DELHI: The Government has started work on easing foreign direct investment (FDI) norms in construction development to attract more foreign capital in the cash-strapped sector.
The Industry Department is finalising a draft Cabinet note that proposes to relax conditions related to entry norms, minimum area requirement and minimum lock-in period for investments to make the construction sector more attractive for foreign investors, an official in the Department of Industrial Policy and Promotion (DIPP) told Business Line.
At present, the FDI policy allows 100 per cent foreign investment in construction development including housing, townships and construction infrastructure, but there are several conditions attached.
The note has been prepared based on inputs given by the Ministry of Housing and Urban Poverty Alleviation.
“We will soon finalise the note and circulate it to other departments and ministries concerned for their comments. We will then place it before the Cabinet for clearance,” the official said.
These include a three-year lock-in period for investments in housing and townships, a minimum built-up area of 50,000 sq meters and minimum capitalisation of $10 million for wholly-owned subsidiaries.
The construction development sector attracted about $22.24 billion FDI between 2000 and 2013 accounting for 11 per cent of the total FDI that came into India, but foreign investments in the sector have started drying up since 2012.
To make the sector more attractive, the Ministry of Housing and Urban Poverty Alleviation has proposed that the minimum lock-in period be reduced, the minimum built-up area be brought down to 20,000 sq meters and minimum capitalisation requirement reduced to $5 million.
“We have incorporated most of the suggestions made by the Housing Ministry to the extent possible. It is also important to get views of others like the Finance Ministry and the Planning Commission. We will incorporate all views in the final note,” the official said.