NEW DELHI: Foreign direct investment (FDI) in the real estate sector could jump over two-fold in the next one year with easing of FDI rules in the construction sector, realtors' body NAREDCO said today.
Real estate developers and consultants were of the view that this move would give fillip to cash-starved realty sector, which is reeling under a slowdown since last 2-3 years. It will help developers in raising funds to complete projects.
Yesterday, the Cabinet relaxed FDI rules in construction sector by reducing minimum built-up area as well as capital requirement and easing the exit norms.
"Reduction in minimum built-up area to 20,000 sq meters from 50,000 sq meters and reduction in capital investment to $ 5 million from $ 10 million has the potential to more than double FDI inflows into housing, commercial real estate, hotels and townships in the next one year," NAREDCO Chairman Navin Raheja said in a statement.
In 2013-14 fiscal, the FDI in construction development, which include housing and township, was $ 1.22 billion. During April-August period of this fiscal, the sector has attracted $ 446 million worth FDI.
Hailing the move, India's largest realty major DLF Group Executive Director Rajeev Talwar said: "Praise to the Finance Minister for being so prompt in meeting the requirements of this industry in his budget announcement, then approval for Real Estate Investment Trusts and now relaxation in FDI norm. There will be huge amount of FDI inflow in this sector".
Unitech MD Sanjay Chandra said this would "surely provide a boost to the real estate industry and go a long way in fulfilling Prime Minister Narendra Modi's dream of creating smart cities throughout the country."
Permission to sell completed projects to foreign investors will help Indian developers get much needed liquidity into the system, Chandra added.
Parsvnath Developers Chairman Pradeep Jain said: "We are thankful to government for this move. The sector is reeling under acute funding pressure. The foreign investment in real estate has also gone down in last few years. Hence, this move has sent a positive signal for the real estate sector".
Terming the decision as a positive development, realty consultant CBRE South Asia CMD Anshuman Magazine said: "Real estate and infrastructure industry is starved of funds. This announcement will widen the base of investors, especially mid-sized financial institutions."
It would also encourage new development projects in prime areas of large cities and in tier II towns, Magazine added.
Property consultant Cushman & Wakefield said the move is likely to give fillip to real estate sector. This step would be beneficial for the next phase of urban development.