Oct 30 2014, 03:18 IST
SummaryIn keeping with the pace it has gathered recently in implementing pending reform proposals...
In keeping with the pace it has gathered recently in implementing pending reform proposals, the Narendra Modi government on Wednesday sought to speed up its 100 smart cities project by easing the foreign direct investment (FDI) policy for the construction sector and sought to curb the subsidy bill by sticking to the recent practice of modest hikes in the benchmark prices of various crops.
The Cabinet Committee on Economic Affairs (CCEA) raised the minimum support price (MSP) of wheat, the most important winter crop, by just 3.6%, or
R 50, to R1,450 per quintal.
The CCEA decided to raise the MSP of winter-sown crops by up to 4.2% for the crop year through June 2015, also aimed at containing inflation, the persistence of which at the retail level is the reason why interest rates remain high, stifling investments.
Wednesday�s relaxations for FDI in construction will accelerate the flow of funds to relatively small real estate projects that have remained out of bounds for foreign investors and kindle the pent-up demand for affordable housing, leading domestic players in the sector told FE. If not immediately, the move could also lead to real estate prices coming down with increased supply some months down the line. The sector has already started witnessing a renewed interest of private equity firms, they noted.
As far as FDI in construction is concerned, the investee company will now be required to bring minimum FDI of $5 million only within six months of the start of the project, as against $10 million earlier. �Subsequent tranches of FDI can be brought till the period of 10 years from the commencement of the project or before the completion of the project, whichever expires earlier,� said a statement issued after the CCEA meeting.
For construction-development projects, FDI can now come in with a minimum floor area of 20,000 sq m, against the lower threshold of 50,000 sq m till now. Subject to these conditions, 100% FDI will be permitted in the sector. While the three-year lock-in (since date of final investment) for FDI investors will broadly remain, the Foreign Investment Promotion Board will consider their proposals for exits before completion of the project on a case-by-case basis.
While no minimum land area will be stipulated for �serviced plots�, in the case of combination projects � which comprises service plots and construction projects � only either of the two conditions of capital
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