parties in a REIT structure will be a trustee registered with Sebi. The main advantage of REITs will be that they will be regulated and accountable to investors’ fund.
REITs can raise funds through initial offer and also follow-on offers after their listing. A REIT will have to come with an initial offer within 18 months of registration with Sebi and it will be mandatory for them to list all units after the initial offer.
REITs will raise funds from an investor, whether resident or foreign, which will be subject to guidelines specified by the Reserve Bank of India (RBI) and the government. Till the market develops, it is proposed that the units of REITs will be offered to only high networth individuals and institutions. The REITs will have a minimum of 20 investors and the minimum subscription will be R2 lakh per investor and the unit size will be of R1 lakh.
All the investment by a REIT will be in properties or securities in India and at least 90% of its assets will be in completed projects where the occupancy certificate has been given by the local authority to the developer of the project.
Also, investment by REITs can be done in rent-generating properties, where 75% of the project is rented or leased out. The balance can be invested in specified assets like developmental properties, listed or unlisted debt, mortgage-backed securities, equity share of real estate companies, government securities or money market instruments.
Most importantly, REITs will not be permitted to invest in vacant land or agricultural land or mortgages other than mortgage-backed securities. They will be allowed to invest the entire corpus in one project and cannot undertake investment in other REITs. Also, the draft guidelines have mentioned that about 90% of the net distributable income after tax of the REIT should be distributed to the unit holder.
To bring in more transparency, all unit holders of a REIT will enjoy equal voting rights and stringent conditions will be imposed for related party transactions, including detailed disclosures, valuation requirements and investor approval. Also, full valuation, including a physical