To safeguard investors' interest in the newly created business trust structures -- REITs and InvITs -- Sebi norms will require them to mandatorily list on stock exchanges and follow stringent norms for disclosures, related party transactions and valuation of their assets.
The new norms for Infrastructure Investment Trusts (InvITs) and Real Estate Investment Trusts (REITs), instruments that will help attract more funds into these key sectors, was approved by the board of market regulator Sebi yesterday.
As per the regulations, "units of REITs shall have to be mandatorily listed on a recognised stock exchange and REIT shall make continuous disclosures in terms of the listing agreement".
Similarly, "listing shall be mandatory for both publicly offered and privately placed InvITs and InvIT shall make continuous disclosures in terms of the listing agreement."
The norms would also include detailed provisions for related party transactions with respect to these trusts.
Besides, provisions pertaining to valuation of assets, disclosure requirements, rights of unit holders, among others, are also provided for under the norms, Sebi has said.
"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," it added.
The regulations also require the trustees of REITs and InvITs to be independent and not an associate of the sponsor or the manager of the Trust.
The new norms would help in channelising domestic investments into real estate and infrastructure sectors, and also help attract foreign capital for these fund-starved segments of the economy.
REIT has the potential to be a game changer for the real estate sector.This will bring much needed funds into the real estate sector and cash strapped developers will have funds to complete thier projects.Currently only HNI can take up these schemes as a minimum subscription is INR 2 Lakh.Lot sizes are around 1 lakh.Compulsory listing on the stock exchange helps to bring regulation by default into the real estate sector.
Investors can also get a monthly dividend and any capital appreciation is a bonus.However this sector might take close to 1 year to take off.