Fdi to flood into indian construction

Mumbai, India Photo: Lecercle

FDI real estate private equity is currently estimated to be approximately $1.5 billion per annum, according to JLL India, but this could increase to as highas $3 billion, says Ramesh Nair, COO – Business & International Director.

"The government’s announcement of easier FDI norms for the construction sector has generated a lot of excitement among the country’s real estate players," he comments, "and justifiably so."

Combinated with the relaxation of other norms, FDI is now expected to increase, says JLL, opening the doors wide for funds, which will, in turn, place more pressure upon developers to accelerate construction of projects.

"Investors will now be permitted to exit either on completion of the project, or after the completion of support infrastructure in the project such as internal and approach roads, water supply, street lights, sewerage, etc." he explains.

"This new exit feature correctly assumes that the successful deployment of such infrastructure is a major landmark point in a project’s lifecycle, post which all other development will happen assuredly and according to stipulated timelines."

The unit size to be considered for affordable housing has also been increased from 60 square meters (carpet area) to 140 square meters (floor area), on condition that at least a quarter of the units under affordable housing should be of a floor area not exceeding 60 square meters.

"With the minimum floor area requirement for FDI having been lowered from 50,000 sqm to 20,000 sqm, smaller projects will now qualify for FDI," continues Nair. "Developers will be exempt from restrictions in area and minimum capitalization if they commit 30 per cent of the project cost to affordable housing, which will increase the supply of budget housing across India."