Amendments in FEMA – Real Estate “Investment Vehicles” Recognised
in Security Transfer Rules
[Ref: Notification No.
FEMA. 355/2015-RB
dated November 16, 2015]
Subject: Foreign Exchange Management
(Transfer or Issue of
Security by a Person Resident outside India)
(Eleventh Amendment) Regulations, 2015
In exercise of the powers conferred by clause (b) of sub-section (3) of Section 6 and Section 47 of the Foreign Exchange Management Act, 1999 (42 of 1999), the Reserve
Bank of India hereby
makes the
following amendments
in the
Foreign
Exchange
Management
(Transfer
or Issue of Security
by a Person Resident outside
India) Regulations, 2000 (Notification No.FEMA 20/2000-RB dated 3rd May 2000) namely:-
1. Short Title & Commencement:-
(i) These Regulations may be called the Foreign Exchange Management (Transfer or
Issue of Security by
a Person Resident Outside India) (Eleventh Amendment) Regulations, 2015.
(ii) They shall
come into force from the date of publication in the official Gazette.
2. Amendment
to Regulations:-
A. Amendment
to Regulation 2
(i) After the existing sub-regulation (ii f) the following shall be added namely:-
“(ii g) ‘Investment Vehicle’ shall mean an entity registered and regulated
under relevant regulations framed by SEBI or any other authority designated for the
purpose and shall include Real Estate Investment Trusts (REITs)
governed by the SEBI (REITs) Regulations, 2014, Infrastructure Investment Trusts
(InvIts) governed
by the SEBI
(InvIts) Regulations, 2014 and
Alternative
Investment Funds
(AIFs)
governed
by the
SEBI (AIFs) Regulations, 2012.”
(ii) After the existing sub-regulation (xi), the following shall be added namely:-
“(xi A) ‘Unit’ shall mean beneficial interest of an investor in the Investment Vehicle and shall
include shares
or
partnership interests.”
B. Amendment
to Regulation 5
In the principal Regulations, in Regulation 5, after the existing sub-regulation (9), the
following shall
be
added, namely:-
“(10) A person resident outside India (other than an individual who is citizen of
or any other
entity which
is registered / incorporated
in Pakistan or Bangladesh), including an Registered Foreign Portfolio Investor (RFPI) or a non-resident Indian (NRI) may acquire, purchase, hold, sell or transfer units of
an Investment
Vehicle, in the
manner
and subject to the
terms
and conditions specified in Schedule 11.”
C. Amendment
to Regulation 9
In the principal Regulations, in Regulation 9, for the words, “shares or
convertible
debentures or
warrants,"
and
"shares or
convertible debentures or
warrants of an Indian company”, wherever they appear, the
words,
“shares
or convertible debentures or warrants
of an Indian company or units of an Investment
Vehicle” shall be substituted.
Provided that the words “shares or convertible debentures or warrants of an Indian company or
units of an Investment Vehicle”
shall not be substituted
in the
qualification clause of Regulation 9(1) beginning with “Further” and ending with “subject to lock-in period requirement”.
D. Amendment
to Regulation 12
In the principal Regulations, in Regulation 12, after the existing sub-regulation (v), the following shall be added, namely:
“(vi) Any person who is a non-resident and holds units of an Investment Vehicle in accordance with these Regulations, may pledge such units to secure credit facilities
being extended to the non-resident investor.”
E. Addition of a
new Schedule
After the existing Schedule 10, the following shall
be
added
Schedule 11
[See Regulation 5(10)]
Investment
by
a person resident
outside India in
an
Investment Vehicle
1. A person resident outside India including an RFPI and an NRI may
invest in units of Investment Vehicles
subject to the conditions laid down in this Schedule.
2. The payment for the units
of
an Investment Vehicle acquired by a person resident or registered / incorporated outside India shall be made by an inward remittance through
the
normal banking channel including by debit to an NRE or
an
FCNR account.
3. A person resident outside India who has acquired or purchased units in accordance
with this Schedule may sell or transfer in any manner or redeem the units as per regulations framed by SEBI or directions
issued by RBI.
4. Downstream investment by an Investment Vehicle shall be regarded as foreign
investment if neither the Sponsor nor the Manager nor the Investment Manager is Indian ‘owned and controlled’ as defined in Regulation 14 of the principal
Regulations.
Provided that for sponsors or managers or investment managers organized in a
form other than companies, SEBI shall determine whether the sponsor or manager
or investment manager
is foreign owned and controlled.
Explanation 1: Ownership and control is clearly determined as per the extant FDI policy. AIF is a pooled investment vehicle. ‘Control’ of the AIF should be in the hands of ‘sponsors’ and ‘mangers/investment managers’, with the general
exclusion of others. In case the ‘sponsors’ and ‘managers/investment managers’ of the AIF are individuals, for the treatment of
downstream
investment by
such AIF as domestic, ‘sponsors’
and ‘managers/investment
managers’
should
be resident Indian citizens. As ownership and control cannot be determined in LLP under the extant FDI policy, a LLP shall not act as sponsor
or manager/investment manager.
Explanation 2: The extent of foreign investment in the corpus of the Investment Vehicle will not be a factor to determine as to whether downstream investment of
the
Investment Vehicle concerned is foreign investment or not.
5. Downstream
investment by
an Investment
Vehicle that is reckoned as
foreign investment shall have to conform to the sectoral caps and conditions / restrictions, if any, as applicable to the company in which the downstream investment is made as per the FDI Policy or
Schedule 1 of the principal Regulations.
6. Downstream investment in an LLP by an Investment Vehicle that is reckoned as
foreign investment has to conform to the provisions of Schedule 9 of the principal Regulations
as
well as the extant FDI policy for
foreign investment in LLPs.
7. An Alternative Investment Fund Category III with foreign investment shall make
portfolio investment
in only those securities or
instruments
in which a Registered Foreign Portfolio Investor is allowed to invest under
the
principal Regulations.
8. The Investment Vehicle receiving foreign investment shall be required to make such report and in such format to Reserve Bank of India or to SEBI as may be prescribed by them
from time to time.
[Notification
No. FEMA. 345/2015-RB dated November 16, 2015]
Subject: Foreign Exchange Management (Permissible Capital Account Transactions)
(Fourth Amendment)
Regulations, 2015
In exercise of the powers conferred by sub-section (2) of Section 6, sub-section (2)
of
Section 47 of the Foreign Exchange Management Act, 1999 (42 of 1999), the Reserve Bank of India makes, in consultation with the Central Government, the following amendments in the Foreign Exchange Management (Permissible Capital Account Transactions) Regulations, 2000 (Notification No. FEMA.1/2000-RB dated 3rd May 2000), namely:-
1. Short Title & Commencement:-
(i) These Regulations
may
be called the Foreign Exchange Management (Permissible Capital Account Transactions)
( Fourth Amendment) Regulations, 2015.
(ii) They shall come into force from the date of
their
publication in the
Official Gazette.
2. Amendment
to the Regulation:-
In the Foreign Exchange Management (Permissible Capital Account Transactions)
Regulations, 2000 (Notification No. FEMA 1/2000-RB dated 3rd May 2000), in
Regulation 4, in sub-regulation (b), the existing Explanation (i) shall be substituted by the following namely:
“(i) For the
purpose of
this regulation, “real estate
business” shall not
include development of townships, construction of residential /commercial premises, roads or
bridges and Real Estate Investment Trusts (REITs) registered
and
regulated under
the
SEBI (REITs)
Regulations
2014”