In an attempt to encourage investor participation in the Indian housing sector, the Ministry of Housing and Urban Poverty Alleviation is looking at proposing easing of norms for foreign direct investment (FDI) in real estate projects.
"For FDI (foreign direct investment in real estate), the ministry is considering recommending some relief in three areas: one, minimum built-up area
requirement should be reduced, two, the definition of the minimum lock-in period should be changed and, third, the minimum capitalisation (investment) that is required should be reduced," said Arun Kumar Misra, secretary, Ministry of Housing and Urban Poverty Alleviation.
"These changes, if adopted by the Cabinet, will allow more and more players to be active partner in the FDI market," the official said at a conference on the real estate sector organised by the Confederation of Indian Industry (CII) and CBRE South Asia.
At present, up to 100 per cent FDI is allowed in
the real estate sector through the automatic route, subject to fulfillment of certain criteria. For housing plots, the project must have at least 10 hectares. Group-housing projects (apartments) are eligible for FDI if the total built-up area is at least 50,000 square metres.
In June-end, the Reserve Bank of India eased the norms for external commercial borrowings in the affordable housing sector. Among other things, the minimum experience required for developers was reduced from five years to three years.
The official said that
the affordable housing sector offers huge opportunity for developers which do not want to limit themselves to the comfort zone of high-end housing with big profit margins.
"We propose to invest at least from the government sector almost around Rs 50,000 crore in affordable housing in the next 2-3 years, supplemented by an equal amount of money from the banking sector and also from the state governments. So the country will see a mobilization of not less than Rs 100,000 crore in the next four years, which will cater to affordable housing. So there is a business opportunity for people who want to get into that," said Misra.
Speaking at the same event, Housing and Urban Poverty Alleviation minister Girija Vyas said that developers should not be wary of the proposed real estate regulatory Bill, which has been cleared by the Union Cabinet and could be tabled in Parliament in the monsoon session.
"There is much ado about nothing. I assure you that we will work together. The Bill will not cause you (builders) any inconvenience. The Bill aims towards
transparency and contractual obligations. It will ensure consumer protection and promotion of the real estate sector through effective regulation and introduction of speedy mechanism for adjudication of disputes," the minister said.
"The housing sector is still considered risky. There are two ways in which we are trying to fight this thing. One of course is to bring a certain amount of transparency and legal basis to all the transactions that take place. The real estate regulatory Bill is the first attempt towards making the whole market based on a foundation of legalities and not based on a foundation of arbitrariness," said Misra.
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