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Union Cabinet approved proposal to amend FDI policy in construction and real estate sector

Nov 1, 2014 13:06 IST

Union Cabinet on 29 October 2014 approved the proposal to amend Foreign Direct Investment (FDI) policy in construction and real estate sectors. The proposals came in the backdrop of depleting FDI inflows in construction and real sector in last few years.

Union government decided to use relaxed rules for FDI in the construction sector by reducing minimum built-up area as well as capital requirement and easing the exit norms to boost the construction and real sector.

• The proposal is the minimum capital requirement is brought down from 10 million US dollar to 5 million US dollar.
• In case of development of serviced plots, the condition of minimum land of 10 hectares has been completely removed.
• In case of development of trunk infrastructure, though the lock in period has not reduced from 3-year lock-in period but permitted foreign investors to investors to exit on project completion or 3 years from the date of final investment.

Present status
Earlier in 2005, although 100 percent foreign direct investment was allowed in townships, housing and built-up infrastructure and construction developments, the government imposed certain conditions.

After the relaxation, the FDI inflows in the construction sector witnessed a steady rise during 2006-07 but have stared declining in 2009-10.

The construction sector received FDI worth 23.75 billion US dollar or 10 percent of the total FDI attracted by India during the period between from 2000 to 2014.

The investment in construction and real estate sector has a multiplier effect on the economy by way of infrastructure creation and employment generation which will also help to create demand for products of related industries like cement and steel.

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