The Securities and Exchange Board of India (SEBI) has revised the minimum unitholding by sponsors of REITs and InvITs, stating it will be on a reducing scale for the entire life of the REIT and InvITs.

Current SEBI regulations mandate that the sponsor hold a minimum of 15 per cent of the units for a period of at least three years from the date of listing of the units.

The revision has been done to align the interests of the sponsors with those of the investors during the life of the investment vehicles. SEBI, in its board meeting on Wednesday, said that the mandatory minimum unitholding will be locked in and unencumbered.

The regulator’s board also approved the proposal for the introduction of self-sponsored REITs and InvITs, where the investment manager also takes on the responsibilities of the sponsor. This provides an additional exit option for the sponsor of the investment vehicles and allows for the emergence of professionally managed investment managers.

The main conditions for self-sponsorship are that the investment vehicles should be listed for at least five years, at least one of the sponsors proposing to dissociate should have been a sponsor for at least five years, the investment manager should meet the same net worth criteria as the sponsor, the investment manager should comply with the minimum unitholding requirement applicable to sponsors, and the existing sponsor should not own or control the investment manager.

In order to empower unitholders in REITs and InvITs, Sebi has amended regulations to provide nomination rights to unitholders holding 10 per cent or more of the total outstanding units on the board of the REIT and InvIT. The regulator said that REITs and InvITs acquire assets from their sponsors, and these are related-party transactions that have a considerable bearing on the returns to unitholders.

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