Up to $5 billion worth of private equity funds, which had invested in real estate over the last five to six years and had planned an exit this year, now find themselves caught in a policy row between the Reserve Bank of India and the government. Six out of every 10 private equity deals in the real estate sector have put and call options built into them. The confusion stemmed from a policy announcement by the Department of Industrial Policy & Promotion (DIPP) in the ministry of commerce and industry in the beginning of October 2011, which said that "equity instruments issued/transferred to non-residents having built-in options or supported by options sold by third parties would lose their equity character and such instruments would have to comply with the extant ECB guidelines". But after a huge amount of negative feedback on the subject, DIPP later on October 31, 2011 deleted the clause.
Source: Economic Times
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