Lock-In Period for FIIs in Indian Real Estate

Foreign institutional investors (FIIs) may not be able to exit from their investments in Indian real estate before three years, once the proposal mooted by the Reserve Bank of India and the Finance Ministry is enforced.

Pre-empting any further speculation in the real estate market in India,
FIIs will not be allowed to cash in on their investments in pre-IPO placements
of Indian real estate firms.

When the regulation does come into force,
it would bring FIIs at par with foreign direct investment (FDI)
in real estate.
The Securities and Exchange Board of India (SEBI) will take
this proposal forward at the next meeting on June 30th in Mumbai .

The Foreign Exchange Management Act (FEMA) would have to be accordingly
amended once the proposal is approved.

The Department of Industrial Policy and the SEBI were not in
favour of a lock-period in the past and had suggested pre- IPO
placements by Foreign Institutional Investors be put on the
same platform as portfolio investments.

The recommendation was not welcomed by the Finance Ministry,
and SEBI has been asked to put in place the lock-in on FII investments
in real estate.

Indian real estate companies had been asked
to hold on to their pre-IPO placements till the amendments are
put into force.

Photo: Buildings in Mumbai 4 by Gannu03, licensed under CC BY-SA 4.0, via Wikimedia Commons.