Now, Sebi tweaks regulations for REITs, InvITs
MUMBAI: The board of Sebi on Monday announced some more changes to the real estate investments trusts (REITs) and infrastructure investment trusts (InvITs), by allowing fund raising by issuing debt securities and allowing a single asset REIT.
The Securities of Exchange Board of India or Sebi amended the norms for REITs and InvITs to give a boost to these financial instruments.
The norms for REITs and InvITs were notified in September 2014 and were tweaked atleast four times since then. However, the issuances have been lacklustre due to restrictive regulations.
In the past three years only two InvITs have been listed on the stock exchanges namely - IRB InvIT Fund and Indiagrid Trust. Though no REIT has been issued yet, Embassy Office Parks REIT was registered Sebi on on 28 July, to become the first such realty trust in the country to be accorded registration by the market regulator.
According to the Sebi press statement the two structures would be allowed to issue debt via debt securities and will be allowed for REITs and InvITs that are listed on national stock exchanges.
“The industry has been asking for allowing REITs and InvITs to raise debt via debt securities as this route has worked well for the corporates and would aid fund raising in these instruments too. Currently the REITs and InvITs are allowed to raise funds via External Commercial Borrowings (ECB) which has certain end-use restrictions,” Bhairav Dalal, Partner, Real Estate (Tax) – PwC India.
REITs are listed entities that primarily invest in leased office and retail assets, allowing developers to raise funds by selling completed buildings to investors.
The regulator also allowed REITs which have a single asset under it. The current norms allows REITs to have two projects under it. “The other important development is on allowing a single asset REITs. Many developers and corporates were interested in REITs but wanted to try with one asset and the requirement of two underlying assets used to deter them,” added Dalal.
Other changes in the norms for REITs includes allowing strategic investors such as scheduled commercial banks, non banking financial services to invest it in and allowing REIT to lend to the underlying holding company. Allowing REIT to lend to holding company will result in efficient fund flow.
The regulator proposes to REITs with 50-50% shareholding. The current norm requires a REITs to have a holding company with 51% stake. Sebi will float a consultation paper to deduce whether REITs can be allowed to invest at least 50% of the equity share capital or interest in the underlying holding company.