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To bring greater clarity to the foreign direct investment (FDI) norms for the construction sector, the Centre has defined the existing rules related to minimum capitalisation and exit clause with greater precision.
The Department of Industrial Policy & Promotion (DIPP), in a clarification note issued on Friday, specified that the minimum capitalisation norm for FDI in construction was project specific and not company specific.
This means that the norm specifying that new FDI will be allowed only if the minimum cap of $5 million is achieved within six months refers to a particular project and not the company making the investment. After the minimum capitalisation norms are met, FDI can be brought in for a period of 10 years or till the project is completed.
The note also specified details related to the exit clause. It stated that exit is permitted even before completion of the project or development of trunk infrastructure, with the approval of the Foreign Investment Promotion Board on a case to case basis. After the completion of the project, exit is permitted on an automatic basis.
The DIPP further specified that if the project is ongoing then the non-residence to non-resident transfers would need FIPB nod.
The government allows up to 100 per cent FDI in construction projects including townships, housing and built-up infrastructure subject to specific conditions.
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