Centre relaxes FDI rules for real estate sector

In a big relief to cash starved real estate sector, the Centre on Wednesday relaxed rules for allowing FDI in the construction sector including housing by reducing the minimum built-up area and capital requirement.

The Union Cabinet chaired Prime Minister Narendra Modi decided to reduce the minimum built-up area requirement from 50,000 sq metres to 20,000 sq metres. The minimum capital requirement has been brought down to $5 million from $10 million.

Aiming to fuel funds to the sector, the Department of Industrial Policy and Promotion (DIPP), under the Commerce and Industry Ministry mooted the proposal to further relax the FDI.  

Infrastructure

Although 100 per cent FDI is allowed in townships, housing and built-up infrastructure and construction developments since 2005, the government has imposed certain conditions.

Between April 2000 and August 2014, the construction development including townships, housing and built-up infrastructure, received FDI worth $23.75 billion or 10 per cent of the total FDI attracted by India during this period. However, the sector was growing in slow pace with the lack of funds. Several real estate firms have asked the Centre to relax the conditions to increase fund flow into the sector.

Union Finance Minister Arun Jaitley in his Budget 2014-15 speech had said that the requirement of the built-up area and capital conditions for FDI is being reduced from 50,000 sq mt to 20,000 sq mt and from  $10 million to $5 million respectively.

He had also said that projects that commit at least 30 per cent of the total cost for low cost affordable housing would be exempted from minimum built-up area and capital requirements.