NRIs to face 3-year realty pre-IPO lock-in

By agencies   |   Tuesday, 05 June 2007, 19:30 IST
Printer Print Email Email
New Delhi: The government plans to cap potential source of foreign funds for the real estate sector. Non- resident Indians (NRIs) planning to invest prior to initial public offers (IPOs) of real estate companies could face a three- year lock in period along with foreign institutional investors (FIIs), reported The Economic Times. In this context, aimed at checking the flight of capital from real estate, the government has proposed to introduce a minimum lock-in period for pre-IPO FII investors. This lock-in period also act as a deterrent that effectively discourages the promoters? own funds coming into the company through the NRI route. So the government is likely to amend the Foreign Exchange Management Act. According to the act all the pre-IPO investments for the realty sector will face a three-year lock-in, a government source told ET. However, compliance of other conditions of minimum capitalization and development of 10 hectares may be applicable only for the FDI in the IPO. To meet the norms that expect to be notified shortly, real estate companies that are planning to hit the capital market will have to change their strategies. Per-mission sought by real estate companies for making pre-IPO placement to FIIs in the past few months have been put on hold following the government?s proposal to rework FDI/ pre-IPO norms for the real estate sector.