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Union Government eases FDI rules in construction

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The Union Cabinet new rules, proposed in the Union Budget, include reducing the built-up area requirement for foreign direct investment (FDI) in construction projects to 20,000sqm from 50,000sqm. The minimum capital requirement has also been reduced to $5 million from $10 million. The investor will be permitted to exit on completion of the project or after three years from the date of final investment, subject to development of trunk infrastructure. The new rules will make it easier to attract investments, help improve the crumbling infrastructure and provide impetus to key manufacturing industries such as cement and steel. Anuj Puri, Chairman & Country Head – JLL, said: “The announcement literally comes in the nick of time for Indian real estate. The easier rules will help faster completion of projects delayed by a squeeze on funds due to elevated debt levels.”

As per, Kailash Advani, CEO, Vaswani Group, “Given the currently estimated shortage of 20 million dwelling units in urban clusters, the introduction of a further relaxation in the FDI norms for “affordable housing” and the EWS category would encourage development in this category, which is the need of the hour.” Expressing the similar sentiments Mallanna Sasalu, COO and Executive Director at Assetz Property Group said, “Relaxing the norms pertaining to FDI would create a positive atmosphere for both developers and investors. The new norms will help in reducing the ambiguity on some issues (such as what constitutes a greenfield project) and also will give a fillip to the affordable housing segment with the relaxation on the minimum capitalization.”

Welcoming the move, Rahul Sabharwal, COO of VBHC stated, “At a time when many foreign players are keen on investing in India, this will act as a big stimulant for the Indian real estate sector and the affordable housing segment is going to gain immensely in the backdrop of PM’s commitment to offer housing for all by 2022.” According to Bijay Agarwal, MD – Salarpuria Sattva Group, “Clarity in the new norms of FDI will bring discipline and reduce ambiguous interpretations, leading to a fair investment opportunity. We have still to wait to see the implementation of this new announcement. But we are confident that this move will bring a sea change to the process of fund- raising for the industry making it grow in a robust and healthy manner.”


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