The Reserve Bank of India has been sequentially making new avenues for foreign investment into Real Estate Investment Trusts (REITs), Infrastructure Investment Trusts (lnvlTs) and Alternative Investment Funds (AIFs) since late last year, through a series of amendments to the Foreign Exchange Management (Permissible Capital Account Transactions) Regulations, 2000 and the Foreign Exchange Management (Transfer or issue of Security by a Person Resident outside India) Regulations, 2000. Recently, SEBI and RBI permitted Foreign Portfolio Investors (FPIs) to invest in units of REITs, InvITs, AIFs and NCDs/bonds under default.

With a view to further facilitate foreign investment in collective investment vehicles registered and regulated by SEBI or any other competent authority, RBI has issued a notification, dated April 21, 2016, prescribing certain clarifications regarding the new investment regime. Persons resident outside India, including FPIs and Non-Resident Indians (NRIs), are now permitted to invest in units of REITs, InvITs and AIFs) For this purpose, a unit shall mean a beneficial interest of an investor in the Investment Vehicle and shall include shares or partnership interests. Such investors may sell or transfer or redeem the units as per regulations framed by SEBI or directions issued by RBI.

Interestingly, downstream investments by these investment vehicles would be considered as foreign investment if either the sponsor or the manager or the investment manager is not Indian 'owned and controlled'. It has to be noted that even if a majority of the contributors to the REITs, Inv ITs and AIFs are foreign, the downstream investments made by them would still not be considered to be foreign 'owned and controlled', if the sponsor or the manager or the investment manager is Indian owned and controlled. Further, where they are foreign 'owned and controlled,' the downstream foreidri investments made by such funds will have to comply with sectoral caps and other conditions under the FDI policy, where applicable. These investments can be made by way of an inward remittance through the normal banking channel, including by debit to a Non Resident Rupee (NRE) or a Foreign Currency Non-Resident (FCNR) account.