The FM has proposed a three year lock-in for investments made by FII in real estate firms through pre-IPO placements to check speculation in the booming sector

The Finance Ministry has proposed a three year lock-in for investments made by foreign institutional investors (FIIs) in real estate firms through pre-IPO placements to check speculation in the booming sector.

Such a regulation, which brings FIIs on par with foreign direct investments (FDI), would require a change in FII norms and market regulator SEBI is expected to amend regulations in this regard shortly.

The regulator is expected to take up the issue of amending SEBI (FIIs) Regulations, 1995 at its next meeting scheduled in Mumbai on June 30, official sources told PTI.

Finance Ministry has supported the views of Reserve Bank, which wanted a lock-in period for FIIs as part of its strategy to curb the rising speculations in the real estate sector, the sources said.

The government may also have to amend Foreign Exchange Management Act to put in place the lock-in, they said.

Earlier, the Department of Industrial Policy and Promotion (DIPP) and SEBI had recommended that pre-IPO placements by FIIs must be treated as portfolio investment and should not face a lock-in.

Sources said Finance Ministry has rejected the views of DIPP and SEBI, and has asked the regulator to amend rules making it mandatory for real estate firms to have a three-year lock period for FII investments through pre-IPO placements.

In the meantime, real estate companies which had sought permission for pre-IPO placements with FIIs had been asked to wait as guidelines had not been firmed up, the sources said.


Source: livemint.com
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