How Sebi looks to make realty trusts attractive to investors

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Mumbai | Published: June 18, 2016 6:31:45 AM

The consultation paper will be placed on the Sebi website seeking public comments

JOIN Japan, India Infrastructure, Infrastructure in india, buildings in India, Infrastructure growth, Infrastructure sectorseveral companies will now be able to move ahead with their REIT plans without changing the existing capital structure.

The Securities and Exchange Board of India (Sebi) proposed certain amendments to its regulations in relation to real estate investment trusts (REITs) on Friday.

Among the top amendments suggested: REITs should be allowed to invest up to 20% in under- construction assets. This limit, experts said, was raised from 10%, giving REITs more flexibility to choose lucrative projects. The earning potential in under-construction projects is far higher than income-generating ones, which will translate to more returns for investors of the REIT.

Sebi also proposed removing the restriction on special purpose vehicles (only in case of such SPV being a holding company) to invest in other SPVs holding the assets. This means several companies will now be able to move ahead with their REIT plans without changing the existing capital structure. Until now, the companies had to dissolve the holding company structure and bring the existing SPVs under the parent company, REIT experts told FE.

In the proposed rules, proposed, Sebi has raised the number of sponsors to five to make REITS attractive for smaller companies. This means five different companies with a limited number of assets can also pool them for a REIT listing. Till now, companies that were looking to do a REIT listing were developers with large project portfolios.

Some of the other amendments proposed rationalisation of compliance with respect to related-party transaction requirements, aligning minimum public holding requirement with the Securities Contracts Regulation Rules and responsibilities of trustee and its associates.

The consultation paper will be placed on the Sebi website seeking public comments.

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