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Sebi may ease minimum holding requirement for REITs, InvITs in special purpose vehicle

Sebi on Monday may also look to approve a proposal where a REIT or InvIT can raise debt capital by issuing bonds. Sebi is also expected to do away with the mandatory requirement for a REIT to hold at least two projects.

sebi, Real Estate Investment Trusts,  Infrastructure Investment Trusts, real estate, business news Sebi on Monday may also look to approve a proposal where a REIT or InvIT can raise debt capital by issuing bonds. Sebi is also expected to do away with the mandatory requirement for a REIT to hold at least two projects.

In a move that may ease acquisition of assets by Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs), the Securities and Exchange Board of India (Sebi) is likely to reduce the minimum holding requirement of the trusts in the special purpose vehicle (SPV) to 50 per cent from existing 51 per cent. The move is expected to give fillip to the real estate sector in the country.

Sebi on Monday may also look to approve a proposal where a REIT or InvIT can raise debt capital by issuing bonds. Sebi is also expected to do away with the mandatory requirement for a REIT to hold at least two projects.

While the current regulations require that a REIT should hold not less than 51 per cent of equity share capital in the underlying SPV, several representations were made to Sebi that pointed the fact that many real estate assets in India are owned and developed through 50-50 partnership. Thus a REIT mandate to hold at least 51 per cent in underlying SPV would rule out inclusion of assets which are held as 50-50 JV.

An official close to the development told that Sebi has taken note of such limitations and may, “Reduce the minimum holding requirement of REITs to 50 per cent,” in a bid to enable REITs to acquire such assets as well. The proposed changes for REITs would also be carried out for InvITs.

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In another important move that may benefit REITs and InvITs, Sebi may allow them to raise debt capital by issuing bonds. While the REIT and InvIT regulations allow them to leverage up to 49 per cent of the value of their assets, they do not clearly provide for raising debt capital through issuance of debt securities.

While RBI has allowed REITs and InvITs to issue rupee denominated bonds in overseas jurisdictions, Sebi is likely to allow issuance of debt securities as a mode of undertaking leverage for REITs and InvITs.

While only 6 InvITs and 1 REITs are currently registered with Sebi, ever since Sebi notified the regulations on September 26, 2014, Sebi may look to provide some more relaxations including allowing single asset REIT. As of now REITs are only allowed to invest in assets whose value is not less than Rs 500 crore and the regulation also requires that a REIT should hold at least two projects.

First published on: 18-09-2017 at 02:47:50 am
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