Cabinet to take up FDI in construction today

The Cabinet will consider a proposal tomorrow to allow foreign direct investment (FDI) in stand-alone construction projects having a minimum acreage of 50,000 square metres.

Officials said the commerce and industry ministry had the option of either allowing 51 per cent or 100 per cent FDI in construction.

At present, 100 per cent FDI is allowed for developing integrated townships with a minimum area of 100 acres under which investors are allowed to build houses, commercial complexes, hotels, resorts, mass rapid transport systems and infrastructure facilities such as roads and bridges.

Prime Minister Manmohan Singh met several colleagues this evening, including Finance Minister P Chidambaram, Defence Minister Pranab Mukherjee and Commerce and Industry Minister Kamal Nath, to discuss the issue.

Officials said the FDI proposal for construction also envisaged a minimum capitalisation norm of $10 million, a condition which already existed for integrated townships.

The FDI rules in construction will also be subject to state, municipal and zonal laws.

Allowing FDI in the construction sector is being mulled over since the present limit in integrated townships is regarded by investors as extremely restrictive requiring investors to develop a minimum of 2,000 dwelling units for about a population of 10,000 is regarded by investors as extremely restrictive. Only a handful of FDI proposals have come to the government in the past four years.

"The new norms will also ensure that the liberalised norms are used for construction development. It will not allow selling of plots except in the case of housing having reserved plots," an official said.

Officials said the new norms would seek to do away with the ambiguity in the present norms. "They will now be able to undertake stand-alone activity," an official said.

Adding that the new norms would, besides bringing in more FDI, enhance infrastructure, generate employment and bring state of the art building technology to the country.

Present norms allowing FDI in integrated townships include minimum capitalisation of $10 million for wholly-owned subsidiaries and $ 5 million for joint ventures along with a lock-in period of three years from the date of capitalisation for repatriation of the investment. Developers also need to complete 50 per cent of the project from the day they get possession of land.

So far, only a handful of players like a consortium of High Point Rendel of the UK, US-Based Edaw Ltd, Kikken Sekkel of Tokyo, Canada-based Royal Indian Raj International Corporation, Dubai-based Emaar Group, Lee Kim Tah Holdings and CESMA International , a subsidiary of the Singapore government's housing agency, have entered India.