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Indian Real Estate News
Industry Dept moots easing of lock-in period for FDI in housing
Source: The Hindu Business Line Oct 27, 2013
The Department of Industrial Policy & Promotion (DIPP) has finalised the Cabinet note on relaxing norms for Foreign Direct Investment (FDI) in the construction development sector and hopes to place it before the Cabinet next week.

The proposed relaxations include reducing the three-year lock-in period for investments in housing & townships, bringing down minimum capitalisation norms and lowering minimum built-up area specifications.
"All comments received from various Departments and Ministries on the draft Cabinet note have been assimilated in the final note and we hope to submit it to the Cabinet next week," the official said.

The construction development sector includes housing, townships and construction infrastructure. The FDI policy allows 100 per cent foreign investment in the sector, but there are several riders attached.

The Ministry of Housing and Poverty Alleviation had come up with a number of suggestions early this year to boost sagging FDI. These included doing away with the lock-in period for investments in housing and townships, reducing minimum capitalisation to $5 million from the present $10 million and bringing down minimum built up area to 20,000 sq meters from 50,000 sq meters.

Most of the proposals in the final Cabinet Note are based on recommendations made by the Ministry of Housing and Poverty Alleviation, the official said.

"All Ministries and Departments were more or less in agreement that riders need to be relaxed to attract more FDI in the sector. There have been small changes made to the original proposal made by the Housing Ministry, but these aren’t very significant. We have done the needful and hope that the Cabinet will take up the proposal soon," the official said.

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 started drying up since 2012.

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