Foreign funds pouring into affordable housing projects

By Vishwanath Pratap Singh and Srabanee Ghosh, Luthra & Luthra Law Offices
0
2931
LinkedIn
Facebook
Twitter
Whatsapp
Telegram
Copy link

The launch of Pradhan Mantri Awas Yojana – a government scheme targeting housing for all by 2022 – has led to a shift of focus from the luxury segment to affordable housing. Other factors which have contributed to the shift include a general real estate slowdown, increase of developers’ overall debt burden, delays in delivery of earlier luxury segment projects and demonetization.

Vishwanath Pratap SinghPartnerLuthra & Luthra Law Offices
Vishwanath Pratap Singh
Partner
Luthra & Luthra Law Offices

The policy focus on housing for all also led to a slew of regulatory relaxations, resulting in the recent trend of pouring of foreign funding into developers targeting lower income groups. Until late 2015, while 100% foreign direct investment (FDI) was permitted under the automatic route into construction and development projects, stringent conditions were imposed, such as minimum thresholds (in terms of floor area and amount of investment) and restrictions on exit of investors (even in the case of transfer to a non-resident, where no repatriation was involved). Such conditions deterred foreign investment in new and smaller projects.

These restrictions were removed and foreign investors were permitted to exit (subject to a lock-in period) via press note 12 of 2015. This provided adequate impetus for achieving the government’s target of housing for all by 2022, as any project irrespective of its size can now have access to FDI. In addition to kick-starting new smaller projects, this policy change could also result in the revival and accelerated development of stagnant projects.

The above-mentioned changes are also projected to considerably reduce the cost of funds for builders, leading to lower prices for buyers. Further, easy access to funds is expected to increase the liquidity of cash-strapped developers and enable them to complete projects on time and avoid cost appreciation due to delays.

You must be a subscribersubscribersubscribersubscriber to read this content, please subscribesubscribesubscribesubscribe today.

For group subscribers, please click here to access.
Interested in group subscription? Please contact us.

你需要登录去解锁本文内容。欢迎注册账号。如果想阅读月刊所有文章,欢迎成为我们的订阅会员成为我们的订阅会员

已有集团订阅,可点击此处继续浏览。
如对集团订阅感兴趣,请联络我们

Vishwanath Pratap Singh is a partner and Srabanee Ghosh is an associate at Luthra & Luthra Law Offices. The views expressed here are personal. They are intended for general information purposes and are not a substitute for legal advice.

luthra & Luthra

9th Floor, Ashoka Estate

Barakhamba Road

New Delhi – 110 001

India

Contact details:

Tel: +91 11 4121 5100

Fax: +91 11 2372 3909

Email: delhi@luthra.com

Website: www.luthra.com

LinkedIn
Facebook
Twitter
Whatsapp
Telegram
Copy link