100% Foreign Direct Investment (FDI) under the automatic route is permitted in townships, housing, built-up infrastructure and construction-development projects to create employment opportunities, generate economic activity and supplement available housing stock and built-up infrastructure, circumscribed by certain limitations in respect of the minimum area required to be developed in the case of serviced housing plots and construction development projects and capitalization for FDI by wholly owned subsidiaries and joint ventures with Indian partners, in real estate projects.
By recent guidelines issued by the Reserve Bank of India (RBI), real estate companies have now been allowed to divest a part of their stake to Foreign Institutional Investors (FIIs) in a Pre-IPO placement. Consequently, FIIs who are presently permitted to subscribe to shares offered through IPOs by real estate companies, may now also participate in the Pre-IPO placements of these companies.
Shares picked up by FIIs in Pre-IPO placements, which may be in the nature of preferential allotments, would be subject to a minimum lock-in period of three years, which is currently stipulated for FDI, in conformity with regulations of the Securities and Exchange Board of India. However, such Pre-IPO placements to FIIs will not attract conditions prescribed by the said Press Note.
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