In order to give a thrust to its ambitious plan of ‘homes for all by 2022’, the government is considering further relaxation of the FDI policy in the construction sector. It is planning to make exit easy for foreign investors by doing away with the condition of three-year lock-in period.
Government sources told The Indian Express that “investors will be permitted to exit after developing the trunk infrastructure”. “The Cabinet has debated over the issue and come to the conclusion that the lock-in period is inconsequential. As such if the trunk infrastructure is being developed, the issue of lock-in does not arise because developing such infrastructure takes 2-3 years. However, by keeping this condition, investors become apprehensive and wary of investing,” the source said.
Currently, investors are 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.
Further, rules explaining the relaxation done in the FDI policy on the sector will be released within a week, the official said adding the development of smart cities will also get a leg up by the liberalisation of the policy.
According to an estimate by the National Housing Bank, India needs about 19 million homes to house an urban population expected to nearly double to 600 million by 2030 from 2011. “Exit route is something which has been of a grave concern to investors. Doing away with this condition will be very useful,” said Neeraj Bansal, partner and head, real estate and construction sector, KPMG India.
Last month, the Cabinet liberalised the norms in the sector. Besides permitting 100 per cent FDI under automatic route, it reduced the minimum floor area to 20,000 sq meters from 50,000 sq metres.