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Exit to be easier in relaxed FDI norms for construction

Investment and built-up area threshold have been brought down.

By: ENS Economic Bureau | Amethi/new Delhi, New Delhi | Published: December 4, 2014 12:54:45 am

The government on Wednesday relaxed the foreign direct investment (FDI) norms for the construction development sector further by easing exit norms and reducing built-up area and capital needs. The move comes amid the Prime Minister’s Office recently expressing the need to liberalise end-use restrictions on external commercial borrowing (ECB) proceeds for infrastructure financing.

This is also in line with the Centre’s endeavour to improve ease of doing business in the country. India has been ranked 142 out of 189 countries in the latest ‘ease of doing business’ report of the World Bank.

Notifying the relaxed guidelines for the construction development sector, the department of industrial policy and promotion (DIPP) said that the minimum floor requirement has been reduced to 20,000 square metre from 50,000 square metre while the minimum capitalisation has been reduced to $5 million from $10 million.

These provisions were approved by the Cabinet in October in order to give a leg-up to the plan of developing 100 smart cities in the country. In case of development of serviced plots, the condition of minimum land of 10 hectares has been completely removed, the consolidated FDI policy circular 2014 said.

As first reported by The Indian Express, the industry department has also made exit easy for foreign investors by doing away with the condition of three-year lock-in period.

As per the earlier rule, investors were permitted to exit on completion of the project or after three years from the date of final investment, subject to development of trunk infrastructure, which includes roads, water supply, street lighting, drainage and sewerage.

Although 100 per cent foreign direct investment was allowed in townships, housing and built-up infrastructure and construction developments since 2005, certain conditions were imposed for investment in the sector.

The move will also give a thrust to the government’s plan of providing housing to all Indians by 2022. To boost the development of affordable homes, government has exempted the conditions of minimum floor area as well as capital requirement if an investee/joint venture companies commit at least 30 per cent of the total project cost for low-cost housing. According to the National Housing Bank estimate, India needs about 19 million homes to house an urban population expected to nearly double to 600 million by 2030 from 2011.

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