Sebi plans to bring follow-on offer rules for REITs, InvITs

The two trusts were launched in India with an aim to provide exposure to investors to real estate and infrastructure projects. This will also help them diversify their risks through pooling arrangements.

What is REIT?

The real estate investment trusts (REITS), invest mainly in completed and rent-generating real estate assets. According to investopedia, it is a company that owns, runs, or finance income generating real estate. It is formed after seeking inspiration from mutual funds. Most of them are publicly traded like stocks, which makes them highly liquid.

What is InvIT?

National Stock Exchange defines infrastructure investment trust (InvIT) as a collective investment scheme akin to mutual funds. It lets investors to put their money directly in infrastructure projects to earn a small portion of the income as return.

The InvIT is designed as a tiered structure with sponsor setting up the InvIT. Privately placed InvITs can also pump their money in under-construction assets as well as completed and revenue generatin assets. On the other hand, public InvITs can invest majorly in completed and revenue-generating assets.

“Taking cognizance of the potential of REITs and InvITs in driving the future of Indian infrastructure, Sebi would endeavour to further develop the market for REITs and InvITs in the coming years through policy measures including considering bringing in norms for follow-on offers by REITs and InvITs,” Sebi said in its annual report for 2022-23.

Krishnan S Iyer, CEO, of NDR InvIT Managers stressed upon the need for domestic institutions like mutual funds to set in to meet the capital requirements of growing infrastructure industry.

“These are well structured, regulated, and transparent vehicles that give them an avenue for developing a perpetual stream of cash flows, ” Iyer added.

SEBI working to streamline the process for REITs and InvITs

The Securities and Exchange Board of India (Sebi) has been continuously engaged in strengthening the regulatory framework as well as in easing the process for these two products.

To streamline the process of public issues of REITs and InvITs, the time taken for allotment and listing after the closure of the issue was reduced from 12 to six working days.

For privately placed InvITs, the time taken was cut from 30 days to six working days. These measures have helped in boossting the liquidity of the market.

“REITs and InvITs are other innovative mechanisms to finance real estate and infrastructure which in turn can have a multiplier impact on India’s economic growth,” Sebi said. Last week, SEBI issued rules to introduce special rights to unitholders of REITs who can now nominate the representatives on the boards. Moreover, the regulator also introduced the concept of  a self-sponsored REIT. 

REITs and InvITs have continued to witness interest from the market with three new InvIT registrations and one new REIT registration during 2022-23. There has also been a rise in REITs and InvITs registration. So far, the total registered entities stands at 20 for InvITs and five for REITs.

Updated: 20 Aug 2023, 02:55 PM IST