Investment reforms for Indian construction

India: The Indian Government's Cabinet Committee of Economic Affairs has approved a proposal to allow 100% foreign direct investment (FDI) in the construction sector. This move will allow funds to be routed directly to projects, rather than going through the Foreign Investment Promotion Board.

The reform is expected to lower the barriers to investment for foreign companies. The main new requirement for such companies is that they have a minimum capitalisation of US$ 10 million. A capitalisation of US$ 5 million is required for joint ventures with Indian partners.

The new law also reduces the minimum land area requirement for residential projects from 100 to 25 acres (40.5 to 10 Ha). The minimum land area requirement for commercial projects has been lowered to 50000 m².

In a separate development, Prime Minister Manmohan Singh has announced that all future road projects in the country will be constructed using build-operate-transfer (BOT) contracts.

Mr Singh was quoted as saying, “We have decided that all future road construction, barring a few exceptions, will be through the BOT route. This will provide additional private investment opportunities.”

Investment is also expected in the rail and air sectors with intermodal transport hubs currently being planned, said Mr Singh. Any future investment will be designed to facilitate domestic and cross border trade using rail-to-ship, rail-to-road, air-to-road and air-to-rail hubs.

Future investment is also reliant on attracting private capital with Public-Private Partnerships as the preferred model.