With FDI norms relaxed, ‘acche din’ begins for Real Estate
Central Government has finally eased the FDI norms for construction sector. While the unchanged repo rates made the realtors community little unhappy yesterday, they got a reason to celebrate with this decision.
As the sector is reeling through an acute funding pressure, real estate fraternity is optimistic that FDI will give much-needed fillip to the sector. This has definitely infused a sense of hope in the sector.
Talking to CommonFloor, Rohit Raj Modi, president, CREDAI NCR said, “it is indeed a welcome step by the government. 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.”
He further added, “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.”
Reiterating the same, P Sahel, vice chairman of Lotus Greens said, “the easing of FDI norms is therefore significant as it will provide an alternative route of funding for projects. These being very capital intensive activities, relaxing the FDI norms will help the players to address issues of liquidity constraints, which will ensure speedy construction and timely delivery of projects.”
Highlights of the press note issues by the Department of Industrial Policy and Promotion (DIPP)
*With no three-year lock-in period, the major hurdle for the overseas investors is removed. Now an investor can exit once the project is completed or after the complete trunk infrastructure development.
*No minimum area requirement for development of serviced plots, which was 10 hectares earlier.
*The minimum built-up area requirement has been cut from 50,000 square metres to 20,000 square metres. This will encourage developments in areas where small land parcels are available.
*To catalyse “Housing for All by 2022” and to promote low-cost housing, developers committing at least 30% for affordable projects will be exempted from minimum area as well as capitalisation requirements.
*The minimum capital requirement for joint ventures involving Indian partners has been reduced to $5 million from $10 million earlier, which has to be brought in within six months of commencement of the project.
* At least 50 per cent of each project must be developed within a period of five years from the date of obtaining all mandatory clearances.
