Signs that India is Opening up to Foreign Investment
September 26, 2013
India has traditionally placed many restrictions on foreign investment in rupee dominated bonds. These include caps on the total as well as limits by investor class, maturity and issuer and have been implemented through a complicated mechanism for allocation and reinvestment. A new publication by the Securities and Exchange Board of India (SEBI) presents an analysis that shows that these restrictions no longer meet the objectives of current economic policies. It recommends removal of quantitative restrictions on foreign holding of Indian rupee dominated debt and suggests ways to move to a more efficient framework.
Similarly, proposals have been prepared by the Ministry of Urban Development to open up restrictions on direct foreign investment in real estate (e.g., relaxation of restrictions on the minimum land parcel size for development), and in real estate companies, transfers of shares of RE companies between non-residents, as well as foreign investment in urban renewal and slum redevelopment projects. If approved these changes would enable real estate players to raise foreign capital at competitive rates and reduce current dependency on domestic financial institutions.