Sebi mulls regulatory framework for REITs, InvITs

Sebi recently proposed to allow REITs and InvITs to issue depository receipts to provide foreign investors an opportunity to participate in the units of Indian emerging investment instruments.

This will be beneficial for foreign investors as depository receipts (DR) avoids the need to trade directly with the Indian stock exchange, the Securities and Exchange Board of India (Sebi) said in a consultation paper. Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs) are set up as Business Trusts and hold and operate revenue-generating real estate or infrastructure assets, respectively.

REITs and InvITs raise funds by issuing units to the public at large. REITs and InvITs do not have multiple schemes or classes of units. The units are denominated in Indian rupees and the units are also required to be listed on a recognised stock exchange in India. "Permitting issuance of Depository Receipts against units of REITs and InvITs which are listed on a foreign stock exchange gives foreign investors an opportunity to participate in the units of Indian REITs and InvITs," Sebi said.

The Securities and Exchange Board of India (Sebi) has sought public comments till February 21 on the proposed regulatory framework. Listing out eligibility criteria, Sebi proposed that REITs and InvITS will be eligible to issue permissible securities for the issue of depository receipts, if such trusts, their directors and selling unit holders are not barred from accessing the capital market by Sebi, they should not be a wilful defaulter or a fugitive economic offender.

Existing unit holders would be eligible to transfer permissible securities for the issue of depository receipts under certain conditions. Listing of DRs on international bourse should meet the highest applicable standards. REITs and InvITs should ensure that DRs are issued only with units as permissible securities. REITs and InvITs should file a copy of the initial document for DRs issued on the back of permissible securities with Sebi and the recognised Indian stock exchange.

Further, final documents for such initial issues should also be filed with them for record purposes. Sebi said that REITs and InvITs should ensure that any public disclosures made by them on international bourse are in compliance with the requirements of the permissible jurisdiction where the DRs are listed. These disclosures should also be made with the recognised bourse within 24 hours from the date of filing.