Market regulator Securities and Exchange Board of India (Sebi) on Friday notified the final regulations for setting up real estate investment trusts (REITs) and infrastructure investment trusts (InvITs).
Sebi had already approved REITs and InvITs in August and the finance minister had proposed in the budget that they would get tax incentives.
REITs are like mutual funds. While in mutual funds one invests in securities, in REITs, which can be listed, one invests in real estate assets, mainly leased office and retail spaces, and the income generated is distributed to unit holders.
REITs and InvITs will be required to make investments either directly or through special purpose vehicles.
Transparency also seems to be a key aspect of the Sebi regulations. The regulations state that every REIT will have valuation at least once a year and will have to declare their net asset values within 15 days of the valuation.
In case of InvITs, a listing will be mandatory for both publicly and privately placed trusts and the collective holding of sponsors of an InvIT has to be at least 25% for at least three years while listing. InvITs will also have to invest 80% in completed and revenue generating infrastructure projects, the rules state.
Real estate developers in India have been burdened with huge debts, and REITs will open up new avenue of generating cash for these companies.
“It’s a good decision at a time when the Prime Minister is visiting the US and is a good signal to US investors,” Credai chairman Lalit Jain said.
PWC India associate director Bhairav Dalal said this is an extremely positive move for the Indian capital markets. “It could free up some liquidity for large real estate and infrastructure players,” Dalal added.
According to real estate consultancy Cushman & Wakefield India’s REIT market could be worth $20 billion (`1.2, lakh crore) by 2020.
(With Agency inputs)