SEBI board brings fresh norms under REITs, InvIT

After extensive public consultation, the market regulator Securities and Exchange Board of India (Sebi), has approved fresh norms under the 'Infrastructure Investment Trusts (InvIT)' and 'Real Estate investment Trust (REIT)',

In a move to make the above captioned instruments more attractive for investment, Sebi has now allowed both REITs and InvITs to invest in two level of Special Purpose Vehicle (SPV) structure through holding company (Holdco). Such is subject to sufficient shareholding in the Holdco and the underlying SPV. 

Going ahead, these two instruments (REITS and InvITs) will have the right to appoint majority of directors in SPVs. 

Further, the holding company will distribute 100% cash flows realised from the underlying SPVs and the least 90% of the remaining cash flows. 

To facilitate the growth of REITs and InvITs, the regulator (Sebi) will remove the limit on the number of sponsors. Presently there are three sponsors required. 

In REITs, the regulator plans to introduce the concept of sponsor group, and will clarify the definition of 'real estate property' in regulations, subject to certain conditions. 

Among the amendments regarding REITs, were also allowing the instruments to invest upto 20% from the current 10% in under construction assets. 

While in regards to InvIT, the regulator has proposed to reduce mandatory sponsor holding in the instrument upto 15%. Further it will also rationalize the requirement for private placement  of InvIT. 

Apart from it, Sebi will amend the definition of valuer and clarify the explanation of “associates” and “related parties” in the regulations. 

Under the related party transaction currently, there are approval of  60% unitholders apart from related parties, and are also is required for passing a related party transaction.