Sebi Plans Fresh Measures To Give REITs A Kick-Start
Those who blamed the government for hindering investments by imposing strict rules and regulations have been subject to many a surprise in the recent past. The speed with which the government machinery across the country is easing norms to attract investments comes as a pleasant surprise to many.
For real estate, a sector that has been reeling under tough times in the past couple of years, the government has been proactive in making the revival attempts. The measures announced in the Union Budget 2016-17, the interest-rate cuts by the Reserve Bank of India, the little ways in which civic authorities are making progressive changes in their property transaction systems, all these are the shining examples on how the real estate sector has the government support to push itself back into action.
So, when the Securities and Exchange Board of India (Sebi) recently announced that it was simplifying the Infrastructure Investment Trust (InvIT) norms, it came as a part of the overall plan to trigger fresh activity in real estate. Going further, the market regulator has decided to extend similar ease of norms to Real Estate Investment Trusts (REIT), too.
According to a PTI report, the Sebi plans to remove the restriction on the special purpose vehicle (SPV) to invest in other SPVs under a proposal to give REITs a fresh start in India. According to the current norms, an SPV has to hold 80 per cent of its assets directly and cannot invest in other SPVs. (An SPV is an arm of an asset company). This means REITs will be free to invest in a holding company that owns stakes in other SPVs. Under the proposal, a REIT would hold the controlling interest and at least 50 per cent equity in a holding company. An SPV will also be allowed to hold controlling interest and at least 50 per cent equity in other SPVs. The number of sponsor in a REIT is also being proposed to be raised to five from the earlier three.
According to the report, the Sebi board will finalise the changes in a meeting to be held next week. Hopefully, these measures may attract investors' interest in REITs.
It is to be noted that investors have so far shown no interest in REITs, while the Sebi is considering four proposals for setting up InvITs. Both investment options were launched in 2014.
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Reserve Bank Of India real estate investments Real Estate Investment Trusts News And Views Sebi