Suggest renaming infrastructure debt funds ‘infrastructure funds'

To avoid potential ambiguities, experts have suggested that investment in fully built properties be incorporated in the definition of a real estate fund.

In a report compiled by PwC incorporating the suggestions of financial experts, SEBI has been requested to clarify the difference between a real estate project and special purpose vehicles (SPVs) undertaking a real estate project.

SEBI's draft discussion paper on alternative investment funds (AIF) defines a real estate fund as a private pooled investment vehicle from institutional investors or HNIs for investing in real estate projects or SPVs investing in real estate projects.

Experts have also suggested that infrastructure debt funds be renamed as “infrastructure funds” as the proposed AIF regulations do not contain any definition or investment conditions for infrastructure debt funds. They say this is because the SEBI board has already approved a framework for setting up Infrastructure Debt Funds in its July 28 board meeting.

The group of experts also pointed out that express permission should be given to real estate funds and infrastructure funds to invest in real estate/ infrastructure holding companies. The group also suggested that investments in direct real estate and equity and equity-linked projects of SPVs engaged in real estate projects may be permitted.

This would enable investment in holding companies that are invested in road projects of the NHAI and other avenues whose end use would be infrastructure or realty related.

Finally, the group said that the anomaly regarding percentage of corpus to be invested should be removed.

SEBI's draft suggested that real estate funds shall invest at least 75 per cent in real estate projects, fully built properties or real estate SPVs and at least 66.67 per cent in equity and equity linked instruments and 33.33 per cent in debt or debt instruments of real estate projects of SPVs. Such a combination leads to an anomalous situation.

(This article was published on October 13, 2011)
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