Securities and Exchange Board of India has permitted real estate investment trusts and infrastructure investment trusts to invest in unlisted shares under certain conditions and has also allowed the inter-se transfer of locked-in units among sponsor group entities.
At the board meeting on Wednesday, the markets regulator also permitted the trusts to invest in interest rate derivatives for hedging.
REITs and InvITs can invest only in the unlisted shares of companies that provide property management, maintenance, and other incidental services to the assets in their portfolios, SEBI said.
Until now, units held by sponsors and sponsor groups of REITs and InvITs, including multiple sponsors, were subject to a lock-in period of up to three years, with no provision for inter-se transfer of such locked-in units among sponsors and sponsor groups.
Permitting the transfer of such locked-in units within sponsor group entities adds more flexibility to the regulations and aligns them with those governing inter-se transfers in corporates.
Allowing InvITs to use interest rate derivatives for hedging helps them manage interest rate fluctuations, as infrastructure projects have long gestation periods and require extended financing durations.
The regulator has also approved provisions for investments and borrowings by small and medium REITs, bringing them closer to parity with traditional REITs.