In order to attract more foreign investments in cash-starved construction sector and to serve its objectives of faster job creation and housing for all people, the government has relaxed, the foreign direct investments (FDI) norms for construction and real estate sector.
The government decided to reduce the minimum built-up area requirement for FDI in construction projects to 20,000 sq metres from 50,000 sq metres and lowering the need for minimum capital requirement to $5 million from $10 million. Further government’s notification highlighted that subsequent tranches of FDI can be brought till the period of ten years from the commencement of the project or before its completion, whichever expires earlier. In case of development of serviced plots, the condition of minimum land of 10 hectares has been completely removed. Though the Cabinet has not reduced the 3-year lock-in period, it has permitted the investor will be permitted to exit on completion of the project or after three years from the date of final investment, subject to development of trunk infrastructure.
Besides enhancing the inflows into the construction development sector, the move is also expected to result in creation of much needed low cost affordable housing in the country and development of smart cities. Meanwhile, the government has allowed 100% foreign direct investment in townships, housing and built-up infrastructure and construction developments since 2005. Over the period FY07- FY10, Indian construction sector witnessed high FDI inflow. After that, foreign investment started declining as the government had imposed certain conditions. During April 2000 and August 2014, the construction sector received FDI worth $23.75 billion or 10 percent of the total FDI attracted by India during the period.
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