To develop the market for emerging investment instruments, SEBI is looking to bring in norms for follow-on offers by real estate investment trusts (REITs) and infrastructure investment trusts (InvITs).
REITs and InvITs were introduced to provide investors with an opportunity to gain exposure to real estate and infrastructure projects respectively, with diversification of risks through pooling arrangements.
Generally, REITs invest majorly in completed and rent-generating real estate assets. Privately placed InvITs can invest in under-construction assets as well as completed and revenue-generating assets and public InvITs can invest majorly in completed and revenue-generating assets.
"Taking cognizance of the potential of REITs and InvITs in driving the future of Indian infrastructure, SEBI would endeavour to further develop the market for REITs and InvITs in the coming years through policy measures including considering bringing in norms for follow-on offers by REITs and InvITs," SEBI said in its annual report for 2022-23.
Krishnan S Iyer, CEO, of NDR InvIT Managers, said given the capital requirements needed for the growth of infrastructure, it is very important that both domestic institutions, mutual funds, and of course retail investors increasingly participated in it.
"These are well structured, regulated, and transparent vehicles that give them an avenue for developing a perpetual stream of cash flows, " he added.
The Securities and Exchange Board of India (SEBI) has been continuously engaged in strengthening the regulatory framework as well as in easing the process for these two products.
To streamline the process of public issues of REITs and InvITs, the time taken for allotment and listing after the closure of the issue was reduced from 12 to six working days.
Similarly, for privately placed InvITs, the time taken was reduced from 30 to six working days. These measures will help enhance liquidity in the market and bring about parity with equity instruments.
The OFS mechanism has also been made available to unitholders or sellers of listed REITs and InvITs to offer their holdings through stock exchange mechanisms.
"REITs and InvITs are other innovative mechanisms to finance real estate and infrastructure which in turn can have a multiplier impact on India's economic growth," SEBI said.
Last week, SEBI notified rules introducing special rights to unitholders of REITs who can now nominate representatives on the boards.
Also, the regulator introduced the concept of a self-sponsored REIT. REITs and InvITs have continued to witness interest from the market with three new InvIT registrations and one new REIT registration during 2022-23.
This takes the total registered entities to 20 for InvITs and five for REITs. Further, the net asset value managed by REITs stood at ₹70,614 crore whereas for InvITs it was ₹1,76,957 crore as on March 2023. Total funds raised by InvITs during 2022-23 stood at ₹6,360 crore and no fresh capital was mobilised by REITs during the year.