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Last Updated: Thursday, 24 February, 2005, 22:02 GMT
India seeks to boost construction
A building in Hyderabad
Indian government wants to see more buildings springing up
India has cleared a proposal allowing up to 100% foreign direct investment in its construction sector.

Kamal Nath, Commerce and Industry Minister, announced the decision in Delhi on Thursday following a cabinet meeting.

Analysts say improving India's infrastructure will boost foreign investment in other sectors too.

The Indian government's decision has spread good cheer in the construction sector, according to some Indian firms.

Benefit for all

A spokesman for DLF Builders, Dr Vancheshwar, told the BBC this will mean "better offerings" for consumers as well as builders. He said the firm will benefit from world class "strategic partnerships, design expertise and technology, while consumers will have better choice."

No country can develop on the basis of foreign investment alone
Chittabrata Majumdar, general secretary of the Centre of Indian Trade Unions

The government proposal states that foreign investment of up to 100% will be allowed on the 'automatic route' in the construction sector, on projects including housing, hotels, resorts, hospitals and educational establishments.

The automatic route means that construction companies need only get one set of official approvals and do not need to gain clearance from the Foreign Investment Promotion Board, which can be bureaucratic.

The government hopes its new policy will create employment for construction workers, and benefit steel and brick-making industries.

Land grab ban

Mr Nath also announced plans to allow foreign investors to develop a smaller area of any land they acquired.

"Foreign investors can enter any construction development area, be it to build resorts, townships or commercial premises but they will have to construct at least 50,000 square meters (538,000 square feet) within a specific timeframe," said Mr Nath, without specifying the timeframe.

Previously foreign investors had to develop a much larger area, discouraging some from entering the Indian market.

This measure is designed to discourage foreign investors from buying and selling land speculatively, without developing it.

Anshuman Magazine, managing director, of CB Richard Ellis - an international real estate company - told the BBC this was "a big positive step."

Seeking self-reliance

However, Chittabrata Majumdar, general secretary of the Centre of Indian Trade Unions (CITU), said allowing FDI in the country is compromising India's own "self reliance". He said, "No country can develop on the basis of foreign investment alone."

Mr Majumdar also said an assessment should be made as to whether foreign investment is indeed beneficial to the country - in terms of employment and money generated - or just another way of international companies filling their deep pockets.

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