Bahrain-based Islamic investment bank Gulf Finance House has signed an agreement with the Maharashtra government to set up a $10 billion (Rs 40,000 crore) special economic zone in five years.

This is the largest foreign direct investment proposal in the state and represents a five-fold increase from an earlier announcement by GFH for a $2 billion to $2.5 billion investment in an "energy city".

The ambit of the SEZ has also been expanded to include IT, IT-enabled services, hospitality and entertainment.The company said it will set up the SEZ on 1,600 acres (648 hectares) of land at Panvel, nearly 50 km outside Mumbai.

Of this, 600 acres will be allotted for building offices for energy companies; software and telecom will occupy 300 to 400 acres. Entertainment-related activities will be housed on 400 acres of land.

GFH is in advanced stages of negotiations with investors from North America and Europe to set up facilities in the SEZ.GFH has already raised $630 million to finance the first phase of development and aims at mobilising $700 million in six months, said Chairman Esam Janahi.

"GFH will spend $2 billion to $2.5 billion to buy land and develop the infrastructure at the SEZ and another $3 billion to construct buildings and other facilities," said its acting chief executive officer Peter Panayiotou.

The fund outlay on the project is more than double a similar project to be set up by GFH to develop a business and residential district for energy companies in China.

The entire money will come from 3,000 wealthy individuals and financial institutions in West Asia.

Speaking at the agreement-signing ceremony, Maharashtra Industry Secretary V K Jairath said the SEZ has a potential of creating 300,000 jobs directly or indirectly.

Maharashtra Chief Minister Vilasrao Deshmukh said, "GFH will help us to maintain our position as the leading state as far as attracting FDI is concerned."

He added that more than 80 projects with over Rs 80,000 crore of investments have come to Maharashtra since 2005.