Reviving a five-year old proposal, Sebi
today issued draft norms for listing Real Estate Investment Trusts
(REITs), which will help in channelising more funds into the real estate
sector.
REITs, a popular investment vehicle in many parts of the world, is similar to mutual funds except that investments would be on real estate assets that generate rental income. Looking to attract more real estate investors into the capital market, Sebi today proposed listing of REITs saying 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 raise funds further through Follow-On Offers, according to the 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 while seeking comments from stakeholders by end of this month.
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.
"To ensure regular income to the investors, it has been mandated to distribute at least 90 per cent of the net distributable income after tax of the REIT to the investors," Sebi said.
Leading consultancy PwC India's Associate Director Bhairav Dalal said REITs can be compared to a mutual fund products "with difference being that the underline investment will be in real estate assets which generate rental income".
In the long term, REITs would help in boosting investments into the realty sector and also bring institutional credibility, according to experts. Property consultant Jones Lang LaSalle (JLL) India Chairman and Country Head Anuj Puri said Sebi has released its consultative guidelines for operation of REITs in India after five years of releasing its first draft.
"The positive thing is that the statement clearly spells the need for REITs in India at the earliest considering its huge popularity across the world," Puri noted.
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. For coming out with an IPO, Sebi said that the size of the assets under the REIT need to be at least Rs 1,000 crore, in a bid to ensure that initially only large assets and established players enter the market.
REITs, a popular investment vehicle in many parts of the world, is similar to mutual funds except that investments would be on real estate assets that generate rental income. Looking to attract more real estate investors into the capital market, Sebi today proposed listing of REITs saying 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 raise funds further through Follow-On Offers, according to the 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 while seeking comments from stakeholders by end of this month.
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.
"To ensure regular income to the investors, it has been mandated to distribute at least 90 per cent of the net distributable income after tax of the REIT to the investors," Sebi said.
Leading consultancy PwC India's Associate Director Bhairav Dalal said REITs can be compared to a mutual fund products "with difference being that the underline investment will be in real estate assets which generate rental income".
In the long term, REITs would help in boosting investments into the realty sector and also bring institutional credibility, according to experts. Property consultant Jones Lang LaSalle (JLL) India Chairman and Country Head Anuj Puri said Sebi has released its consultative guidelines for operation of REITs in India after five years of releasing its first draft.
"The positive thing is that the statement clearly spells the need for REITs in India at the earliest considering its huge popularity across the world," Puri noted.
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. For coming out with an IPO, Sebi said that the size of the assets under the REIT need to be at least Rs 1,000 crore, in a bid to ensure that initially only large assets and established players enter the market.
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