The objective is to find out whether realty companies are diverting the funds for buying agricultural land for their projects. This is banned under FDI norms. The move came at a time when the government is trying to relax the three-year lock-in period on the repatriation of investments by foreign partners in real estate projects.

The decision followed unearthing many FDI violations in the purchase of land by a prominent Delhi-based real estate developer. The company possessed around a 12,800-acre land area, of which 8,700 acre is farm land. The Enforcement Directorate that conducted the raids claimed that most of this farmland was acquired through FDI, in contravention to existing rules.

Under current regulations, FDI is banned in agriculture and agriculture-related activities. However, 100% FDI is allowed for integrated townships and housing development projects. These regulations also do not provide for either the purchase or sale of undeveloped land for which FDI approval is granted. Such land must be retained by the developer.

DIPP will now ask realty firms to submit quarterly reports on their end-use of foreign funds to ensure that the funds are not being routed to projects other than FDI-compliant ones.