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SEBI’s Final Push To Make InvITs And REITs Work

Market regulator is trying to remove irritants for InvITs and REITs.



U. K. Sinha, chairman of the Securities & Exchange Board of India (Photographer: Dhiraj Singh/Bloomberg)
U. K. Sinha, chairman of the Securities & Exchange Board of India (Photographer: Dhiraj Singh/Bloomberg)

The Securities and Exchange Board of India is ensuring that the current irritants that are hampering the takeoff of Infrastructure Investment Trusts (InvITs) and Real Estate Investment Trusts (REIT) in India are removed. The regulator at its board meeting, held at the newly built National Institute of Securities Market campus, approved measures that will allow infrastructure players to access the markets with ease.

InvIT Changes

The regulator has allowed InvITs to invest in a two-level special purpose vehicle structure through a holding company (Holdco). An InvIT will be allowed to appoint majority directors on the SPV and Holdco will be allowed to distribute 100 percent of the cash flows realised from underlying SPVs and at least 90 percent of other cash flows.

SEBI has also reduced minimum holding for mandatory sponsor holding in an InvIT to 15 percent while removing the limit on a number of sponsors.

Besides easing regulations for the sponsors, SEBI has rationalised the requirement for private placement, amended the definition of ‘valuer; and clarified definition of ‘associates’ and ‘related parties’.

REIT Changes

The regulator has also provided the same relaxation to REIT with respect to investment in two levels of Special purpose vehicle structure through Holding company (Holdco). A REIT will be allowed to appoint majority directors on the SPV and the Holdco will be allowed to distribute 100 percent of the cash flows realised from underlying SPVs and at least 90 percent of other cash flows, SEBI said.

The regulator has expanded the definition of a ‘real estate property’ to include hospitals and hotels. It has introduced the concept of a sponsor group for a REIT while removing the limit on the number of sponsors. REITs will be allowed to invest up to 20 percent in under construction assets.

SEBI has, besides easing regulations for the sponsors, also amended the definition of ‘valuer’ , and clarified definition of ‘associates’ and ‘related parties’.