Government relaxes FDI rules in construction sector
In the Cabinet meeting held on October 29, the government decided to relax rules for allowing FDI in the construction sector. This move is expected to attract more foreign investment in the construction and real estate sector. The minimum built-up area and capital requirement for FDI in construction projects has been reduced to 20,000 sq. meters and $5 million respectively from the earlier 50,000 sq. meters and $10 million.
CommonFloor spoke to few key real estate experts to know their views and what to expect for the construction sector in the future. Here are the excerpts.
Mr David Walker, Managing Director, SARE Homes
The Government’s announcement of easing of funding rules for FDI in construction sector are welcomed as a step in the right direction. However it does not constitute the big reforms that are required to attract the approx. $1 trillion over five years (2012-17) to overhaul its infrastructure sector such as ports, airports and highways to boost growth. Bigger reforms are required to make it easier to do business in India. In terms of direct support to the residential sector, availability of finance is a critical area with mortgage debt in India only circa 9% of GDP v’s China with circa 35% and the UK with over 70%. With progress on these fronts FDI investment will naturally flow to India, attracted by the tremendous potential of the size of the population, increasing earnings and urbanization.
Mr. Dhiraj Jain, Director, Mahagun Group
This decision would definitely provide a relief to the sector and will hopefully result in smooth construction of projects with fresh FDI inflow. Availability of funds will also help developers to carry-on the projects in time and would help them to get an extra route of funding their projects which will boost largely real estate industry.
Mr. Aman Agarwal, Director, KV Developers
This is really a welcome step taken by Modi’s government. This move to relax FDI limit will help increase the development of low-cost and affordable housing furthering the government’s vision. This move will be a boon for developers as well as real estate industry. This would also help developers get an extra route of funding their projects and it would award a momentum to Indian real estate industry.
Mr. Rohit Raj Modi –Hon. Sec (CREDAI NCR) & Director, Ashiana Group
It is indeed a welcome step by the government. The sector has been reeling through an acute funding pressure. The foreign investment in real estate has also gone down in last few years. Investors were shying away due to ambiguity in rules and regulations. Also they were not keen on locking their funds for longer period. With these reforms in place, they would now be able to manage their fund quite well. We believe affordable housing would be the biggest beneficiary of this step as funding is now allowed in projects sizing 20,000 sq meters as well. It is evident that government intends to fulfil its dream of housing for all by 2022 and these steps are aligned to that. We are happy that government is now considering real estate as an important sector and is coming out with corrective measures. We are hopeful that soon we would be given industry status as well which will further ease out the funding issues.
Mr. Pradeep Jain, Chairman, Parsvnath Developers
In order to attract more foreign investment in the construction and real estate sector this is a remarkable step. We are thankful to the government for this move. The sector is reeling through an acute funding pressure. The foreign investment in real estate has also gone down in last few years. Hence, This move has sent a positive signal for the real estate sector which will be shown in coming days.
The new government too is keen on improving the current sub 5% GDP figures to 8-9% levels. So these all steps will revive the overall economy as well as real estate industry. We are also hoping infra status in near future.
Mr. Vineet Relia, Managing Director, SARE Homes
This is a positive move from the Government which will no doubt pave the way for more such progressive policies and will boost the real estate sector. The relaxation of the two norms will improve the overall investor sentiments and increase the inflow of investments. The reduction of the minimum built-up area to 20,000 sq. metres will give builders more space to operate, especially in urban locations where there is a problem of land shortage as well as high cost of land.
Moreover, the exemption of the projects which commit 30% of their total cost to affordable housing is a measure which will give a big thrust to the affordable and mid-income segments. These measures will also support the developers to pursue housing projects which will be the backbone of the Government’s ‘Smart City’ dream. I am confident the sector will now start moving on a fast-growth trajectory.
