New FDI norms to improve builder’s liquidity, says Fitch
12/11/2014 11:25
According to the rating agency Fitch, the easing of FDI rules in realty sector is likely to improve the liquidity situation of developers as well as enhance the supply, said the media report. "Relaxation of rules on foreign direct investments into India's property development sector, will improve developers' liquidity and speed-up project-turnaround times, but may also increase competition," Fitch Ratings said in a statement. On October 29, the Cabinet had relaxed FDI rules in construction sector by reducing minimum built-up area as well as capital requirement and easing the exit norms. Under new FDI norms, foreign developers have been allowed to invest in smaller property development projects - with a minimum floor area of 20,000 sq meters compared to 50,000 sq meter previously. The minimum foreign-investment threshold was also lowered to USD 5 million per project, from USD 10 million. "These moves may encourage more foreign developers to tie-up with their domestic counterparts, which will improve domestic developers' liquidity and speed up project turnaround times," it added. On the flip side, Fitch said the relaxed rules will also mean a higher supply of property projects and more price-competition among domestic developers, which will pressure profit margins.
12/11/2014 11:25
According to the rating agency Fitch, the easing of FDI rules in realty sector is likely to improve the liquidity situation of developers as well as enhance the supply, said the media report. "Relaxation of rules on foreign direct investments into India's property development sector, will improve developers' liquidity and speed-up project-turnaround times, but may also increase competition," Fitch Ratings said in a statement. On October 29, the Cabinet had relaxed FDI rules in construction sector by reducing minimum built-up area as well as capital requirement and easing the exit norms. Under new FDI norms, foreign developers have been allowed to invest in smaller property development projects - with a minimum floor area of 20,000 sq meters compared to 50,000 sq meter previously. The minimum foreign-investment threshold was also lowered to USD 5 million per project, from USD 10 million. "These moves may encourage more foreign developers to tie-up with their domestic counterparts, which will improve domestic developers' liquidity and speed up project turnaround times," it added. On the flip side, Fitch said the relaxed rules will also mean a higher supply of property projects and more price-competition among domestic developers, which will pressure profit margins.
