Foreign investors looking to invest in the real estate sector in India may be allowed to bring in only $5 million as minimum capital, down from the current $10 million, if the Cabinet approves the proposal of relaxing the conditions for FDI in the sector.
As per the extant foreign direct investment policy, though 100 per cent FDI in the construction development sector is allowed through automatic route, the department of industrial policy and promotion (DIPP) is looking at relaxing the conditions for investment to boost the cash-strapped sector.
“We have proposed reduction in the minimum capitalisation for wholly-owned subsidiaries from $10 million to $5 million. The funds will have to be brought in within six months of commencement of business of the company. This has been done keeping in mind low and affordable housing,” an official told The Indian Express.
The official added that the Cabinet note will be circulated this week for comments. Further, the department has also done away with the concept of built-up area. Instead, carpet area has been introduced in line with the real estate (regulation and development) bill, 2013. Introduction of the concept of only ‘carpet area’ will curb unfair trade practices.
The minimum area to be developed in case of serviced housing plots has also been “reduced to 5 hectares from 10 hectares while in case of construction-development projects, a minimum carpet area of 20,000 sq mts has been introduced instead of the existing 50,000 sq mts built-up area in all class-I cities having population of more than one lakh.”
“However, dealing in land and immovable property will not be allowed,” the official said.
From 2000-2013, $22.43 billion has flown in the sector in form of FDI, comprising 11 per cent of the total FDI flow in the country. In April-July 2013-14, $2.09 billion flew in the construction development sector including townships, housing, built-up infrastructure.
To encourage investor participation in the country’s housing sector, the ministry of housing and urban poverty alleviation had earlier proposed easing of norms for FDI in real estate projects.
*DIPP has also done away with the concept of built-up area