Further Relaxation of FDI Norms in Construction Sector
The Commerce and Industry minister is expected to float a revised Cabinet note with regards to relaxation of Foreign Direct Investment (FDI) norms for the construction sector. This move is expected to attract greater foreign investment in the construction and real estate sector. This decision was taken following the persistent demand from this sector to relax norms.
Incidentally, in November 2013, a discussion was held in the Cabinet meeting with regards the proposal of the Department of Industrial Policy and Promotion (DIPP) to relax FDI norms in the sector. However, any decision in this regard was deferred due to concerns raised by the Urban Development ministry on the formulation of new norms. On their part, the DIPP has suggested easy conditions for the exit of developers even before the three-year lock-in period.
Ministry suggests uniform minimum capitalisation of $5 million
Moreover, there was also the suggestion for a change in the current requirement of having a minimum built-up area of 50,000 – 20,000 sq.mt. of carpet area for granting FDI in construction development projects. Further, the ministry has also suggested the implementation of a uniform minimum capitalisation of $5 million for Wholly-owned Subsidiaries (WOS) as well as joint ventures with Indian partners.
Meanwhile, the National Real Estate Development Council (NAREDCO) had suggested the government to lower the minimum requirement for streamlining developers for FDI in real estate. It was felt that this move would enable in bringing in more FDI as well as help in the creation of more jobs in the real estate sector. Moreover, it would also enable small developers to meet their funding requirements. NAREDCO further suggested that the minimum requirement for FDI qualification be set at a built-up area of 20,000 sq.mt. as well as a minimum capitalisation of $5 million.
It is expected that the corporatisation of the sector will bring in more transparency. Besides, the influx of multinational funds will enable the increased exposure of domestic developers to stick to global best practices as well as international quality standards, thereby benefitting the end users. The proposed move by the government to bring into effect a revised Cabinet note regarding relaxation of FDI would certainly send a positive signal to the real estate sector in 2014.
