Board approves SEBI Real Estate Investment Trusts (REIT) Regulations 2014
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2. SEBI (Infrastructure Investment Trusts) Regulations, 2014
the SEBI (Real Estate Investment Trusts) Regulations, 2014 (“REIT Regulations”)
provide a framework for registration and regulation of Real Estate InvestmentTrusts (“REIT's”).
Salient features of the REIT Regulations are as under:
a. REITs shall be set up as atrust and registered with SEBI. It shall have parties such as Trustee,Sponsor(s) and Manager.
b. The trustee of a REIT shall be a SEBI registered debenture trustee who is not an associate of the Sponsor/manager.
c. REIT shall invest in commercial real estate assets, either directly or through SPVs. In such SPVs a REIT shall hold or proposes to hold controlling interest and not less than 50% of the equity share capital or interest. Further, such SPVs shall hold not less than 80% of its assets directly in properties and shall not invest in other SPVs.
d. Once registered, the REIT shall raise funds through an initial offer. Subsequent raising of funds may be through follow-on offer, rights issue, qualified institutional placement, etc. The minimum subscription size for units of REIT shall be Rs 2 lakhs. The units offered to the public in initial offer shall not be less than 25% of the number of units of the REIT on post-issue basis.
e. Units of REITs shall be mandatorily listed on a recognized Stock Exchange and REIT shall make continuous disclosures in terms of the listing agreement. Trading lot for such units shal lbe Rs 1 Lakh.
f. For coming out with an initial offer, the value of the assets owned/proposed to be owned by REIT shall be of value not less than Rs 500 crore. Further, minimum issue size for initial offer shall be Rs 250 crore.
g. The Trustee shall generally have an overseeing role in the activity of the REIT. The manager shall assume operational responsibilities pertaining to the REIT. Responsibilities of the parties involved are enumerated in the Regulations.
h. A REIT may have multiple sponsors, not more than 3, subject to each holding at least 5% of the units of the REIT. Such sponsors shall collectively hold not less than 25% of the units of the REIT for a period of not less than 3 years from the date of listing.After 3 years, the sponsors, collectively, shall hold minimum 15% of the units of REIT, throughout the life of the REIT.
i. Not less than 80% of the value of the REIT assets shall be in completed and revenue generating properties.
Not more than 20% of the value of REIT assets shall be invested in following :
i. developmental properties,
ii. mortgage backed securities,
iii. listed/ unlisted debt of companies/body corporates in real estate sector,
iv. equity shares of companies listed on a recognized stock exchange in India which derive not less than 75% of their operating income from Real Estate activity,
v. government securities,
vi.money market instruments or Cash equivalents.
However investments in developmental properties shall be restricted to 10% of the value of the REIT assets
j. A REIT shall invest in at least 2 projects with not more than 60% of value of assets invested in one project.
Detailed investment conditions are provided in the Regulations.
k. REIT shall distribute not less than 90% of the net distributable cash flows, subject to applicable laws,to its investors, atleast on a half yearly basis.
l. REIT, through a valuer,shall undertake full valuation on a yearly basis and updation of the same on ahalf yearly basis and declare NAV within 15 days from the date of such valuation/updation.
m. The borrowings and deferred payments of the REIT at a consolidated level shall not exceed 49% of the value of the REIT assets. In case such borrowings/ deferred payments exceed 25%,approval from unit holders and credit rating shall be required.
n. Detailed provisions for related party transactions. valuation of assets, disclosure requirements,rights of unit holders, etc. are provided in the Regulations. However, for any issue requiring unit holders’ approval, voting by a person who is a related party in such transaction as well as its associates shall not be considered.
The board has also approved the above regulation. Click here to read more >>
