The approval of the cabinet to the revisions in norms for allowing 100% FDI in construction is a step that will be beneficial for the next phase of urban development as envisioned by Prime Minister Narendra Modi under the '100 Smart Cities' project, said Cushman & Wakefield.

Relaxation in the development size will benefit Tier II and III cities where large projects typically suffer from poor demand. Further, locations around the Golden Quadrilateral and DMIC can also look at reaping benefits out of this as new FDI will also be attracted to new towns and cities planned in these corridors. However, the revised policy will first help in infusion of investment in housing development projects in metropolitan locations in the suburban and peripheral locations as well as for niche housing projects in city centre locations of Delhi, Mumbai and Bengaluru.
 
Keeping in mind the fact that the proposal is more attractive now, it will help attract investment in the sector from funds that want to limit their exposure. However, the details of the proposal will have to be evaluated before enunciating the complete benefits. Further, the government would have to ensure that process of acquisition and approval on real estate and construction projects is streamlined to ensure minimum delays to make investment environment more conducive for global investors. So far one of the main concerns has been the delays in commencement and completion of projects in India, it said.
 
There is already an improvement in FDI in construction this year with a number of foreign sovereign and pension funds already committing funds to Indian real estate not only through fund managers, but also through direct agreements with local developers in projects, clearly indicating higher confidence in Indian real estate markets. The total FDI in the Construction and Development sector was recorded at Rs 36 billion (USD 0.6 billion) in H1 2014 (Jan - June 2014), a 58% increase from the same period in 2013, it added.

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