Construction gets 100 percent FDI

By agencies   |   Thursday, 24 February 2005, 08:00 Hrs
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NEW DELHI: The center today permitted 100% foreign equity in construction sector, aimed at attracting foreign investment. The equity covers a range of areas from hotel resorts to integrated townships.

The Cabinet Committee on Economic Affairs, which met today morning made the decision. The committee meeting, chaired by Prime Minister Manmohan Singh here, also gave its approval for all applications for such projects to be cleared under the automatic route.

“To forestall speculation in real estate by foreign investors, the sale of undeveloped land has been prohibited, Commerce and Industry Minister Kamal Nath said after the meeting.

"We want incremental investment in the construction sector so that it triggers employment generation, greater economic activity, a rapid increase in built-up infrastructure and spin-off benefits for manufacturing sector."

Foreign investment in the construction sector will not displace or replace the local industry, but rather help it to grow at a rapid pace and generate greater economic activity, the minister added.

The projects could include projects in housing, commercial premises, hotels, resorts, hospitals, educational institutions, recreational facilities and city and regional level infrastructure.

The guidelines issued after the cabinet meeting fixes a minimum land area for development at 10 hectares for serviced housing plots and five hectares for other construction projects.

The investment would further be subject to a minimum capitalisation of $10 million for 100-percent subsidiaries and $5 million for joint ventures with Indian partners.

The minister also said the firms will bring funds within six months of commencing business and the original investment cannot be repatriated before a period of three years from the date of completion of minimum capitalization amount.

However, the investor may be permitted to exit earlier with prior approval of the government through the Foreign Investment Promotion Board (FIPB).

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