In the much awaited decision, the cabinet, in its meeting on Wednesday, may take on final call on the issue of relaxing foreign direct investment (FDI) norms in construction sector. Earlier, reports suggested government to ease norms for foreign direct investment in the construction sector ahead of Prime Minister Narendra Modi’s visit to the United States late in September. However, this did not fructify.
The Department of Industrial Policy and Promotion (DIPP), the nodal agency for FDI rules, proposed bringing down the minimum built-up area requirement for FDI in construction projects from 50,000 sq. metres to 20,000 sq. metres along with reducing the minimum capital requirement for such projects from $10 million to $5 million. Currently, the requirements are for built up area of 50,000 square metre and capital of $10 million.
The agency also has proposed additional relaxations for projects which commit at least 30% of the total project cost for low cost affordable housing. Such projects will be exempt from minimum built up area and capitalisation requirements. However, a decision on the minimum lock-in period for FDI, still needs to be firmed up. Notably, the proposal also remains silent on land-use rules for the sector including agricultural land. Nevertheless, the proposal, if approved would also help infuse more funds into the debt burdened sector and facilitate faster completion of projects.
Although, a 100% foreign direct investment is allowed in townships, housing and built-up infrastructure and construction developments, the government has imposed conditions. So far, in the period between April 2000 and August 2014, construction development, including townships, housing and built-up infrastructure in the country received FDI worth $23.75 billion or 10 per cent of the total FDI attracted by India during the period.
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