FDI relaxation in real estate sector to aid home buyers

The Centre’s recent decision on further relax rules for allowing FDI in the construction sector may benefit home buyers as more foreign funds are expected to invested in the sector leading to increase the supply.

The decision which is dubbed as investor friendly, also likely to help real estate firms particularly those with high debt and may reverse the current lull in new project launches.

The government relaxed norms on the minimum development area for a project. For construction-development projects, the minimum floor area is reduced to 20,000 sq. meters, from 50,000 sq. meters.

For serviced plots — where roads, water, drainage and other conveniences are available — the minimum land size has been waived, from a requirement of 10 hectares earlier.
Although 100 per cent foreign direct investment is allowed in townships, housing and built-up infrastructure and construction developments since 2005, the government has imposed certain conditions.

The latest changes were made aiming to increase the foreign investor interest in smaller projects and as well as small cities, said the official in the Ministry of Urban Development.

Even the minimum capital requirement has been brought down to $ 5 million from $ 10 million. This was aimed at to attract more investments into the sector as the flow of fund was reduced after 2009-10.

However, the lock-in period for investment has however not been relaxed from 3-years..
 
These changes were expected to bring relief to debt-laden developers who have been hit by slowing demand and rising interest cost.