Surbhi Gupta

Exactly 12 months ago, when the real estate industry was busy sharing the outlook 2015, many experts anticipated further easing up of rules for foreign direct investment (FDI) in residential housing. Call it a planned strategic move or visionary planning, the government actually freed up the regulations in the last few months of 2015.

The year started when industry experts were discussing strict rules in the existing foreign direct investment policies. However, very recently the Modi government relaxed FDI norms in the construction sector by diluting major conditions related to the minimum built-up area as well as capital requirement.

This has been done to boost foreign investment in the cash-starved construction sector. The eased rules for foreign investors to exit and repatriate their investments will instill positivity in the industry. In fact, each phase of the project will be treated as a separate project for attracting foreign investment.

According to the government’s statement, “Conditions such as area restriction of floor area of 20,000 sq meters in construction projects and minimum capitalisation of $5 million to be brought in within a period of six months of the commencement of business, have been removed”.

Although 100 per cent FDI was allowed in townships, housing and built-up infrastructure and construction developments since 2005, the government had imposed certain conditions.

The government relaxed FDI norms for the construction sector in October last year. It further eased the norms as the realty sector is facing demand slowdown leading to liquidity crunch and delay upto five years in completing the projects.

“The crux of these reforms is to further ease, rationalise and simplify the process of foreign investments in the country and to put more and more FDI proposals on an automatic route instead of the Government route where time and energy of the investors is wasted. It is one more proof of minimum government and maximum governance,” – as per the government statement.

Despite policy formation and the required push, the industry is still waiting for action. There is no fixed figure available which can indicate the attraction of foreign money to Indian realty. Only time will tell how and when the industry will be able to benefit.