Real Estate Investment Trusts in India: Recent Regulatory Updates
SEBI introduces new regulations for Small and Medium Real Estate Investment Trusts, revises pricing methodology for privately placed Infrastructure Investment Trusts, and amends SEBI (InvIT) Regulations, 2014.
Real Estate Investment TrustsSebiInfrastructure Investment TrustsSm ReitsRegulatory UpdatesReal EstateSep 09, 2024
\n\nSEBI has revised the pricing methodology for institutional placement by privately placed Infrastructure Investment Trusts (InvITs). The floor price for institutional placement for privately placed InvITs will be the new asset value per unit of such InvIT. This change is expected to provide more clarity and transparency in the pricing of InvITs.
\n\nSEBI has also introduced new regulations for Small and Medium (SM) Real Estate Investment Trusts. The SEBI (Real Estate Investment Trusts) (Amendment) Regulations, 2024, outline provisions for SM REITs, which are defined as REITs that pool INR 50,00,00,000 (Indian Rupees fifty crore) or more for the purpose of issuing units to at least 200 investors.
\n\nThe amended regulations prescribe certain eligibility criteria for the formation of SM REITs, including the requirement that the applicant for registration of a SM REIT must be the investment manager on behalf of the REIT. The investment manager must have a net worth of at least INR 20,00,00,000 (Indian Rupees twenty crore), out of which at least INR 10,00,00,000 (Indian Rupees ten crore) must be in the form of positive liquid net worth.
\n\nThe SM REIT must make an initial offer of a scheme within 3 years from the date of registration. The amended regulations also prescribe the conditions to be complied with for the initial offer of a scheme, such as the identification of assets proposed to be acquired and the disclosure of relevant details in the draft offer document.
\n\nThe SM REIT's scheme is mandated to invest at least 95% of the value of its assets in completed and revenue-generating properties. It is prohibited from investing in under-construction or non-revenue-generating real estate assets. However, up to 5% in value of the scheme's assets can be invested in unencumbered liquid assets such as investment in mutual funds or fixed deposits.
\n\nThe minimum offer and allotment to the public in each scheme of the SM REIT must be at least 25% of the total outstanding units of such scheme. The minimum public holding for the units of each scheme of SM REIT must be satisfied failing which action may be taken by SEBI and the designated stock exchange including delisting of units.
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\n\nThe content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
Frequently Asked Questions
What is the revised pricing methodology for privately placed Infrastructure Investment Trusts?
The floor price for institutional placement for privately placed InvITs will be the new asset value per unit of such InvIT.
What are the eligibility criteria for the formation of Small and Medium Real Estate Investment Trusts?
The applicant for registration of a SM REIT must be the investment manager on behalf of the REIT, and the investment manager must have a net worth of at least INR 20,00,00,000 (Indian Rupees twenty crore), out of which at least INR 10,00,00,000 (Indian Rupees ten crore) must be in the form of positive liquid net worth.
What is the minimum investment required for a SM REIT to invest in completed and revenue-generating properties?
At least 95% of the value of its assets
Can a SM REIT invest in under-construction or non-revenue-generating real estate assets?
No, it is prohibited from investing in under-construction or non-revenue-generating real estate assets.
What is the minimum public holding required for the units of each scheme of SM REIT?
At least 25% of the total outstanding units of such scheme
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