• Minimum area threshold reduced from 50,000 sq ft. to 20,000 sq ft.
  • No minimum area threshold, if 30% project cost is contributed towards development of affordable housing.
  • Are investments in completed yield generating real estate assets allowed?

In a recent press release issued in relation to its meeting dated October 29, 2014 (“Press Release”), the Union Cabinet has cleared the further liberalization of Foreign Direct Investment (“FDI”) in ‘construction-development sector’, in line with the announcements in the Finance Minister’s budget speech for 2014.

CHANGES

The changes sought to be made by the Press Release are set out below.1

Click here to view the table.

Analysis: The obligation to obtain all necessary approvals, including the business plans has now been clarified to be that of the investee company in India, doing away with the unnecessary hassles around this for investor.

CONCLUSION

The changes introduced by way of the Press Release are along expected lines after the Budget Speech earlier this year. The minimum land requirement was an impediment for foreign investment, since it was difficult to find large tracts of land for development to satisfy the minimum land requirements in Tier-I cities. Further, the demand was inadequate for such investment to be made in Tier-II cities, where minimum land requirements could be met. Reducing or removal of minimum land requirements, along with removal of the requirement to obtain a completion certificate for sale of such plots would encourage foreign investment into this space.

While the final press note is still awaited to clarify certain aspects, this seems to be a positive move by the government to attract further investment.