Government relaxes FDI rules in construction sector

New Delhi: The government on October 29 relaxed rules for allowing FDI in the construction sector including housing by reducing the minimum built-up area and capital requirement for foreign investment in such projects — a move that will help the cash-starved realty sector raise funds.

The approval has been given by the Cabinet in its meeting held here on October 29, sources said. The Cabinet decided to reduce the minimum built-up area requirement for FDI in construction projects from 50,000 sq metres to 20,000 sq metres. The minimum capital requirement has been brought down to USD 5 million from USD 10 million, they added.

The Department of Industrial Policy & Promotion (DIPP), under the Commerce and Industry Ministry, moved the proposal to attract more foreign investment in construction and real estate sector that is facing a slowdown and liquidity crunch since last 2-3 years. Although 100 per cent foreign direct investment is allowed in townships, housing and built-up infrastructure and construction developments since 2005, the government has imposed certain conditions.

Between April 2000 and August 2014, the construction development including townships, housing and built-up infrastructure, received FDI worth USD 23.75 billion or 10 per cent of the total FDI attracted by India during this period.

In his Budget 2014-15 speech, Finance Minister Arun Jaitley had said that the requirement of the built up area and capital conditions for FDI is being reduced from 50,000 sq meters to 20,000 sq mts and from USD 10 million to USD 5 million respectively.

The projects that commit at least 30 per cent of the total cost for low cost affordable housing would be exempted from minimum built up area and capitalisation requirements, he had said.