India has relaxed its rules on overseas investment in construction, which is expected to give a huge boost to property development in the country.

The Indian government’s union cabinet recently approved measures including reducing the minimum foreign direct investment (FDI) requirement in construction development to $5m from $10m and lowering the minimum built-up area demanded of overseas investors to 20,000sqm from a minimum of 50,000sqm. India has also eased the exit rules for foreign investors in the sector.

“The recent relaxation of FDI norms in construction development is expected to provide an immediate breather to the cash-strapped real estate sector,” said Neeraj Bansal, a partner and head of the real estate and construction sector at KPMG in India, adding, “in the near term, we expect the policy to support housing and commercial office projects in metro cities such as Delhi and Mumbai, where project size is generally small, yet requires heavy investment, due to expensive land parcels and high construction costs.”

The new Indian government, which came to power in May in a landslide victory, is aiming to develop 100 smart cities across the country. There are massive urban housing shortages in India, so it is hoped changes like these will help to alleviate those shortages.