‘Relaxation in policy for Foreign Direct Investment in the construction sector a welcome move’: Niranjan Hiranandani
MUMBAI, December 04, 2014: The Narendra Modi Government recently announced a relaxation in the policy for Foreign Direct Investment (FDI) in the construction sector, and it is a welcome move, said Niranjan Hiranandani, MD, Hiranandani Constructions. “The relaxation in policy is easing of exit norms and reducing built-up area and capital needs. This will help attract foreign funds in construction of townships, hospitals and hotels,” he added.
The revised norms in the policy effectively impact the three year lock-in period for repatriation of investment, pointed out Niranjan Hiranandani. “The revised norms relating to Construction Development Sector has been notified by the Department of Industrial Policy and Promotion (DIPP),” he added. “Consider that India allows 100 per cent FDI in the sector through the automatic route, and the importance of the revised norm becomes apparent,” he said.
"The DIPP circular states that an investor will be permitted to exit on (i) completion of the project or (ii) after development of ‘trunk infrastructure’ i.e. roads, water supply, street lighting, drainage and sewerage," said the Hiranandani Constructions MD. “Effectively, this does away with the previous norm of a 3-year lock-in period for repatriation of investment, subject to either completion of the project or development of ‘trunk infrastructure’,” he added.
Under the revised norms in the policy, the minimum floor area requirement has been reduced to 20,000 sq mt from 50,000 sq mt earlier. “It also brought down the minimum capital requirement to USD 5 million from USD 10 million,” said Niranjan Hiranandani. “In case of development of serviced plots, the condition of minimum land of 10 hectares has been completely removed,” he added.
What makes this a welcome move, from an industry perspective, is that even though 100 per cent foreign direct investment was allowed for townships, housing and built-up infrastructure and construction developments since 2005, the response was not as good as should have been expected, given that the Indian government, in 2005, had imposed certain conditions, said Niranjan Hiranandani. “The revised norms should result in enhanced inflows into the construction development sector. I expect the measure to be a positive in terms of creation of much needed low cost affordable housing in the country, as also development of smart cities,” added the Hiranandani Constructions MD.
“This is in keeping with the focus of the Narendra Modi Government on ‘affordable housing’, and going by the Union Urban Development and Housing minister M Venkaiah Naidu’s recent statement about initiatives that promise a turnaround in the real estate sector, the relaxation in policy for FDI in the construction sector is a welcome move,” said Niranjan Hiranandani, MD, Hiranandani Constructions.
“The Union Urban Development and Housing Minister M Venkaiah Naidu’s focus on affordable housing seems to be apt; his mention of a revival in the housing sector boosting GDP growth seems to reflect ground realities,” pointed out Niranjan Hiranandani.
Commenting on the revised norms in the FDI policy for construction, Niranjan Hiranandani termed it ‘laudable’. “These are definite steps in the right direction, and will augur well for India’s real estate,” he said. “While these measures will definitely be a ‘positive’ for the real estate sector, we also look forward to moves on part of the Government towards streamlining the approval processes as also creating a one window clearance system,” Niranjan Hiranandani, MD, Hiranandani Constructions concluded.
KEY WORDS: relaxation, policy, Foreign Direct Investment, FDI, construction sector, real estate industry, lock-in period, repatriation, investment, completion of the project, development of trunk infrastructure, Department of Industrial Policy and Promotion, DIPP, affordable housing, Union Urban Development and Housing minister, M Venkaiah Naidu, Prime Minister Narendra Modi, Niranjan Hiranandani, MD, Hiranandani Constructions, boost GDP growth, approval process, one window clearance.