The proposal to ease the FDI guidelines for the sector was mooted by the Ministry of Housing and Urban Poverty Alleviation.
The ministry has asked for relaxation in provisions, including easing three-year lock-in period for FDI in housing and townships. It has said that the minimum capitalisation should be $5 million instead the present $10 million for wholly-owned subsidiaries.
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It has also suggested a cut in the minimum built-up area of 50,000 sq mts in case of construction development projects to 20,000 sq mts of carpet area.
"The DIPP is looking at it (all the demands) favourably. There is a need to define the word 'completion' in the current policy on the matter of reducing three year lock-in period," a top official of the commerce and industry ministry told PTI.
As per the current FDI policy, the lock-in period of three years applies to every tranche of investment brought in by a foreign player from the date of receipt or from the date of 'completion' of minimum capitalisation whichever is later.
"The main objective of relaxing the provisions is to attract more FDI and provide houses at affordable prices to the people," the official said.
During April 2000 and May 2013, construction development including townships, housing and built-up infrastructure, the country has received FDI worth $22.16 billion or 11% of the total FDI attracted by India during the period.
Press Note 2 (2005) of the DIPP allows FDI up to 100% in townships with conditions.
The Department of Industrial Policy and Promotion (DIPP) which deals with FDI related matter, issues provisions in the form Press Notes or consolidated circulars.
Although 100% foreign direct investment is allowed in townships, housing and built-up infrastructure and construction developments, the government has imposed conditions.