Government eased FDI norms for construction, real estate sector

The MODI government has eased the foreign investment rules in construction to attract money into the sectors which are short of funds and serve its dual objectives as promised of creation of more and more employment opportunities and all the Indian families shall have their own roof to live in. The Union Cabinet has approved a comprehensive proposal by the Department of Industrial Policy & Promotion (DIPP), reducing the minimum 10-hectare rule for serviced housing plots and cutting the minimum floor area for construction development projects to 20,000 sq m from 50,000 sq m. to be eligible for overseas investment.

It also drastically cut the minimum foreign direct investment (FDI) amount to $5 million from $10 million and substantially eased the exit norms, raising an across-the board cheer from an industry that now hopes for bigger foreign fund flows into a sector that is in the need of the money.

The new rules will also give a boost to the project of development of 100 smart cities being planned by the government. Home buyers will also cheer the relaxation as fresh investments will increase the pace of the completion of the projects in pipeline that are at the verge of the completion.Most housing projects are running one to two years or even more behind schedule because of the slowdown and the shortage of funds on account of increased debt levels.

The certain major reforms can be listed as follows:

1. Minimum foreign investment cut to $5m from $10m

2. Conditions set aside for hospitals, tourism, SEZ’s, NRI’s and old age homes

3. 3 Year lock-in removed developer can exit on completion or even earlier

4. Minimum floor area cut to 20,000 sq m. form 50,000 sq m.

It is a welcome move by the government and will definitely help the developers which are running late with their projects due to the shortage of the funds. Real Estate Experts commented that townships take a minimum of 10 years to be completed, so the relaxation will ensure that funds are not a problem. The norms will come into force after Department of Industrial Policy and Promotion will issue a notification in this regard. The government has promised housing for all by 2022 and to provide an incentive for housing in the rectified policy of the Government.

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