Real-estate companies, which are looking to access foreign loans and route the money to activities where its use is barred, may land in mess. The Reserve Bank of India (RBI) and department of industrial policy and promotion are jointly working on tightening the press notes for regulating reality firms’ access to and use of external commercial borrowings (ECBs). It is also being contemplated that a monitoring mechanism is put in place to ensure compliance with the stricter norms.

The initiative comes in the wake of the reports that half a dozen real estate companies are planning to raise ECBs worth Rs4,000-crore in the coming months and the possibility of these funds being used for activities which, as per the extant press notes, cannot be funded through ECBs.

Under the current norms, realty companies that are purely into integrated townships of specific sizes are allowed to access ECBs provided the funds are used only for activities in these townships.

The country’s major realty developers have been circumventing the rules by placing non-convertible debentures with banks and NBFCs and listing them at a later stage for eventual sale to foreign institutional investors.

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