The Securities and Exchange Board of India (SEBI) on Friday proposed to relax norms governing real estate investment trusts (REITs) in a bid to make them more attractive. The proposed changes include allowing a larger number of sponsors and removing the investment restrictions on special purpose vehicles.

An REIT is an investment vehicle structured like a mutual fund but with real-estate as the underlying asset. SEBI introduced the concept in India in 2014 to open the cash-strapped real-estate industry to investors, but not a single REIT has been created because of the restrictive norms.

After its board meeting on Friday, SEBI said it intends to relax the norms and encourage the creation of REITs.

The regulator said it would bring out a consultation paper “proposing certain changes and providing some clarification in the REIT regulations”.

The paper is likely to propose removing the rule restricting a special purpose vehicle (SPV) from investing in other SPVs’ holding assets, and recommend a change in the number of sponsors as also in the responsibilities of trustees and associates. Currently, SEBI regulations for REITs allow for only three sponsors.

The paper is also expected to suggest rationalising compliance in related-party transaction requirements, aligning minimum public shareholding requirements with the Securities Contract Regulations Rules, and raising the investment cap in under-construction assets to 20 per cent.

The changes proposed are intended to woo investors to the country’s capital-starved property sector.

Portfolio managers In a bid to encourage foreign fund managers to relocate to India, the capital market regulator will modify rules and relax the regulatory regime for them.

The move assumes significance in the wake of the government already announcing tax incentives for offshore fund managers willing to relocate to India. 

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