SEBI issues guidelines for investment in REITs

NEW DELHI: Market regulator SEBI cleared final guidelines for creation and listing of business trusts for real estate and infrastructure sectors at a board meeting in New Delhi on August 10. Finance minister Arun Jaitley also addressed the meeting.

To help attract greater foreign and domestic investments into real estate and infrastructure, the Security and Exchange Board of India cleared final guidelines for creation and listing of business trusts for these key sectors.

SEBI said that REITs and INVITs should have a starting asset value of at least Rs 500 crore and the initial offer has to be Rs 250 crore or more. Importantly, REITs will be allowed to invest only in commercial property. They have to be listed on a recognised stock exchange and would have to meet stringent disclosure norms.

Trading lot will be Rs 1 lakh with minimum subscription size ofRs 2 lakh. REITs will invest in commercial real estate through special purpose vehicles (SPVs) in which they must hold a controlling stake of more than 50 per cent. The SPV in turn must hold at least 80 per cent of its assets directly in properties and won’t be allowed to invest in other SPVs.

Welcoming the development, Anuj Puri, Chairman and Country Head, JLL India, said, “With the stamp of approval by SEBI, REITs are finally a formalised concept. This is a big change from the ambiguity and uncertainty that prevailed about this very important instrument in previous years. It is gratifying to note that SEBI fully intends to deliver on its assurances of bringing better and faster funding into Indian real estate.”

Puri added as the drafts for REITs stands now, further clarity about taxation eligibility norms is definitely required, and will doubtlessly come before the first listing goes up. “When this happens, there will be vastly increased interest from foreign investors”, he said.

The JLL India head said, “Grade A office space in the top seven cities of India amounts to around 376 million square feet, and we anticipate that approximately 50 per cent of this space will get listed in next two to three years. The valuation of these assets is around $10-12 billion, and this accounts for a fairly massive influx of funding waiting in the wings to hit the Indian real estate market via REITs over the next few years.”