The real estate industry in India has been suffering due to
the consequences of the economic slowdown over the last few years. In order to
boost the flow of funds in this sector, the government of India is considering making
some drastic changes with regards to Foreign Direct investment (FDI).
According to the suggestions from the urban development
ministry, real estate firms with less than 50% foreign ownership are to be
exempted from all restrictions including the minimum area norms. This is to
attract foreign capital, even those who do not have specific long term
interest. Another motive is to allow the players of this segment to raise funds
from foreign institution to support the finances, thus fulfilling a dual role
of keeping the inflow of cash for construction without imposing on the already
strained domestic financial institutions.
A similar proposal has been suggested for foreign investment
in slum redevelopment and urban renewal projects, as well as for foreign investors
picking up more than 50% stake major relaxation of policies has been advocated.
This includes permission to purchase farmland for the firms funded by FDI, as
well as reduction of the minimum land parcel size for plotted development to 5
acres from 10 hectares. Foreign investors will now also be allowed to sell
underdeveloped plots, though the Indian companies will need to provide the
infrastructure and undertake development before occupancy. These changes in the
rules for FDI in real estate are deemed to bring about a positive outlook in
the sector and thus keep the real estate a booming sector as ever.
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