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.

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