06 November 2014

FDI Policy relaxed for construction sector

The Indian Government has approved amendments to Foreign Direct Investment Policy (FDI) relating to Construction Development Sector. According to the press release issued after the Cabinet meeting, the minimum area requirement of 10 hectares for serviced housing plots has been removed and the minimum built-up area has been reduced to 20,000 sq metres of minimum floor area.  An architect empanelled by the relevant authority will determine if the floor area requirement has been met.

Minimum capitalisation will be reduced to USD 5 million but to be brought in within 6 months of commencement of project. Commencement has been clarified to mean date of approval of the building and layout plan. Balance investment can be brought over a period of 10 years. An investor can exit in 3 years from date of final investment or completion of project, whichever is earlier, subject to development of trunk infrastructure.

The relaxations include exemption in certain cases like committing a portion of the project towards affordable housing would exempt projects from minimum area and investment requirements but the 3 year lock-in would remain. 100 % FDI will be permitted in completed projects for operation and management of townships, malls / shopping complexes and business centres.

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