In a move to help the cash stripped developers optimize their foreign capital inflows, the commerce ministry under Kamal Nath is contemplating easing foreign direct investment (FDI) norms for the sector.
The new proposal will allow the real estate companies which brought FDI into projects that qualified for the purpose earlier, to divert such funds, if unutilised, into other projects where FDI was not allowed earlier. However, the move will need to be cleared by the cabinet committee on economic affairs before it can be implemented.
The issue was taken up in a meeting of Foreign Investment Promotion Board (FIPB) in wake of difficult liquidity scenario being faced by the sector. However, Reserve Bank of India, which has earlier been cautious of FDI into the real estate sector due to violations of forex related norms, may not look favourably at the proposal. A middle ground can be that the relaxation is only extended for a short period of time to help the realtors tide over the cash crunch.
RBI Governor Dr. Reddy was the best person to handle the Real Estate Bubble in India but was shown the door since he would not budge to Babus or Netas 🙂