Seeking to attract real estate investors to the capital market, Sebi has revived an over five-year old proposal to allow listing and trading of REITs (Real Estate Investment Trusts) as an investment product.
The move is aimed at allowing investors to buy and sell units of REITs and providing them an investment vehicle for the real estate sector, similar to mutual fund and Exchange Traded Fund structures for stocks, bonds and other securities, a senior official said.
However, Sebi is initially considering restricting the investments in REITs to only foreign funds, domestic institutional investors and HNIs given the higher level of risks associated with the real estate sector, the official said, adding that small retail investors could be allowed at a later stage.
The move is likely to help channelise investor interest towards REITs, while leaving the physical real estate market (comprising of housing units and office spaces) for the end users -- thus helping the market reach a pricing level based on real demand and supply metrics.
As per the proposal being considered, REITs can issue units of their investment schemes through a public offer and list them thereafter on a stock exchange in a way similar to the issuance and listing of shares during an IPO.
Thereafter, the units can be traded on the stock exchange platform just like shares.
The money collected by the REIT through the public offer can be used for development of real estate projects as per its stated objective disclosed in the offer document.
Also, the scheme would need to be terminated after sale of the project developed with investors' money, and the proceeds would need to be distributed proportionately to the unit holders.