FDI in Construction: Government to Issue Clarifications Soon

New Delhi: After recently liberalizing foreign direct investment (FDI) norms for the construction development sector, the government is expected to soon come out with some clarifications on the rules of the policy.

"We will issue clarification on FDI in construction shortly...it would be out in next 2-3 days," Secretary in the Department of Industrial Policy and Promotion (DIPP) Amitabh Kant said on the sidelines of India Economic Summit here.

He, however, refused to divulge details.

On October 29, the Union Cabinet relaxed rules for FDI in the construction sector by reducing minimum built-up area as well as capital requirement and eased the exit norms to boost to cash-starved real estate industry.

In view of depleting FDI inflow in construction and real estate sector in last couple of years, the Cabinet decided to reduce the minimum floor area to 20,000 square metres from the earlier 50,000 sq mt. It also brought down the minimum capital requirement to $5 million from $10 million.

In case of development of serviced plots, the condition of minimum land of 10 hectares has been completely removed. It also permitted foreign investors to exit on project completion or 3 years from the date of final investment subject to the development of trunk infrastructure.

The government had said that the relaxation was necessary as FDI inflows in the sector, which witnessed a steady rise during 2006-07 and 2009-10, have started declining.

Between April 2000 and August 2014, the construction sector received FDI worth $23.75 billion or 10 per cent of the total FDI attracted by India during the period.