The Securities and Exchange Board of India (SEBI) has recently issued a consultation paper aimed at refining the regulatory framework for Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs). This initiative underscores SEBI’s continued focus on improving transparency, easing regulatory compliance, and promoting investor confidence in India’s rapidly evolving alternate investment space.
The paper seeks public feedback on several key proposals that span two broad areas: Ease of Doing Business Measures and Investor Education & Protection. These proposals are shaped by inputs from multiple sources, including market participants, industry bodies like the Indian REITs Association (IRA) and Bharat InvITs Association (BIA), and the Hybrid Securities Advisory Committee (HySAC).
Part A: Ease of Doing Business Measures
One of the most significant proposals under this section is the clarification of the definition of “public” for determining minimum public unitholding in REITs and InvITs. Currently, the definitions across regulations create ambiguity—particularly regarding the inclusion of units held by related parties who are Qualified Institutional Buyers (QIBs).
While Regulation 2 of both REIT and InvIT regulations allows QIB-related parties to be considered as public, Regulation 14 seems to contradict this by excluding units held by related parties of sponsors, managers, or project managers. This inconsistency has prompted industry participants to seek alignment.
SEBI, based on HySAC’s recommendation, proposes to amend the definition of “public” to explicitly include related parties of REIT/InvIT or their associated entities as public, provided they are QIBs. To further remove ambiguity, it is also proposed that conflicting provisions in Regulation 14 be omitted.
This move is expected to provide much-needed clarity and flexibility to REITs and InvITs during initial public offerings and ongoing compliance, making capital-raising processes smoother and more efficient.
Other notable proposals aimed at improving ease of operations include:
- Allowing negative cash flows at holdco to be adjusted against distributions from SPVs while computing Net Distributable Cash Flows (NDCF).
- Synchronizing quarterly reporting timelines to align with financial result submissions for greater operational efficiency.
- Aligning valuation report submission deadlines with financial reporting cycles.
- Matching minimum allotment sizes with trading lots for privately placed InvITs, simplifying investor participation.
Part B: Investor Education and Protection
SEBI also proposes the introduction of an Investor Charter for REITs and InvITs, echoing its broader efforts to enhance transparency and empower investors with clear, concise information on rights, risks, and responsibilities associated with these investment vehicles.
