SEBI To Introduce Follow-On Offer Norms To Promote REITs, InvITs

SEBI has regularly been working on developing and strengthening the regulatory framework and procedure for both of these products.

REITs and InvITs were introduced to give investors an opportunity to get exposure to real estate and infrastructure projects respectively.

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The Securities and Exchange Board of India (SEBI) is planning to introduce policies to promote real estate investment trusts (REITs) and infrastructure investment trusts (InvITs) in the market, the regulator stated in it’s annual report for 2022-23. SEBI is looking at bringing in norms for follow-on offers by REITs and InvITs. 

According to a PTI report, SEBI stated that it will focus on developing the market for REITs and InvITs in the upcoming years to utilise their full potential in developing the Indian infrastructure market. 

Introduced to give investors an opportunity to get exposure to real estate and infrastructure projects, REITs and InvITs respectively, aimed at providing diversification of risks for the investors. 

The report noted that REITs are typically invested in completed and rent-generating real estate projects. While privately held InvITs can be invested in under-construction projects along with completed and revenue-generating projects, public InvITs invest majorly in completed and return-generating projects. 

SEBI has regularly been working on developing and strengthening the regulatory framework and procedure for both of these products. Earlier, SEBI reduced the allotment and listing time after the closure of issue for the public issues of REITs and InvITs. It reduced the allotment and listing time for REITs from 12 to 6 working days, and for privately placed InvITs, from 30 to 6 working days. 

The regulator stated that these measures were aimed at increasing the liquidity of the market and bringing about parity with equity instruments. The report further noted that SEBI made available the OFS mechanism for unitholders or sellers of listed REITs and InvITs to allow them to offer their holdings through the stock exchange. 

Notably, the banking regulator also introduced special rights to unitholders of REITs recently. These rights allow the unitholders to nominate their representatives on the boards and the regulator also brought in the concept of a self-sponsored REIT. 

NDR InvIT Managers’ CEO, Krishnan S Iyer, added, “Given the capital requirements needed for the growth of infrastructure, it is very important that both domestic institutions, mutual funds, and of course retail investors increasingly participated in it. These are well-structured, regulated, and transparent vehicles that give them an avenue for developing a perpetual stream of cash flows,” as quoted in the report. 

Lately, REITs and InvITs have seen an increase in interest from the market. 3 new InvIT registrations and 1 new REIT registration took place during the last fiscal year. Now, the total registered InvITs has increased to 20 and the number of total registered REITs stands at 5. Further, the complete net asset value managed by REITs was Rs 70,614 crore as of March 2023. The value for InvITs stood at Rs 1,76,957 crore.