Sebi notifies REITs norms: 7 top points explained

Written by ENS Economic Bureau | New Delhi | Updated: Sep 27 2014, 15:48pm hrs
Real EstateReducing the minimum asset value to Rs 500 crore for REIT IPO will enable more sponsors to enter into the REIT market.
The Securities and Exchange Board of India (Sebi) on Friday firmed up regulations that will govern real estate investment trusts, or REITs, and so-called infrastructure investment trusts (InvITs) that the market regulator decided to allow last month.

REITs will enable easier access to funds for developers, create new investment avenue for institutions and HNIs.

Here are the key facts on Real Estate Investment Trusts

REITs

1. Reducing the minimum asset value to Rs 500 crore for REIT IPO will enable more sponsors to enter into the REIT market.

2. Introducing the concept of multiple sponsors thereby enabling more than one sponsor to sponsor a REIT

3. REITs can invest in special purpose vehicles (SPVs) which are set up as LLPs.

4. For Developer sponsors, track record of completion of 2 projects

5. Withdrawal of single asset REIT concept thereby reducing the concentration risk

6. Investment in completed and rent generating assets reduced from 90 per cent to 80 per cent and allowing additional 10 per cent in other specified assets will provide additional flexibility and diversify the risk profile.

7. 90 per cent distribution of net distributable cash flows would enable the REIT to service its own debt before payout to unit holders.