Sebi issues Consultative Paper on REITs

Comments are invited on the Consultative Paper latest by October 31, 2013

January 01, 1970 5:30 IST | India Infoline News Service
Market regulator SEBI (Securities and Exchange Board of India) on Thursday issued draft guidelines to set up real estate investment trusts (REITs) in India, five years after it had withdrawn a similar proposal.

The Consultative Paper and draft SEBI (Real Estate Investment Trusts) Regulations are placed on SEBI website for Public Comments.

REITs invest primarily in completed, revenue generating real estate assets and distribute major part of the earning among their investors. Typically, most of such investments are in completed properties which provide regular income to the investors from the rentals received from such properties.

The regulator has proposed REITs to raise capital through an initial offer and raise subsequent funds through follow-on offers.

SEBI has also proposed a minimum initial offer size of Rs. 2.5 billion and the minimum public float for REIT has been proposed to be 25%. The regulator broadly has applied framework similar to that of an initial public offering (IPO).

In the paper, SEBI has mentioned responsibilities of the trustee, investment conditions and dividend policy, borrowings and deferred payments and valuation of assets among others.

REIT will be formed as a trust under the Indian Trust Act, 1882 and it will consists of parties like sponsor, manager and principal valuer.

SEBI has suggested minimum subscription size shall be Rs 2 lakh and the value of single REIT unit that will be traded on the exchange will be Rs 1 lakh. SEBI has also specified minimum asset size of Rs. 10 billion under REIT.

The capital market regulator SEBI released its first draft on REITs in 2008 and after five years it has put out a consultative paper with the sole intention of securing public feedback.

After considering the feedback, SEBI will formalize the regulations, bringing in the first set of rules for REITs. This gives a strong signal that SEBI is going to operationalize the REITs market in India on high priority basis.

This is a very positive move which will enhance the depth of the country’s real estate market and will give financing and exit options to developers on one hand and avenues for investors on the other. The timing of this move is also very important keeping in mind the prevailing paucity of funds coupled with the ongoing slowdown in the economic growth, Dr Samantak Das, Chief Economist & Director-Research, Knight Frank India, said

Comments are invited on the Consultative Paper latest by October 31, 2013.

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