The Hindu Business Line : SEBI announces guidelines for REITs

Investors now have another route to invest in real estate. The SEBI has announced guidelines for schemes under the proposed Real Estate Investment Trusts (REITs).

As per the draft guidelines, all schemes are to be compulsorily listed on the stock exchanges and only close-ended scheme would be allowed. This means investors cannot redeem the schemes, but can exit by selling the units on the exchange.

Investment Limit

Net asset value of the schemes will be disclosed on the basis of the valuation report of a principal valuer appointed by the Trust and should be disclosed to unit holders as per the frequencies specified by SEBI.

The SEBI has also prescribed prudential investment limit for REITs. As per the draft guidelines issued today, no real restate investment Trust, under all its schemes, can have exposure to more than 15 per cent of a single real estate project or 25 per cent of a project developed or owned by a group.

REITs are also allowed to invest in a building, which is unoccupied, or under redevelopment but the aggregate contract value of such properties should not exceed 20 per cent of scheme’s NAV. REITs, however, are not allowed to invest in vacant land or participate in development activities.

Valuation report

All schemes floated by REITs should be compulsorily rated, appraised and valued by the SEBI empanelled agencies and valuers.

Banks, financial institutions, corporates and insurance companies can float REITs. The Trusts and the investment management company should have a minimum net worth of Rs 5 crore each and should be registered with the SEBI.

Every scheme should have an independent valuer who will submit valuation report on properties to be acquired or sold by the scheme or where new units are offered by the scheme. REITs are allowed to invest only in real estates.