The government has recently made some changes to the investment regulations, in order to attract foreign inflows into Alternative Investment Funds (AIFs), Infrastructure Investment Trusts (InvITs) and Real Estate Investment Trusts (REITs). The inflows are believed to be one of the key drivers for India’s economic growth. AIFs, REITs and InvITs are expected to provide impetus to various crucial sectors of the Indian economy. Therefore, foreign investment in these Investment Vehicles has been on the radar of the Union Government in recent times.
As per the latest changes, Investments by non-resident Indians and other foreign investors into such funds or trusts will now be allowed under the automatic route. The recent changes also do away with a number of ambiguities surrounding the status of the trusts from an FDI point of view. Earlier, while the trusts were regulated by SEBI, there was no provision under the FDI policy for classification of such trusts as Indian-owned and controlled or otherwise. Though, these developments are positive, the government may still have to determine certain tax delays to ensure large investments into these trusts.
AIFs, Infrastructure Investment Trusts and REITs are all investment vehicles regulated by capital markets regulator Security exchange Board of India (SEBI). Formed as a trust for the purpose of pooling in capital, any foreign investment into them required an approval from the Foreign Investment Promotion Board (FIPB) which was time consuming.