Pitching for paying adequate attention to the development of REITs and InvITs, Sebi chief Ajay Tyagi on Thursday said other regulators including those for insurance, pension and provident funds need to play an active role for the growth of such alternative investments.
Further, the regulator is hopeful that changes made to the regulatory and tax framework for REITs (Real Estate Investment Trusts) and InvITs (Infrastructure Investment Trusts) may show positive results going forward.
Speaking at South Asia Regional Conference on 'Urban Infrastructure: New approaches to public-private partnership and Municipal Finance Innovations', Tyagi stressed on developing alternative avenues for financing such projects in the wake of present NPA (non-performing assets) problem of banks.
Tyagi said, "Other regulators need to play an active supporting role for the development of REITs and InvITs. For instance, IRDAI, currently allows insurance companies to invest not more than 5 per cent of the units issued by a single REIT/InvIT. PFRDA has mandated minimum rating of AA for the sponsor as a pre-requisite for investment in REITs/ InvITs".
Further, EPFO has not yet come out with guidelines for investment in such trusts. Also, pension and insurance funds are not permitted to invest in debt securities issued by REITs/InvITs.
Similarly, banks and foreign portfolio investors (FPIs), who otherwise are allowed to invest in units of REITs and InvITs, cannot invest in their debt securities, he added.
He said that an active municipal bond market would help municipalities to finance a part of their requirement through the financial market, besides, enabling capital market can also play an important role in the funding of infrastructure projects.
The Sebi chairman said that a humungous amount of investment needs to go into infrastructure development in India to address the current gap as well as to provide for projected requirements of the economy.
"Paying adequate attention to the development of alternative investment instruments like AIFs, REITs, InvITs and municipal bonds is equally important," Tyagi said.
The regulator had notified REITs and InvITs Regulations in 2014, allowing setting up and listing of such trusts which are very popular in some advanced markets. After that, Sebi has relaxed the framework on several occasions to make these trusts attractive.
However, only seven InvITs and two REITs have been registered with Sebi so far.
Of this, three of the registered InvITs have already issued and listed more than Rs 100 billion of units and recently one REIT filed the documents with the markets regulator to make an offering of over Rs 50 billion of units.