Relaxation in rules on foreign direct investments (FDI) into India’s property development sector will not only improve developers’ liquidity and speed-up project-turnaround times, but may also increase competition in the market, Fitch Ratings has said.
The Government on 29 October amended FDI norms for construction sector by allowing inflows into projects spread over a smaller area with a minimum floor area of 20,000 square meters (sqm).The minimum foreign-investment threshold was also lowered to USD5m per project, from USD10m.
These moves may give impetus to FDI with more foreign developers joining hands with their domestic counterparts.
On the other hand, the relaxed rules will also encourage a higher supply of property projects and more price-competition among domestic developers, which will affect profit margins.
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