FDI in realty may revive stuck projects & simplify the otherwise complicated process

The new policy for foreign direct investment in the construction sector could help revive several hundred midsize housing projects that have been stuck for want of capital, fund managers and builders.
Earlier last week, the government relaxed FDI norms, removing two major conditions related to minimum built-up area as well as capital requirement.
Each phase of construction now would be considered as a separate project for the purposes of FDI. That means, a foreign investor can exit and repatriate money even before the entire project is completed – which wasn’t previously allowed – if he has been invested for at least three years. The investor can exit also if the project is completed before the lock-in period ends.
According to property research firm PropEquity, close to 2,500 real estate projects in the top eight cities of the country were delayed by more than 12 months and about a third of them were considered to be stuck.
Vineet Relia, Managing Director of SARE Homes which is backed by a foreign private equity fund said, the new rules would benefit their company and now there will be able to pick up many smaller projects at the level of special purpose vehicles that they were unable to do earlier.
These few changes will bring in more money to the fund-starved real estate sector. Liberal rules, including easier exit, mark the loosening of capital control. It will encourage smaller projects and lower the risks of delay.
The new rules will also create room for short-term capital, and increase the supply of good quality urban real estate. However, to have more urban centres with high density and planned amenities, the government must have a robust policy to release urban land. Home-buyers will then be able to buy affordable homes.

Source – http://articles.economictimes.indiatimes.com/2015-11-14/news/68274735_1_new-rules-propequity-projects

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