SEBI issues draft real estate investment trust norms
11 Oct 2013 7:15 AM IST
Looking to attract more investments into the capital market, SEBI on Thursday proposed listing of Real Estate Investment Trusts (REITs), a popular instrument for raising funds in the realty sector.
Issuing draft norms for REITs, the capital market watchdog said the evolution of such investment vehicles is ‘crucial’ for the rapidly growing real estate industry.
REITs would be allowed to list on stock exchanges through initial public offer (IPO) and can raised funds further through follow-on offers, according to the consultation paper and draft norms issued by Securities and Exchange Board of India (SEBI). ‘REIT shall be set up as a trust under the provisions of the Indian Trusts Act, 1882,’ it said.
However, REITs would not be allowed to launch any schemes. As per draft rules, only such entities that have at least 90 per cent investment in completed revenue generating projects.
The move is aimed at providing investment avenues for investors by way of trading units of REITs, similar to mutual fund and exchange traded fund structures for stocks, bonds and other securities.
‘The REIT shall have parties such as trustee (registered with SEBI), sponsor, manager and principal valuer,’ it added.
The Trust needs to initially apply for registration with SEBI as a REIT in the specified format. After being satisfied on the eligibility conditions, the regulator would grant registration to it. According to SEBI, 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. It further said that listing of units will be mandatory for all REITs.
The regulator said that REITs may raise funds from any investor, resident or foreign. However, initially till the market develops, it is proposed that the units of REITs may be offered only to HNIs/ institutions
Issuing draft norms for REITs, the capital market watchdog said the evolution of such investment vehicles is ‘crucial’ for the rapidly growing real estate industry.
REITs would be allowed to list on stock exchanges through initial public offer (IPO) and can raised funds further through follow-on offers, according to the consultation paper and draft norms issued by Securities and Exchange Board of India (SEBI). ‘REIT shall be set up as a trust under the provisions of the Indian Trusts Act, 1882,’ it said.
However, REITs would not be allowed to launch any schemes. As per draft rules, only such entities that have at least 90 per cent investment in completed revenue generating projects.
The move is aimed at providing investment avenues for investors by way of trading units of REITs, similar to mutual fund and exchange traded fund structures for stocks, bonds and other securities.
‘The REIT shall have parties such as trustee (registered with SEBI), sponsor, manager and principal valuer,’ it added.
The Trust needs to initially apply for registration with SEBI as a REIT in the specified format. After being satisfied on the eligibility conditions, the regulator would grant registration to it. According to SEBI, 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. It further said that listing of units will be mandatory for all REITs.
The regulator said that REITs may raise funds from any investor, resident or foreign. However, initially till the market develops, it is proposed that the units of REITs may be offered only to HNIs/ institutions
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