open for foreign investment as per government rules.

Key Factors for FDI in Real Estate in India

FDI in the real estate sector in India is influenced by several factors, such as infrastructure growth, policy reforms, and investor confidence that encourage sustainable development, foreign participation, and overall market stability. Below are a few factors to keep in mind:

•  Economic Growth: Rapid urbanization and rising income levels attract foreign investors seeking profitable opportunities in India’s expanding real estate market.
• Government Policies: Supportive FDI policies, related regulations, and initiatives like smart cities encourage global investment and ease of doing business.
• Infrastructure Development: Ongoing projects in housing, metro, and transport networks create demand for investment and long-term growth potential. 
• Transparency and Reforms: Implementation of RERA and GST ensures fair practices, improving investor trust and market accountability.
• Investment Returns: High demand for residential and commercial spaces provides attractive returns, motivating foreign investors to participate actively in the sector.

FDI in Real Estate vs Other Forms of Real Estate Investments

The primary difference between FDI in Real Estate and other Real Estate investment options, is the level of control and ownership. 

FDI allows foreign entities to make direct investments in real estate projects, providing them with substantial control. In contrast, REITs offer indirect or fractional ownership with limited decision-making influence. Here's a more detailed comparison across various aspects—

FDI In Real Estate: Pros and Cons

FDI in real estate will have a positive ripple effect on market expansion, job opportunities, and technology. But what are some potential drawbacks of FDI in India? Let's take an in-depth look into the advantages and disadvantages of FDI in Real Estate

FDI Policies and Guidelines in India

Foreign Direct Investment (FDI) in the Real Estate Sector in India was facilitated in 2009 through a notification issued by the Department of Industrial Policy and Promotion (DIPP). As per the notification,

• FDI up to 100% allowed in construction development projects, including housing, commercial premises, etc.
• Original investment can't be repatriated before three years from minimum capitalization completion("Original Investment" refers to the entire FDI investment for PN 2(2005) compliant projects, locked in for three years.)
• Early exit possible with Government approval via the FIPB.
• FDI funds must be brought in within six months of commencing business.

Regulatory Framework for FDI in Indian Real Estate 

• The Reserve Bank of India (RBI): RBI plays a pivotal role in overseeing and regulating foreign investments in the real estate sector.
• Foreign Direct Investment Policies: These policies provide the overarching guidelines and framework for FDI in India, including the real estate sector.
• Foreign Exchange Management Regulations: The Foreign Exchange Management (Transfer/Issue of Security by a Person Resident Outside India) Regulations, 2000, play a crucial role in facilitating and monitoring FDI-related transactions.

Guidelines for FDI in the Real Estate Sector in India

FDI policies in India aim to promote economic growth by simplifying foreign investment procedures, ensuring transparency, and creating a favourable environment for investors in various sectors, including real estate foreign investment. Check the points below for guidelines:

• Minimum Area Requirement: Projects must meet size norms, specifically 10 hectares for housing plots or 50,000 sq. m. for construction projects. 
• Minimum Capitalization: Wholly owned subsidiaries need US$10 million, and joint ventures US$5 million, infused within 6 months of starting operations.
• Repatriation Rules: Original investment can be withdrawn after a 3-year lock-in period, with earlier exit allowed through government approval.
• Project Completion: At least 50% of the project must finish within 5 years, with full infrastructure provided before plot sales.
• Regulatory Compliance: Developers must follow local building rules, get all necessary approvals, and ensure monitoring by State or Municipal authorities.

Conditions For Foreign Investment In Construction Development Projects

In the realm of Construction Development, which encompasses townships, housing, and built-up infrastructure, FDI has played a pivotal role in meeting the sector's demands. In 2005, the Reserve Bank of India (RBI) introduced a significant change by allowing 100% FDI in this sector, subject to specific conditions.

Key Conditions for Foreign Investment in Construction Development Projects:

• Minimum Capitalization: No minimum capitalization is required.
• Exit and Lock-in Restrictions: Investors can exit under certain conditions, such as after three years from the date of each foreign investment tranche, project completion, or full development of trunk infrastructure. Specific categories, like Hotels & Tourist Resorts, Hospitals, and others, are exempt from the three-year lock-in period.
• Transfer of Stake: Transferring stakes between Non-Resident Investors does not require repatriation and isn't subject to a lock-in period or prior RBI approval.
• Separate Phases/Projects: Each project phase is treated as a separate entity under the FDI Policy.
• Minimum Land Stipulation: No minimum land area is required.
• Completed Assets: 100% FDI is allowed for fully completed projects, with a three-year lock-in period.
• Transfer of Control: Transfer of control from residents to non-residents is allowed, with a three-year lock-in period and no transfer of immovable property during this period.
• Earnings from Property Lease: FDI isn't allowed in entities engaged in the Real Estate Business. However, earnings from property leases, not amounting to a transfer, are permitted.
• Obligations on the Indian Investee Company: The Indian Investee Company can only sell developed plots with trunk infrastructure. They are responsible for approvals, development charges, and local government compliance.
• Monitoring by Authorities: The State Government/Municipal/Local Body responsible for approving plans monitors compliance.

Open Conditions Regarding FDI Policy in Construction Development

India’s FDI policy in construction development, guided by FDI limits in various sectors and RBI rules, allows flexible investment opportunities promoting transparency, infrastructure growth, and foreign participation in real estate projects.

• Exit Flexibility: Foreign investors can exit after project completion or a 3-year lock-in period, subject to RBI and government guidelines.
• Transfer of Stakes: Transfer of states from one non-resident to another requires government approval, ensuring proper valuation and compliance.
• Operational Freedom: Developers can use funds for construction and related infrastructure, ensuring project completion aligns with approved plans and regulations.

Recent Updates in FDI Policies

India’s FDI policies have evolved in 2025 to attract global capital. Key updates include easing investment rules, enhancing sectoral limits, and streamlining compliance, aligning to boost economic growth.

• Insurance Sector Liberalization: In February 2025, the Indian government proposed regulations allowing up to 100% FDI in he insurance sector, aiming to attract more foreign capital and enhance the sector’s growth.[2]
• E-commerce Investment Relaxation: In September 2025, India drafted proposals to ease foreign investment rules, permitting e-commerce companies like Amazon to buy products directly from Indian sellers for export, enhancing operational flexibility.[3]
• FDI Compliance Overhaul: In September 2025, the government announced plans to reduce red tape and simplify FDI approval processes, aiming to attract more global capital by streamlining procedures and synchronizing approvals.[4]

FDI Limitations and Prohibited Sectors

FDI in India faces sector-specific restrictions to ensure strategic control. FDI-prohibited sectors in India include certain government areas, gambling, real estate trading, and other sensitive industries. Below are a few things to keep in mind:

• Prohibited sectors: FDI is not allowed in gambling, loitering, atomic energy, railways, and most retail trading except for single-brand products.
• Restricted businesses: Chit funds, Nidhi companies, tobacco, and trading in transferable Development rights (TDRs) face strict FDI limitations.
• Agriculture Exception: FDI is prohibited chiefly in agriculture, but in floriculture, animal husbandry, and certain allied activities are allowed.
• Real Estate participation: FDI in real estate is permitted only for township development, housing, commercial projects, hotels, hospitals, and educational institutions.
• Condition for Real Estate FDI: 100% FDI allowed under the automatic route with minimum capitalization and restrictions on selling underdeveloped plots.

FDI Percentage and Investment Scenarios

FDI in India’s real estate sector remains modest but growing. Investor-friendly policies, structural reforms, and improved transparency have gradually increased foreign participation, even though domestic sources still dominate the market.

• Current Share of FDI: Foreign investment contributes less than 2% of India’s $480 billion real estate market, with most funding from banks, NBFCs, and customer advances.[5]
• Sector Potential: Rapid urbanization, growing housing demand, and infrastructure expansion present strong opportunities for increased foreign investment in India’s real estate sector.
• Recent Growth Trend: In 2025, foreign institutional inflows into India’s real estate reached $4.3 billion, driven by investor-friendly policies, infrastructure development, transparency, and growing confidence in the residential and commercial property sector.[6]

Scope And Growth of Real Estate in India

India’s real estate sector has immense growth potential, driven by urbanization, infrastructure projects, housing demand, and supportive policies, making it a key contributor to economic development and investment opportunities. 

• Residential Growth: Rising population and urban migration are increasing demand for affordable and premium housing, boosting residential real estate development across cities. 
• Commercial Expansion: Expansion of IT, retail, and industrial sectors is driving commercial property development, including offices, malls, and warehouses.
• Infrastructure and Investment: Government initiatives like smart cities, metro projects, and favorable FDI policies are accelerating real estate development and infrastructure growth nationwide.

How Can NoBroker Help?

FDI in real estate opens up India's economic growth potential while meeting the rising demand for infrastructure. You dont need to break your head over real estate investments. NoBroker offers you expert guidance and seamless solutions to address any hurdles you may encounter. With our assistance, you can navigate the world of FDI in real estate efficiently and expedite your investment goals. Don't hesitate; contact NoBroker today to embark on your real estate investment journey with confidence.