Pre-IPO Sale of Real Estate Firms under Review

By Meera Kapoor · February 8, 2026

Real estate companies in India are under the scanner once more, as the Government gets down to reviewing the pre-initial public offering of shares of these companies in the Indian stock market.

The pre-IPO sale of shares is likely to be categorized as a
FII investment by the Department of Economic Affairs and the
Department of Industrial Policy and Promotion
The RBI however carries a different view of pre-IPOs, arguing
that these funds ought to be treated as foreign
direct investment (FDI).

The bank has suggested amendments in the Foreign Exchange
Management Act (FEMA), 1999 in order to have FDI in real estate
accepted as portfolio investment.
A FII status for pre-IPOs would be more advantageous to real
estate companies, as FDI norms are difficult to meet.

The real
estate lobby has been pursuing for FII status to derive the
maximum gains from the current boom in the industry.
FDI in Indian real estate is permitted on a limited scale, in
residential projects over 10 hectares, with a minimum investment
of USD 5 million in case of a joint venture.

However, a wholly
owned subsidiary would have to invest at least USD 10 million
in a project. Moreover, these funds need to be brought in within
6 months of the start of business in India.
In case of FDI in construction development projects, the minimum
area requirement is 50,000 sq. metres.

The investor’s original investment cannot be repatriated before three years of completion of the project, though an early exit is permitted through the Foreign Investment Promotion Board (FIPB)