Cabinet Eases FDI Norms for Construction
The Government, in a bid to make the construction segment more attractive for foreign investors, has eased the norms for foreign direct investment (FDI) in construction. According to the new norms only 20,000 sq metres build-up area is required for FDI, as compared to the earlier requirement of 50,000 sq metres build-up area. The cabinet has also reduced the minimum capital requirement by half from $10 million to $5 million. However the capitalization and minimum built-up area requirements are not applicable to those projects that will dedicate atleast 30% of the total project cost to build low-cost housing. Also there is no minimum land area requirement for developing serviced plots. The current policy allows 100 % FDI in the construction sector if the minimum capitalization and minimum built-up area requirements are met.
The government, however, has not relaxed the exit norms for foreign investors. Overseas investors will be able to exit a project after three years of project completion or three years after making the final investment, which will be subject to trunk infrastructure development.
Easier FDI norms will allow the speedy completion of projects, that have slowed down or stopped due to lack of funds. This move has brought some cheers to the property sector in India. Makaan.com team finds out the view of Developers, lets see what they have to say about it.
Rajesh Goyal, MD RG Group:The significant relaxation in the hitherto applicable terms and conditions in the case of FDI in construction is a tremendous relief to the already subdued scenario in the real estate sector. The reduction in the conditions of already existing minimum 50,000 sqft. area to 20,000 sqft. of area shall prove a breather to the sector as it shall directly boost the affordable housing in the country. Consequently with the influx of the money available to the projects, the progress shall be uninterrupted and shall improve the atmosphere of confidence of the buyer, whose trust has somehow shaken in the industry.
Ajay Kumar , CMD Ace Group:The decision of the govt. regarding the relaxation of terms and conditions in the case of FDI in construction shall help regain the positive market sentiment as the new conditions shall pave the way for the availability of funds to carry-on the projects in time which was otherwise losing ground for one reason or the other. The market shall now become vibrant and full of activity and shall help in realizing the dream of the govt. of providing the affordable housing to the people of the country.
Mr. Owais Usmani, MD, Presidency Infraheights Pvt. Ltd., says “Expectations were high, and finance minister tried to live up to it in the Union budget 2014-15. With the announcement to promote 100% FDI in Construction and Real Estate sector, it will definitely boost investment opportunities. Relaxation of FDI limit in construction and real estate development under the automatic route is a clear road map for inviting investments. Relaxation of limit for minimum investment is an invitation to small players and increased NRI investment. The reduction in built-up area and size of projects will allow mid-sized and smaller developers with good track records better access to FDI and boost affordable housing in the country.”
Mr. Dujender Bhardwaj, Executive Director, ABCZ Builders, says “In the budget 2014-15, the decision by Govt. to ease up the FDI norm in the sector is possibly the most considerable economic policy. Now the announcement of FDI in construction and real estate will boost investments in the industry, and made it an attractive sector to both domestic and foreign investors and developers. This step can open several doors to the real estate sector. In relation to township, housing development of projects under mechanical route was the first step towards promoting the participation of the foreign investors in real estate. It can say that further growth in the construction industry looks hopeful.”