The Telegraph
Since 1st March, 1999
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Plan to relax FDI norms on housing

New Delhi, Nov. 18: The government plans to relax foreign direct investment (FDI) regulations in real estate development which is expected to spur foreign inflow into integrated township projects.

Sources said the minimum area required to be developed by an offshore real estate developer’s wholly-owned local unit would be lowered to 25 acres from 100 acres at present.

Last year, the government had permitted FDI up to 100 per cent into development of integrated townships, which includes housing, commercial premises, resorts as well as regional level urban infrastructure facilities such as roads and bridges. Also, the developer has to have a minimum investment of $10 million.

However, the sector was unable to attract any foreign inflow as offshore real estate developers said the minimum stipulated land holding requirement acts as a stumbling block.

Sources said the government had recently held a meeting with officials of Korea, Malaysia, Singapore, Thailand, offshore real estate developers and senior domestic officials, to discuss their problems.

He added that the government would also relax the minimum lock-in period of three years before repatriation of original investment is permitted.

“Since the government is looking at the development of quality organised housing sector instead of only foreign inflows, it has decided to relax the norms,” said the official.

Analysts said the current regulations is only helping small and local contractors at the cost of consumers as the regulations does not apply to Indian firms.

“It is very difficult to plan and sell such a huge township in small towns like Durgapur or Bokaro and this is keeping away the majority of offshore developers from investing in India” said Rajesh Srivastava, director of the local unit of Meinhardt, a Singapore-based civil engineering firm.

“Competition not only helps to pull down prices but also offers the customers a variety of choices,” Srivastava said.

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