Sebi to broaden strategic investor definition under REIT, InvIT norms

Mumbai: Sebi on Friday decided to broaden the definition of ‘strategic investor’ under the REIT and InvIT norms by including QIBs and certain categories of FPIs to attract more institutional capital.

The Sebi board also cleared a proposal for reclassifying REITs (Real Estate Investment Trusts) as “equity” and retaining the “hybrid” classification for InvITs (Infrastructure Investment Trusts) for the purpose of investments by mutual funds and Specialised Investment Funds.

These proposals, approved by Sebi in its board meeting here, could boost higher investors’ participation in these investment vehicles.

Sebi said its board approved the proposal of amending InvIT/REIT norms to widen the investor base for applying under the strategic investor category in a public issue of such trusts.

“This will promote ease of doing business by enabling InvITs/REITs to attract capital from more investors under the Strategic Investor category,” Sebi said.

The regulator believes that the current definition of strategic investor under the REIT and InvIT framework is narrow and excludes several large institutional investors, such as pension funds, provident funds, and insurance funds.

These entities, though active participants in REITs and InvITs due to their preference for long-term and stable income-generating assets, were not eligible to be categorised as strategic investors before the amendments.

To address this gap and promote ease of doing business, the Sebi board approved a proposal to amend the definition of strategic investor to provide that an entity that is considered a QIB (Qualified Institutional Buyer) may apply as a strategic investor.

This includes a wider pool of institutions, such as public financial institutions, pension and provident funds, alternative investment funds, state industrial development corporations, family trusts and intermediaries registered with a net worth of more than Rs 500 crore; middle-layer, upper-layer and top-layer non-banking finance companies.

On facilitating enhanced participation of Mutual Funds in REITs and InvITs, Sebi board approved the amendments to mutual fund rules for “re-classifying REITs as equity and retaining the hybrid classification for the InvITs for the purpose of investments by mutual funds and Specialised Investment Funds”. Sebi said REITs were reclassified as equity for liquidity and global alignment, while InvITs retained hybrid status due to stability and limited liquidity.