mumbai hectic lobbying is under way to bring about a small change in the way one interprets a rule on foreign investment in property a change that could backfire on overseas investors but rescue several indian realtors watchit will not require a cabinet decision or a new press note issuance by the government all it will call for is a simple clarification one that could make or break many players in the local property market that has attracted close to 20 billion in the past five yearsaccording to the foreign direct investment fdi regulations a foreign investor has to bring in a minimum 5 million to participate in a joint venture jv with an indian developer while the rest of the money can be brought in at a later point may be in tranches interestingly the march 2005 press note 2 which spells out fdi rules says original investment cannot be repatriated before a period of three years from completion of minimum capitalisationtill now the interpretation has been that the threeyear lockin applies only to the original or minimum investment of 5 million and not to the entire money that the foreign investor puts in for instance if a foreign fund invests 100 million the interpretation has been that it can recover and repatriate up to 95 million before three years while the balance 5 million can be repatriated only after three years but not any more something the government will soon specifywe are expecting a changethere have been representations to the government to clarify that the repatriation rule and the lockin should apply to the entire investment and not just the initial capitalisation of 5 million said a large shareholder of a top property firm the change could be a boon to at least 30 indian real estate groups large as well as small which had sold put options to foreign investors to bring in fdi through fancy deals these put options required the indian promoter to buy out the foreign investor but grappling with a cash crunch low demand and soft property prices these developers are today not in a position to honour these options and even if they can cough up the amount they want to avert a large payoutunder the circumstances if the government spells out that the entire investment of the foreign investor is lockedin for three years the foreign investor will not be able to exercise the option immediately this will give several cashstrapped developers time to organise money more importantly it will help them avoid distress sales and hang on to higher property prices but some feel that the new interpretation informally being spoken about by officials in the government should not apply to deals that were signed before it the new clarification can have a significant impact on fdi in real estate at best it should apply prospectively said punit shah leader financial service tax practice pricewaterhouse coopers the existing fdi said mr shah was done on the basis of