A.P. (DIR Series) Circular No. 63
Date: April 21, 2016
All Category – I Authorised Dealer Banks
Foreign Investment in units issued by Real Estate Investment Trusts, Infrastructure Investment Trusts and Alternative Investment Funds governed by SEBI regulations
Attention of Authorised Dealers Category – I (AD Category – I) banks is invited to the Foreign Exchange Management (Permissible Capital Account Transactions) Regulations 2000, notified vide Notification No. FEMA 1/2000-RB dated May 3, 2000, as amended from time to time and Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000, notified vide Notification No. FEMA 20/2000-RB dated May 3, 2000, as amended from time to time (Principal Regulations).
2. With a view to rationalising foreign investment regime for Alternative Investment vehicles and to facilitating foreign investment in collective investment vehicles for real estate and infrastructure sectors, it has been decided, in consultation with the Government of India, to allow foreign investment in the units of Investment Vehicles registered and regulated by SEBI or any other competent authority. At present, Investment Vehicle will include the following:
Further, unit shall mean beneficial interest of an investor in the Investment Vehicle and shall include shares or partnership interests.
3. The salient features of the new investment regime are:
4. Further, in terms of Regulation 4(b) (iv) of Notification No. FEMA 1/2000-RB dated May 3, 2000, foreign investment in any company or partnership firm or proprietary concern or any entity, whether incorporated or not, which is engaged or proposes to engage “in real estate business, or construction of farm houses” is prohibited. However, Explanation (i) ibid provides that “real estate business” shall not include development of townships, construction of residential /commercial premises, roads or bridges. It is now clarified that foreign investment in units of REITs registered and regulated under the SEBI (REITs) Regulations, 2014 will not be included in “real estate business” for the purpose of these regulations.
5. AD Category – I banks may bring the contents of this circular to the notice of their constituents and customers concerned.
6. Reserve Bank has since amended the subject Regulations accordingly through the Foreign Exchange Management (Permissible Capital Account Transactions) (Fourth Amendment) Regulations, 2015, Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) (Eleventh Amendment) Regulations, 2015 and Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) (Second Amendment) Regulations, 2016 which have been notified vide Notification No. FEMA 345/2015-RB dated November 16, 2015, vide G.S.R. No.859 (E) dated November 16, 2015, Notification No. FEMA 355/2015-RB dated November 16, 2015, vide G.S.R. No.858 (E) dated November 16, 2015 and Notification No. FEMA 362/2016-RB dated February 15, 2016, vide G.S.R. No.166 (E) dated February 15, 2016 respectively.
7. The directions contained in this circular have been issued under section 10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and are without prejudice to permissions / approvals, if any, required under any other law.
Chief General Manager-in-Charge