Government eases foreign investment norms in construction sector

To attract more foreign capital in the construction activity, the government Wednesday eased regulations on the entry of investments into the sector.

The decision came after the commerce ministry held a review of foreign direct investment (FDI) policy on the construction development sector and made amendments with immediate effcet.

In a 'consolidated FDI policy circular 2014' issued by the ministry, 100 percent investment will be allowed through the automatic route to boost construction of townships, residential premises, roads, bridges, hotels, resorts, hospitals, educational institutions and recreational facilities.

The circular reduced the minimum floor area requirement to 20,000 sq. metres with a minimum FDI of $5 million to enter the sector within six months of commencement of the project.

The amendment also allowed the foreign investor right to exit the project after the completion of trunk infrastructure like road, water supply, street lighting and drainage.

The circular also clarified that the current amendment is not meant for real estate business, construction of farm houses and trading in transferable development rights (TDRs).

The entry of 100 percent FDI in real estate sector is already allowed, however with a rider that the investor has to be engaged with the project under a lock-in period of three years.