Real estate mutual funds (REMF) – Rejoice!

July 31, 2008 at 8:52 am Leave a comment

The cloud over real estate mutual funds (REMF) has lifted. The finance ministry has brushed aside RBI’s concerns of REMFs violating foreign direct investment (FDI) norms in the realty sector. North Block has said the central bank’s concern — stating that REMF scheme notified by Sebi in April contradicted FDI norms — was unwarranted.

The finance ministry view could pave way for the launch of new investment avenues for small investors keen to tap the real estate sector’s growth potential. The doubts raised by RBI added to the hesitation in REMF launches.

Highlighting that the scheme allowed NRIs and FIIs to invest in real estate sector in conflict with the policy, the apex bank had asked finance ministry to intervene and take up the issue with Sebi. The FDI policy prohibits investment in real estate but allows investment in construction and development sector with conditions like a three-year lock-in, minimum capitalisation of $5 million for a wholly-owned subsidiary and $10 million for joint ventures, and development of at least 10 hectares. The government had allowed 100% FDI in the construction and development sector on the automatic route in 2005 under the Press Note 2 issued that year.

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Entry filed under: Funds-Investments.

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