Global Crisis

AND, more importantly, importantly, they can avoid distress sales and hang on to higher property prices.

But some say the new interpretation, informally being spoken about by government officials, should not apply to deals that were singed before. "It (the new clarification) can have a significant impact on FDI in real estate sector. At best, it should apply prospectively," said Price water house Coopers financial service practice tax leader Punit Shah. "The existing FDI," said Mr. Shah "was done on the basis of earlier interpretation."

In the original investment documents, signed at the peak of the property boom, the builders had agreed to pay back bulk of the money after one or two years. Local builders and global property funds resorted to new financial structures that helped them side-step FDI restrictions; and more importantly bring in money that was essentially debt but cou

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Centre May Interpret FDI Rule In Local Cos'Favour

HECTIC lobbying is on to bring about a small change in the way a rule of foreign investment in property is interpreted – a change that could backfire on overseas investors but rescue several Indian realtors.

It will not require a Cabinet decision or a new Press note issuance by the government. All it calls for is a simple government clarification – one that could make or break many players in the local property market that has attracted around $20 billion in the last five years.

According to the foreign direct investment (FDI) regulations, a foreign investor has to bring in a minimum $5 million to participate in a JV with an Indian developer while the rest of the money can be brought in at a later stage, may be in tranches.

Incidentally, the March '05 Press Note 2, which spells out the FDI rules, says: "Original

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