RBI's proposal on ECB may give realty a funding boost

If, interms of a central-bank proposal, real-estate activities in which foreign direct investment (FDI) is permitted also get the benefit of external commercial borrowing (ECB), it will be a landmark shift — one that could reshape how Indian developers access and manage capital.

- PRACHI PISAL

By opening the door to offshore debt for construction and development projects, the draft framework is expected to ease longstanding funding constraints, lower borrowing costs, and revive stalled projects in the country.

For more than three decades, India’s real estate has remained cut off from external commercial borrowing, primarily due to concern around speculative land dealings and currency risks, say experts.

According to legal experts, the move reflects a fundamental realignment of policy.

Hardeep Sachdeva, senior partner at AZB & Partners, said the Reserve Bank of India’s draft framework “represents a significant recalibration of India’s external debt policy”.

“The distinction between the ‘real-estate business’ and ‘construction-development is critical,” Sachdeva said.

“Under India’s FDI policy, trading in immovable property and land speculation remain prohibited, but 100 per cent FDI is permitted under the automatic route in construction. The draft framework mirrors this boundary, ensuring flow of offshore money into productive, asset-creating activities rather than speculative land banking”