Cabinet has approved relaxation in construction foreign direct investment (FDI) norms. The minimum capital for project has been reduced to USD 5 million from USD 10 million.

The norms have been relaxed for minimum built-up area and capitalisation. The minimum built-up area has been more than havled to 20,000 square metres. Currently 50,000 sq metres built-up area was a must for FDI, say sources.

The minimum capitalisation is at USD 5 million in project in a joint venture with Indian company, say sources.

Between April 2000 and August 2014, construction development, including townships, housing and built-up infrastructure in the country received FDI worth USD 23.75 billion or 10 percent of the total FDI attracted by India during the period.



This move is likely to help the cash strapped builders and developers and will attract investments into affordable housing and smart cities.

The proposal was moved by the Department of Industrial Policy & Promotion (DIPP), under the Commerce and Industry Ministry, to attract more foreign investment in construction and real estate sector that is facing a slowdown and liquidity crunch since last 2-3 years.



Although 100 percent foreign direct investment is allowed in townships, housing and built-up infrastructure and construction developments since 2005, the government has imposed certain conditions.

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



The projects that commit at least 30 percent of the total cost for low cost affordable housing would be exempted from minimum built up area and capitalisation requirements, he had said.

(with inputs from PTI)