Cabinet set to take a call on FDI in realty
The planned changes in foreign direct investment rules for the realty sector will be discussed by the cabinet this week. The new rules will help realtors to infuse more money into the sagging housing sector by lowering the minimum built-up requirements and minimum capitalisation.
The minimum area requirement would be halved from 10 hectares to 5 hectares, as said by Top officials. Likewise, the minimum built-up area requirement of 50,000 square metres will be relaxed for small townships with a population of less than 1 lakh.To be eligible for FDI, the realtors will have to build estates with a minimum carpet area of 20,000 square metres.
Instead of built-up area calculation, from now on realtors have to work on carpet area as the former often leads to consumer disputes.
Most of the developers were planning small satellite townships at a distance from metro cities and these required new norms, as land being a scarce resource, said by an official.
For fully owned subsidiaries of foreign realtors, the minimum capital requirement would also be halved from $10 million to $5 million. India allows up to 100 per cent FDI in realty, subject to riders. Though the funds will, have to be brought in within six months of the commencement of business of the company
Officials said, to allow funds to invest in realtors, a minimum three-year lock-in for developers may also be relaxed.
Officials added, “The changes proposed in the cabinet note, if adopted, will allow more and more players to be active partners in the FDI market.”
West Asian and South East Asian funds and realty firms are assumed to be eager to tap on the Indian market. During the first three quarters of 2013, India saw FDI inflows in construction development at Rs 5,500 crore, a 25 per cent increase over the same period in 2012.
In 2013, Private equity (PE) investments in Indian realty increased by 13 per cent with total inflows throughout the year at Rs 7,000 crore, in comparison to Rs 6,200 crore in 2012, according to a report by Cushman and Wakefield.
The realty and construction sector saw the inflow of $22.43 billion in FDI from 2000 to 2013. An independent investment banker advising a clutch of Honk Kong and Singapore based private equity funds said, “The FDI rule tweak could unlock more realty spaces for foreign investment and see a far higher amount of money being pumped into India.”
Source: The Telegraph
Cushman and Wakefield, FDI in realty, foreign direct investment, Housing sector, India, Indian market, minimum built-up area requirement, Private Equity, South East Asian funds, the cabinet, West Asian funds
