This week, the government relaxed FDI rules in the construction sector by reducing minimum built-up area as well as capital requirement, and by easing exit norms. The industry has welcomed the move, saying it will boost sector and impel economic growth.
Although 100 per cent FDI was allowed in townships, housing and development projects in 2005, the government had imposed certain conditions. These have now been removed.
The Cabinet has decided to reduce the minimum built-up area requirement for FDI in construction projects from 50,000 sq. metres to 20,000 sq. metres. Also, the minimum capital requirement has been brought down to $5 million from $10 million. Both measures are meant to attract more investment in the sector, which facing a slowdown.
Said Arun Kumar, Founder-MD, Casa Grande, “The decision will build a positive sentiment in the segment. We hope there is an organised approach to conducting business. The regulation will result in a streamlined process of funding and transparency. We are hopeful that these norms will seep into the residential segment, which will benefit customers.”
Industry experts also predict that more foreign investment, coming with rules attached, will clean up the industry. As Nimesh Bhandari, CEO, RealtyCompass.com, says “More FDI will mean that builders would have to adhere to international norms and will be forced to be more transparent in the way they operate. Overall, the sector will become cleaner, more efficient and consumer friendly.”
Builders are upbeat about the move because it means a significant reduction in the cost of funds. Said M. Murali, MD, Shriram Properties, “Easy and more money to the construction sector will mean more jobs and more houses, and the faster growth of ancillary industries. The new norms will help medium-size developers who suffer from funds crunch.”
