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NRI Investment Through ETFs or ADRs in Indian Real Estate

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Question by Mr. Narendran: We are Bangalore based real estate company and we are inviting foreign individual investors/institutes to invest in our residential projects across India. We are basically a marketing company and we have now stepped into our own property development in India. Can NRI’s invest through ETFs or ADRs? Kindly comment.

Answer: Thanks for asking your question. Please see the following posts for relevant inputs:

RBI Guidelines for FDI and ECB in Indian Real Estate

How can USA residents invest in India Real Estate through ETFs/ADRs?

So, can NRI’s invest through ETFs or ADRs? The simple answer is Yes in most cases. You should double check that your specific “residential projects” don’t have any regulation constraint from either Central Govt (RBI) or State Govt (I believe some state govts have added clauses to Central govt rules). Since you are already operating in India, you would have a good understanding on these aspects.

One more point from our experience is that if you are looking to attract FDI from NRIs for Real Estate Projects in the form of ETFs/ADRs, then you should tie-up with a company that has existing relationships with NRI investors, so that your offering gains more credibility.

You can contact us if you want help in connect with such companies. Feel free to ask any other question.

Thanks,
Shankar on behalf of India-Real-Estate.org

India Real Estate Developers, India Real Estate Funds, India Real Estate Investments, India Real Estate Opportunities, India Real Estate Trends

RBI Guidelines for FDI and ECB in Indian Real Estate

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Question by Mr Prasad: Could you be kind enough to tell me if we can bring FDI in debt form in India in real estate sector under current RBI Guidelines under automatic route and if you can suggest few names to whom we can contact for this for detailed procedures and documentation etc?

Answer: I think when you say FDI in debt form, you meant to say: External Commercial Borrowing (ECB), because FDI (foreign direct investment) stands for investments rather than debt.

The finance ministry allowed External Commercial Borrowing (ECB) in Indian real estate projects (in 2005) involving integrated townships of 25 acres or 50,000 square metres of more. However, the RBI’s position has to be checked on a project by project basis. Its not right to give a general answer on this website – so that other readers don’t take wrong conclusions.

As per our understanding, the RBI allows ECB in real estate projects involving integrated townships of 100 acres or more.

As you maybe aware, in real estate projects, significant capital is required upfront for land acquisition, which is classified as working capital. But end-use restrictions like not allowing ECB money to be used for working capital mean that Foreign funds (as debt) can’t be applied everywhere in Indian Real Estate.

RBI guidelines are often related to type and scale of the project. So if you are planning a large infusion of debt capital then please check RBI guidelines at a micro level.  Our team of legal real-estate experts could offer detailed help on specific cases. Feel free to contact us or ask any other questions.