On Wednesday the government has approved changes to FEMA regulations which will allow such instruments to tap foreign funds.

Under the Foreign Exchange Management Act (FEMA), REITs which mainly brings funds into the realty sector in a transparent manner are prohibited from getting overseas investments at present.

An official statement said that, “The Union Cabinet, chaired by Prime Minister Narendra Modi, has given its approval to allow the Real Estate Investment Trusts (REITs) as an eligible financial instrument/structure under FEMA 1999.”

“The approval is expected to enable foreign investment inflows into the completed rent yielding real  estate projects, which is, as of now, prohibited under the FEMA Regulations,” the statement said.

“The intent of introducing the instrumentality of REITs is to reduce pressure on the banking system to which the real estate sector looks for funds, free up existing funds of Banks and to encourage construction activities,” it added.