Foreign Investors in Realty Locked in for Three Years

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Mar. 25 – In a new ruling the Foreign Investment Promotion Board has said that foreign investors in real estate cannot sell their stake to another foreign investor before termination of the lock in period of three years, the Economic Times reported.

The new ruling comes while the Indian government is promoting FDI in the realty and infrastructure sectors while also trying to stem foreign capital outflow. According to the norms, FDI is allowed only in projects with a minimum investment of US$10 million (in wholly-owned subsidiaries) or US$5 million in joint ventures, and which has a minimum area of 10 hectares.

The new regulation overrules the department of industrial policy and promotion which states that a foreign investor can repatriate funds if it offloads its stake to another foreign investor as the actual investment in the project would remain intact and only its ownership would change.

In order to attract more FDI into strategic, previously protected sectors like retail and real estate, the Indian government recently amended press note 2 allowing foreign companies to indirectly invest in these sectors through other Indian companies that are owned and controlled by Indians.