Ensuring smooth flow of funds for the cash starved construction sector, the Union Government has recently initiated the process of putting in place an easier Foreign Direct Investment (FDI) norms to attract more foreign funds. In this connection, the industry wing of the ministry has finalized a draft note proposing to relax conditions related to entry guidelines, minimum-area requirement and minimum lock-in period for investments, official sources said adding that the note has been prepared based on inputs given by the Ministry of Housing and Urban Poverty Alleviation. Currently, the FDI policy permits 100% foreign investment, including in housing, townships and construction and infrastructure with multiple riders including a three-year lock-in period for investments in housing and townships, a minimum built-up area of 50,000 square metres and minimum capitalization of $10 million for wholly-owned subsidiaries. Attempting to make the sector more attractive, the Housing Ministry has proposed that the minimum lock-in period be reduced, the built-up area required be brought down to 20,000 sq m and minimum capitalization reduced to $5 million. The construction sector attracted a little more than $22 billion in FDI between 2000 and 2013, accounting for 11% of the total FDI that came into India, but foreign investments into the sector have started drying up since 2012.
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