FDI Norms Eased: Affordable Housing Gets Leg Up

 FDI Norms in Construction:Cabinet Relaxes

The Cabinet has relaxed norms for foreign direct investment (FDI) in construction development to make the sector more attractive for overseas investors.

The minimum built-up area requirement for FDI in construction projects has been reduced from 50,000 square metres to 20,000 square metres, according to an official release.

The Central Government has also halved the minimum capital requirement for such projects from $ 1 Crore  to $ 50 lakh.

Projects that commit at least 30% of the total project cost toward low - cost affordable housing will be exempted from the minimum built-up area & capitalisation requirements.

However, there has been no relaxation in land-use norms.

The previous UPA Government was examining the option of allowing Indian firms with foreign investments to buy agricultural land with a promise to change it into non-agriculture use later.

Last month, the BJP- led Government relaxed FDI norms for the railways sector.

 Mr. Anuj Puri, Chairman & Country Head, JLL India, “The announcement has come in the nick of time. The construction sector’s share in total FDI has slipped from over 20% in 2009 - 10 to nearly 3% this year (2014), as developers reel under high levels of debt”

The easier rules will help speed up completion of projects, which are being delayed by a squeeze on funds due to elevated debt levels, he added. In the case of development of serviced plots, there is no condition of minimum land area.

The existing FDI policy allows 100% foreign direct investment in the construction sector subject to minimum built-up area and minimum capitalisation requirements.

According to the new rules, an investor will be permitted to exit on completion of the project or three (3) years after the date of final investment, subject to development of trunk infrastructure.

The Central government may permit repatriation of foreign investment or transfer of stake by one non-resident investor to another non-resident investor before the completion of the project.

These proposals will be considered by the Foreign Investment Promotion Board (FIPB) on a case by case basis.

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