100% FDI Permitted in urban infrastructure projects

With almost 300 million Indians living in urban areas, the country has the second largest urban population in the world. It comprises about 30 per cent of the total population and contributes to over 60 per cent of the country’s GDP. Essential infrastructure facilities need to be provided to this growing urban population.

• The country has over 3,700 towns and cities. The urban population of the country has been growing at a rapid pace of over 31 per cent over the last decade. This is significantly higher than the growth of the rural population (approximately 18 per cent).

• Employment in urban areas registered a growth of around 38 per cent (over the last decade), substantially exceeding the rural employment growth rate of around 16 per cent.

• A large number of Indian cities and towns need adequate infrastructure facilities, specifically in the areas of water management, roads, transportation, housing, sanitation, sewage etc.

• The government has initiated a number of steps to improve the physical and economic infrastructure and improve facilities in urban areas. In addition to the basic infrastructure projects, a number of urban transportation projects have also been taken forward, e.g. metro rails.

Policy Initiatives

• In India, urban infrastructure facilities are typically provided by urban local bodies that depend significantly on central and state government grants and loans for funds. However, now the urban local bodies have also been allowed to borrow and raise funds from the market for urban infrastructure projects. Most of the state governments have set up facilitating agencies to channel funds into urban infrastructure projects.

• The central government and most state governments have begun looking at different models (BOT/ Concessions/Management Contracts) for private participation in developing, operating and maintaining urban infrastructure facilities.

• The government allows 100 per cent FDI in urban infrastructure projects.

• Non Resident Indians, persons of Indian origin and overseas corporate bodies (OCBs) are allowed to invest up to 100 per cent on a repatriable basis in many housing and real estate projects.

• 100 per cent FDI is permitted for the development of integrated townships, including housing, commercial buildings, hotels, resorts, etc. Prior government approval is required for investment in such projects.

• A 10-year tax holiday is available to investors investing in urban infrastructure projects. This is available to developers, and those carrying out operations and maintenance of water supply, sewerage, sanitation, etc.