RBI move to clamp foreign VC investment in Real Estate
After the failed attempts to contain inflation even by restricting money supply, RBI is coming round to the view that foreign funds into real estate are creating an asset bubble. To avoid a hard landing as seen in US economy, RBI proposes curbs on foreign venture capital investments (FVCIs) funds. The central bank notes that this route has opened a parallel channel of investment thus opening a regulatory arbitrage window. Majority of such funds have their base in tax havens like Cayman Islands, Mauritius and Cyprus . FVCIs enjoy significant benefits which are not available to domestic VCs including full tax exemptions and minimum capital base of INR50m. Besides, FVCIs enjoys full exemption from entry and exit pricing norms which are applicable to foreign investors in form of FDI, exemption from one year lock in period for sale after IPO. All these exemptions prompted foreign funds and Indian firms to set up companies abroad (usually in tax havens), raise funds at cheaper rates and t