Govt. Allows Foreign VCFs, PE Funds to Invest in Indian Realty

July 31, 2007	(1 votes, average: 1 out of 5)  Loading ...
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Foreign investors have once again lined up to bring big money into booming Indian property market, with the government relaxing the norms. Major players including the Citigroup, Deutsche Bank, -The Carlyle Group and Blackstone, among others have finalized half a dozen deals worth $1 billion.

All the niggling doubts related to investments by foreign institutional investors (FIIs), foreign venture capital funds (VCFs) and private equity players have been cleared through a clarification issued by the department of industrial policy & promotion (DIPP), under the ministry of commerce and industry.

The clarification settled the issues between the finance and commerce ministries and finance sector regulators. Foreign investors now require to wait for three years before exiting the company completely. And, they will have to lock-in a minimum of $5 million, in case of a joint venture with an Indian real estate player. It would be $10 million if it is a wholly owned subsidiary of a foreign investor.

The prevailing norms for foreign investors regarding the lock in period are also applicable to property market. Therefore, FIIs and private equity investors will have a minimum lock in period of 1 year, if the investment occurs during the preceding 12 months before the IPO date.

This allows a multitude of foreign investors to operate at the entity level. It is completely opposite of the earlier scenario when equity investments were project specific.

A number of property developers such as Hiranandanis, Lodha Developers, Runwal Group, Paranjpe Schemes, and Kolte Patil Developers are planning to raise money through IPO and are currently holding discussions with foreign investors.

Prior, all were perplexed regarding FIIs’ pre IPO investments in real estate companies. With the clarification issued by the government, foreign VCFs, and PE funds can invest in realty firms with a lock in period of minimum 1 year. The new norms will certainly push the investments in Indian real estate sector, says Akhil Hirani, managing partner of Majmudar & Co.

News Published Under:   Real Estate India |

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