To Revitalize the Real Estate Sector, the Government May Ease FDI Norms

Kishan Thakkar K

The government has decided to introduce a few modifications in the Foreign Direct Investment (FDI) in the real estate sector and gave the green signal for overseas investment in completed projects. This will help the real estate sector to bounce back amid the current liquidity crunch by the lockdowns.

Experts are acknowledging this decision of the government and hoping for the revival of the sector especially the projects that are pending due to lack of funds.

According to the data released by Department for Promotion of Industry and Internal Trade Policy (DPIIT), construction is the third-largest sector in terms of FDI inflow.

The government of Prime Minister Narendra Modi is struggling to revive the economy and generate employment in the country. By permitting LLPs, the government opens up a new investment avenue. By 2022, India will need investment worth $777 billion for infrastructure development.

Government data show that the construction sector attracted $25.7 billion in foreign direct investment from April 2000 to September 2020.  Moreover, easing the rules would help the Modi government reach its target of providing affordable housing to all urban areas by 2022, as well as building 100 smart cities.

The construction development sector requires foreign investors to meet specific conditions for investing. For example, investors have to lock in three years before bailing out. Allowing Limited Liability Partnership (LLP) firms to receive foreign investments will make the sector more attractive to foreign investors.

On a Final Note

The ministry of housing and urban poverty alleviation had previously proposed easing norms on foreign direct investment in real estate projects to encourage investor participation in the country’s housing sector. While the real estate sector is showing positive signs, it is prevalent that the sector will have a positive trajectory for the future.

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