Of FDI in Construction....

The government eased overseas investment rules in construction to attract money into the funds-starved sector and serve its twin objectives of faster job creation and housing for all.
The Union Cabinet has approved a comprehensive proposal by the Department of Industrial Policy & Promotion (DIPP), dropping the minimum 10-hectare rule for serviced housing plots and slashing the minimum floor area for constructiond evelopment projects to 20,000 sq m from 50,000 sq m to be eligible for overseas investment.
It also halved the minimum foreign direct investment (FDI) amount to $5 million from $10 million and substantially eased the exit norms, raising an across-the-board cheer from an industry that now hopes for bigger foreign fund flows into a sector that desperately needs money . “The government is bang on (target). We are very glad about the trunk infrastructure completion part as it will bring in asset-based FDI. This will ensure that the project developers who have taken FDI are not left with more debt,” said Rajeev Talwar, executive director of DLF, India’s biggest listed developer. Trunk infrastructure refers to essential amenities such as roads, water supply, street lighting, drainage and sewerage. The new rules will also give a boost to the 100 smart cities being planned by the government.
Home buyers will also cheer the relaxation as fresh inflows raise the possibility of projects that are stuck getting completed and cheaper housing becoming available going ahead. Most housing projects are running one to two years or even more behind schedule because of the slowdown and the shortage of funds on account of elevated debt levels.
The norms will come into force after DIPP issues a notification.
The government has promised housing for all by 2022 and toward that end provided an incentive for affordable housing in the revamped policy. The sectoral condition of minimum area and capital will not apply if the developer sets aside 30% of the project for affordable housing, defined as dwelling units of less than 60 sq m. Singh said finding 10 hectares of land in tier-I and tier-II cities was difficult, so scrapping this rule will encourage investors to bring in money.
In its July budget, the new government had said it would relax foreign investment rules for the sector.
The government is also looking to boost construction of hotels, tourist resorts, hospitals, special economic zones (SEZs), educational institutions, old-age homes and investments by non-resident Indians (NRIs), giving free access in these segments. “These measures are expected to result in enhanced inflows into the construction development sector consequent to easing of sectoral conditions and clarification of terms used in the policy,” the government said in a statement.
The sector attracted $1.2 billion in FDI in 2013-14, down 8% from 2012-13.
The most significant incentive to foreign investment is the easier exit compared with the lock-in of three years after the completion of minimum capitalization of $10 million in the existing policy.
Under the new rules, investors will have to bring $5 million within six months of commencement of projects and the balance over 10 years or before the completion of project, whichever is earlier.
The investor can exit on completion of the project or three years after the final investment, subject to the development of trunk infrastructure. FDI can be repatriated or transferred before the completion of the project if approved by the Foreign Investment Promotion Board.