Government to take call on FDI relaxation for construction tomorrow

NEW DELHI: The Cabinet may tomorrow decide on relaxing foreign direct investment ( FDI) norms in construction sector.

The Department of Industrial Policy & Promotion (DIPP), under the Commerce and Industry Ministry, has proposed to bring down the minimum built-up area requirement for FDI in construction projects from 50,000 sq metres to 20,000 sq metres. It has also proposed reducing the minimum capital requirement for such projects from $10 million to $5 million.

The move was aimed at attracting more foreign investment in construction and real estate sector.

The proposal is likely to come up at the Cabinet meeting tomorrow, sources said.

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

Press Note 2 (2005) of the DIPP allows FDI up to 100 per cent in townships with conditions.

The DIPP, which deals with FDI related matter, issues provisions in the form of Press Notes or consolidated circulars.

Although 100 per cent foreign direct investment is allowed in townships, housing and built-up infrastructure and construction developments, the government has imposed conditions.

To further encourage this, Finance Minister Arun Jaitley in his maiden Budget had also said that projects which commit at least 30 per cent of the total project cost for low cost affordable housing would be exempted from minimum built up area and capitalisation requirements, with the condition of three year lock-in.