Centre relaxes FDI rules in construction sector

The minimum built-up area requirement has been reduced

Giving a significant push to affordable housing and Prime Minister Narendra Modi’s dream project, smart cities, the NDA government  on Wednesday announced relaxation in foreign direct investment (FDI) rules in the construction sector. The proposal — first made by the UPA government — seeks to reduce the minimum built-up area from 50,000 sq. metres to 20,000 sq. metres. The minimum capital requirement for such projects has also been brought down to $5 million from $10 million.

The relaxations are expected to facilitate the infusion of funds into the debt-burdened sector, thereby, ensuring faster completion of projects.

 The Union Cabinet approved the new limits in a meeting chaired by Prime Minister Narendra Modi on Wednesday.

In his maiden budget speech on July 10, Union Finance Minister Arun Jaitley had made an allocation of Rs.7,000 crore for 100 new smart cities in the country before 2020, and promised to further liberalise FDI in the construction sector.

 Although 100 per cent FDI was permitted in townships, housing and built-up infrastructure and construction development back in 2005, on Wednesday the government announced new rules, including on minimum levels of built-up area and capital requirements.

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

 The FDI proposal was moved by the Department of Industrial Policy and Promotion (DIPP), under the Commerce and Industry Ministry, to attract more foreign investment in construction and real estate sector that has been facing liquidity crunch over last 2-3 years.

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