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Govt gearing up to fast track decision on relaxing rules for FDI in construction

04 Sep 2014 Evaluate

Right after liberalizing foreign direct investment (FDI) norms in the defence sector and the Railways, the government is now gearing up to fast-track the decision on easing rules for foreign investments in the construction development sector.   It is in view of this, the department of Industrial Policy & Promotion (DIPP) floated a cabinet note proposing to scale down the minimum built-up area requirement for FDI in construction projects from 50,000 sq metres to 20,000 sq metres. It has also proposed reducing the minimum capital requirement for such projects from $10 million to $5 million.

The current policy though allows 100% FDI in the construction sector, but is subjected to minimum built-up area and minimum capitalization requirements, vis-a vis, minimum area to be developed under each project in case of development of serviced housing plots, should be minimum land area of 10 hectares; in case of construction-development projects should be a minimum built-up area of 50,000 sq. mts; and lastly in case of a combination project, could be any one of the two conditions. Further, on investment front, it required minimum capitalisation of $10 million for wholly owned subsidiaries and US$ 5 million for joint ventures with Indian partners.

Meanwhile, the cabinet note floated by DIPP, also suggested that projects which commit at least 30% of the total project cost for low cost affordable housing would be exempted from minimum built-up area and capitalization requirements.

At a time when the government is keen to attract investments in the 100 smart cities proposed in the Budget, relaxing rules in construction is the need of the hour. Further, in encouraging development, countries such as the US, Japan and UK have already expressed interest in investing in smart cities.

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