FDI in Realty worries RBI

By Staff Reporter

When few realty house offered Preferrencial Shares and convertible Debentures to FII and Investors, it was treated as back door entry of FDI in real estate for commercial ventures. Today, 100 % FDI is allowed in residential venture for real estate development.
In the second week of January 2007, RBI, this time, raised the alarm over FDI in Real Estate sector. The Apex Bank has drawn attention of the finance ministry to the unprecedented growth in the real estate sector, which has recorded a 400% rise in Foreign Direct Investments (FDI). The sector has recorded US$703.3 million in January – October 2006 from US$135.35 million in January- October 2005. The total inflow of FDI into the country in January – October, 2006 stood at US$7.9 billion, up against US$3.2 billion in the same period of 2005. The concern of RBI is on the rapid pace and unexpected growth in the sector which will lead to speculations and trading.
Over heated sector Over heated sector is now poised for unreasonable limits which is beyond common men’s reach. Leading investors of who brought FDI in the country inc ludesBlackstone Group, Goldman Sachs, Emmar Properties, Pegasus Realty, Citigroup Property Investors, Lee Kim Tah Holdings, Salim Group, Morgan Stanley and GE Commercial Finance Real Estate. The Apex Bank had earlier said that pre-IPO and follow-on public offers of real estate companies should be treated as FDI and governed by the FDI guidelines. The Bank also wants Foreign Exchange Management Act (FEMA) needs to be amended if FDI in real estate had to be given the status of portfolio investments.