With the recent announcement by the Central government to relax rules for Foreign Direct Investment in construction, we look at the details of how the norms have been relaxed and how they will benefit foreign companies which would like to invest in Indian Real Estate.
Minimum Built Up Area
Under the new rules, foreign investment will be allowed in projects with a minimum built-up area of 20,000 square metres, down from 50,000 square metres. The minimum capital investment by foreign companies has also been halved to $5 million.
Removal of Minimum Land Requirement
100 per cent foreign investment will be allowed through the automatic route to boost construction of townships, residential premises, roads, bridges, hotels, resorts, hospitals, educational institutions and recreational facilities. For serviced plots, the condition of minimum land requirement of 10 hectares has been completely removed, said the Consolidated FDI Policy Circular 2014.
The funds will, have to be brought in within six months of starting a project. The investor will be permitted to exit on the completion of the project or after three years from the date of final investment,
subject to the development of trunk infrastructure such as road, water supply, street lighting and drainage.
With the rules looking to be foreign investor friendly, the sector can look forward to FDI at a large scale which will only be beneficial for the growth and development of the real estate sector as a whole.