Sebi notifies norms for real estate and infrastructure trusts
26 September 2014
The Securities and Exchange Board of India (Sebi) today notified norms for listing of real estate investment trusts (REIT) and infrastructure investment trust (InvITs) that would help attract more funds in a transparent manner into realty and infrastructure sectors.
Business trusts incorporated as real estate investment trust and infrastructure investment trust, set up under the regulatory framework prescribed by the market regulator are eligible for tax incentives.
To get listed in a bourse, both REITs and InvITs should have a minimum asset base of Rs500 crore. They should also make initial offers for a minimum amount of Rs250 crore, with a public float of at least 25 per cent.
The market regulator has prescribed stringent norms on disclosure as well as related party transactions in order to ensure transparency.
In separate sets of regulations, Sebi said that all related party transactions of the two trusts should be at "arms-length", in accordance with relevant accounting standards.
Both REIT and InvIT are required to make investments either directly or through special purpose vehicles. In case of PPP projects, investment has to be only through SPVs.
In the case of REITs, the minimum public holding should be 25 per cent while the total number of outstanding units at all times as well as the number of unit holders -- who are part of the public -- should be 200.
Under both the initial offer and follow-on public offer, the REIT should not accept subscriptions of below Rs2 lakh from an applicant, as per the norms.
Sebi has said that at least 80 per cent of the value of REIT assets should be invested in completed and rent generating properties.
Accordingly REITs are barred from investing in vacant land or agricultural land or mortgages other than mortgage-backed securities.
"Not less than seventy five percent of the revenues of the REIT and the SPV, other than gains arising from disposal of properties, should be, at all times, from rental, leasing and letting real estate assets or any other income incidental to the leasing of such assets," Sebi said.
An REIT should, at any point of time, be holding at least two projects, either directly or through SPV. Out of that, only up to 60 per cent of the asset value can be invested in one project.
The number of sponsors for both REIT and InvIT should not be more than three, each holding or proposing to hold not less than five per cent of the number of units of the REIT on post-initial offer basis and should collectively have a net worth of not less than Rs100 crore, ie, each sponsor holding Rs20 crore of the Rs100 crore net worth.
The sponsor or its associate should have not less than five years experience in development of real estate or fund management in the real estate industry. Provided that where the sponsor is a developer, at least two projects of the sponsor have should have been completed.
Sebi has also prescribed guidelines for trustees and managers of REITs and InvITs.