RBI restricts Issue of Hybrid Instruments under FDI

By NRI Realty News Desk · March 2, 2026

The Reserve Bank of India issued fresh guidelines last week with respect to its Foreign Direct Investment (FDI) Policy.

To pre-empt any move by corporates to issue hybrid instruments like optionally or partially convertible debentures, the RBI has elucidated that only fully convertible debentures into time-bound equity can be issued to foreign investors.

The RBI recognises partially and optionally convertible debentures as
debt instruments.
Existing partially or optionally convertible debentures can continue
to be held till they mature, clarified the RBI. Foreign institutional
investors (FIIs) can invest in non-convertible debentures or
bonds issued by Indian firms subject to limits defined by the apex bank.

USD 6 billion Expected from FDI in Real Estate

Meanwhile, FDI investment in real estate is expected to touch
the USD 6 billion figure this year, and USD 10 billion in another
12 to 18 months from now, according to a report by Jones Lang
LaSalle. This would bring FDI investment in real estate to reach a share
of 26% in 2007-08, up from 16% received last year.

Residential properties have been preferred over commercial properties,
according to the report, as returns from the investment are assured.
Besides, exiting from these projects is relatively easier.

Commercial
properties in tier I cities are also a favourite amongst foreign
investors as rentals on these properties have appreciated by
more than 100% in the last one and a half years.

Private equity deals in Indian real estate would account for
USD 1.2 billion of the total foreign investment, primarily into
Tier I markets of Delhi, Mumbai and Bangalore, which have a lower
risk element.

However, as DLF ventures into Tier II markets,
equity investors are encouraged to invest their capital in projects
in these locations too.