Sebi finalises REIT, InvIT norms; addresses industry concerns

To make its proposed REIT norms more attractive, capital markets regulator Sebi has agreed to incorporate industry suggestions to reduce their minimum asset size to Rs 500 crore and to allow foreign investors at IPO and later stages.
At the same time, the regulator is keen on REITs (Real Estate Investment Trusts) being limited to larger investors in the initial stages due to higher risks, and therefore the minimum investment amount would remain higher at Rs two lakh.
The final REIT regulations, along with that for another new product Infrastructure Investment Trusts (InvITs), are likely to be considered for approval by the Sebi board this Sunday, sources said.

Along with foreign investors, domestic institutions like insurers, pension funds and provident funds would also be allowed to invest in these trusts.
Through InvITs, the regulator is aiming to create a new avenue for raising funds to meet infrastructure investment requirements to the tune of Rs 65 lakh crore for the 12th Five Year Plan (2012-17).
The new norms would enable listing and trading of REITs and InvITs as any other security on the stock exchange platforms and also help create new platforms for raising of funds by real estate and infrastructure companies, respectively.

Despite significant tax benefits for the sponsors of these business trusts, these new regulations would also be "revenue accretive" for the government in form of taxes, sources said.

As per the proposed regulations, they would help in channelising domestic investments into real estate and infrastructure sectors, and also help attract foreign capital for these fund-starved segments of the economy.
Tax benefits for these investment vehicles were announced during the Union Budget last month by Finance Minister Arun Jaitley, who is likely to address the Sebi board also on August 10 when these proposals would be considered.
According to sources, certain changes or amendments and additional guidelines would be required the government and other regulators for development of REITs and InvITs in India.
These include allowing foreign investment into the units of REITs and InvITs at the time of IPO and for acquisition from secondary markets, and for allowing insurance companies, pension funds and provident funds to invest.

Sebi would take up these issues with the concerned regulator or the government deparment for necessary action, sources said.
The draft guidelines for REITs and InvITs were earlier put in public domain for comments by all stakeholders and the final guidelines have been prepared after taking those into account.
Among others, comments were received from 65 entities, running into over 450 pages, for REIT guidelines. For InvITs, comments were received from Finance Ministry, companies, merchant bankers and asset management companies.