Wednesday, May 23, 2007

FIIs' pre-IPO investments in real estate to get FDI status

The government proposes to treat the investments by foreign institutional investors in pre initial public offers (IPOs) of real estate companies as foreign direct investment (FDI), as reported by Business Standard.

The government has also said FII investments in the pre-IPO allotment of real estate companies will have a lock-in period of three years, in line with the FDI norms. The lock-in period of three years is currently applicable to FDI in real estate.

The government recently also clamped down on the use of external commercial borrowings for the real estate sector for integrated townships. All these measures are in response to widely held opinion that overseas funds are contributing to an asset bubble in the real estate space.

The government had said that it intended to slow down the flow of foreign debt into the real estate sector through its recent curbs on external commercial borrowings (ECBs).

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