Profile
Settings
Refer your friends
Sign out
A Foreign Direct Investment (FDI) refers to an investment that is made by a foreign corporation in a foreign enterprise. It means that foreign firms are actively engaged in the day-to-day activities of the host nation. More than just bringing money to the table, they are also contributing to the expertise, know-how, and cutting-edge technology.
The construction industry has a significantly exponential impact on the Indian economy, making it one of the most important sub-sectors. Economic development is directly impacted by changes in the real estate market. The FDI path has drawn foreign investors’ attention to the FDI in the construction sector in India due to the well-acknowledged necessity for foreign capital given the overwhelming demand.
Will easing out FDI rules in the construction sector bring a boom?
Since the coronavirus took down the economy, India is proposing relaxing foreign investment laws in areas ranging from construction to animation, according to individuals with knowledge of the situation. They asked not to be named because of regulations so that the idea to enable limited liability partnerships to invest in the development of townships, highways, hotels, and hospitals could be discussed.
The government’s proposed budget may also include a proposal to enable 100% foreign direct investment in the animation, visual effects, gaming, and comics industries. Easing out rules in the FDI in the construction sector will bring a boom in the following ways:
LLPs will provide a new investment route
As India struggles to recover from its yearly recession on record after the pandemic-induced lockdown, LLPs (limited liability partnerships) will provide a new investment route for the administration of Prime Minister Narendra Modi. It is estimated that by 2022, India will need $777 billion in infrastructure investment.
Meeting goals of providing cheap homes
FDI inflows into the construction industry totalled $25.7 billion from April 2000 to September 2020, according to official statistics. The Modi government’s goal of developing cheap homes for everyone in urban areas by 2022 and establishing 100 smart cities is also anticipated to benefit from the easing of regulations.
Easy to obtain foreign investments
A three-year lock-in term is now required for foreign investors to participate in the building development business. Allowing LLP companies will make it easier for the industry to obtain international investments.
Industry scenario of FDI in the construction sector in India
- By 2025, the global construction market is predicted to be worth $1.4 trillion.
- The construction sector received the second-largest amount of foreign direct investment (FDI) between 2000 and 2020.
- There are about 250 sub-sectors in the construction business, all of which are interconnected. Real estate and infrastructure development are the two broad areas in which these activities fall.
- The real estate market in India is expected to be worth $1 trillion by 2030, or 13% of the country’s GDP.
- 24 per cent of India’s $1.4 trillion infrastructure investment budget under NIP is intended for renewable energy, 19 per cent for roads and highways, 16 per cent for urban infrastructure, and 13 per cent for the railway network.
Investment in the construction industry
India’s GDP is heavily reliant on the building sector. As a major contributor to India’s GDP, the industry serves as a door to more possibilities. India’s economic growth is strongly linked to the country’s investment in the building sector.
Both the real estate and urban development sectors make up the Indian construction business. Commercial and residential properties are included in the Real estate sector. Urban development is a large category that includes sub-categories such as water supply, sanitation, urban transportation, schools, and healthcare. A total of $5 billion is expected to be invested in Indian real estate by institutional investors by the year 2020.
The country’s construction market is predicted to reach its third-largest worldwide share by 2025, with annual building production rising by an average of 7.1%. Cement, technology, steel, and other industries will all benefit from an increase in the building industry.
Infrastructure is a measure of a nation’s progress. FDI in the building sector in the north of India will open up new avenues for the construction industry to grow and prosper.
A total of $ 6.5 billion in revenue was generated by the construction equipment business in 2020.
The computer software & hardware sector attracted maximum FDI investment in India in 2020
According to the latest statistics from the Department for Promotion of Industry and Internal Trade (DPIIT), FDI in the computer software and hardware industry surged almost four-fold to $24.4 billion in April-December 2020-21. This shows that the computer software and hardware sector attracted maximum FDI investment in India in 2020.
India has seen a dramatic increase in technology use during the epidemic, at both organisational and industrial levels. Because of the COVID problem, consumer contacts have been digitised many years faster. Businesses are gradually adopting the latest breakthroughs in artificial intelligence and robotic process automation. For the computer software and hardware business, this has resulted in significant growth potential.
According to DPIIT statistics, the industry received the second-most FDI inflows. Investing in India’s IT sector has been boosted by its core capabilities and strengths, as well as the government’s efforts to encourage the manufacture of IT hardware in India.
Conclusion
There was a clear loosening of restrictions on FDI in the construction sector in India because of the pressing demand for more low-cost housing supply. That is why the automatic FDI path is open to 100% foreign direct investment in the brokerage of real estate services. If you want to learn more about the FDI rules in India, you can check out the latest rules for FDI policy in India, how to get FDI, the entry routes for FDI, etc.
