The new guidelines will provide automatic approval to joint ventures with a majority foreign stake. Approvals will be subject to a five-year lock-in period.

The Centre is also planning to extend a spate of tax concessions and other facilities to investors. The Companies Act and the Fera will be drastically amended to facilitate growth in the sector.

The new policy, yet to be cleared by the cabinet, will also allow investors to raise external commercial borrowings for housing and real-estate development, removal of wealth-tax provisions on rent, formation of joint ventures with overseas firms, depreciation of housing assets over 10 years and relief from capital gains for income earned on sales.

Other concessions being considered are grant of income-tax exemption as is done in the case of export income, and limitingthe Centre's stake in joint ventures.

"The proposals have been sent to the government for its approval. Discussions will be held soon with union finance minister Yashwant Sinha," a senior officer in the urban-affairs ministry said.

He said policy norms would be made transparent, non-discretionary and non-discriminatory to attract foreign direct investments. The Foreign Investment Promotion Board will be empowered to take a decision within 60 days.

The proposals also include opening up of the sector to non-resident Indians. They will be allowed to set up joint ventures with 60 per cent equity in association with foreign firms, which will have a stake of 40 per cent.

The ventures will either be in the form of management contracts or specialpurpose vehicles set up under the Companies Act. These ventures will be on a government-to-government basis.

Detailed guidelines have been laid down to identify foreign partners. The criteria for floating ventures will include efficiency and productivity, prevailingmanagement practices and willingness to transfer technology to upgrade housing techniques.

Insight

Lock-in period is a must

Inadequate investment in urban housing has given realtors a field day to indulge in speculative pricing. The proposal to give foreign investors and NRIs a free hand will therefore be welcomed.

The stipulation of a five-year lock in period is a must. This will ward off speculative investment. The lock-in will prevent short-term inflows and outflows of foreign currency. (The absence of such a restriction led to the currency crisis in Thailand). The problem area is availability of land.

In most urban centres, state agencies (housing boards) have pre-empted housing land. There is need for reform in housing land ownership.

It will also be necessary to create a market for mortgages. This will allow the original investor in urban housing to roll-over his investment. Besides banks, other financial institutions should be encouraged to deal in mortgages.