FDI in construction likely to be eased before PM Narendra Modi's US visit
DIPP has proposed to reduce requirement of built-up area and capital conditions for FDI in the sector
Sep 18, 2014
Source : The Financial Express
Department of Industrial Policy & Promotion


New Delhi: Ahead of Prime Minister Narendra Modi’s visit to the United States next week, the government is expected to ease norms for foreign direct investment in the construction sector.

According to sources, the department of industrial policy and promotion — the nodal agency for FDI rules — has floated a Cabinet note on the proposal for inter-ministerial consultations.

“The proposal, which is on the lines of the Budget announcement, is likely to be taken up by the Union Cabinet in its next meeting,” said an official familiar with the development. Once it is approved, it is expected to be notified immediately, he added.

Accordingly, the DIPP has proposed to reduce the requirement of the built-up area and capital conditions for FDI in the sector to 20,000 square metre and $5 million, respectively, with a three-year post-completion lock-in. Currently, the requirements are for built up area of 50,000 square metre and capital of $10 million.

Though 100 per cent FDI is permitted through the automatic route in the construction sector, finance minister Arun Jaitley had in the Union Budget in July announced plans to liberalise norms to “to encourage development of Smart Cities, which will also provide habitation for the neo-middle class”.

“The Insurance Laws (Amendment) Bill to hike FDI in the sector to 49 per cent is already in Parliament while higher FDI caps for defence and railways has been notified. This is the last announcement on FDI that is to be implemented,” said the official, adding that it will help the government attract investments to the sector.

Prime Minister Narendra Modi is scheduled to leave for the US on September 26 for a five day visit where he is also expected to meet US businessmen as he seeks to promote India as an investment destination.

The NDA government has been keen to promote construction of smart cities to help meet the country’s urbanisation challenge and 100 such cities are being planned to be constructed. The government is understood to be identifying such cities at present that will be selected based on their population.

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