The Securities &
Exchange Board of India (Sebi) has issued final guidelines for infrastructure
investment trusts (Invits) and real estate investment trusts (Reits),
instruments expected to help these sectors raise resources to meet a funds
crunch.
They could generate
investment of as much as $ 2,000 crore according to some experts.
Final guidelines were
issued after a meeting of the capital market regulator's board in the capital
on Sunday that also eased registration requirements for stock brokers and
clearing members. Finance minister Arun Jaitley also addressed the board on
Sunday. Mr. Jaitley had, in his budget speech announced pass-through status for
the purpose of taxation to these two instruments to make them attractive to
investors.
Trusts are like
mutual funds (MFs) that raise resources from many investors to be directly invested
in realty or / infrastructure projects. The pass-through status means that the
return from investments through these instruments will be taxed only in the
hands of investors and the trusts will not have to pay tax on income.
Once the relevant
changes in other regulations are made, overseas investors will be able to bring
funds into India through these vehicles, reducing the need for bank funds for
these sectors. SEBI has said Reits and Invits should have a starting asset
value of at least Rs. 500 crore and the ini. 250 crore or more.
Reits will be allowed
to invest only in commercial property. They have to be listed on a recognised
stock exchange and would have to meet stringent disclosure norms.
Trading lot will be
Rs. 1 lakh with minimum subscription size of Rs. 2 lakh.
For Invits, this will
be Rs. 5 lakh and Rs.10 lakh,
respectively.
Reits will invest in
commercial real estate through special purpose vehicles (SPVs) in which they
must hold a controlling stake of more than 50%. The SPV in turn must hold
minimum 80 % of its assets directly in properties and would not be allowed to
invest in other SPVs.
“This is a welcome
move, especially coming within a month of the budget,“ said Mr. Neeraj Bansal,
partner and head of real estate and construction, KPMG.
“Expediting Reit
& Invit norm notification will facilitate infusion of $ 1500 Cr to 2000 Cr
in the sector, and an alternative to bank finances.“ Invits will allow
infrastructure developers to monetise specific assets, helping them use proceeds
for completing projects of theirs stalled for want of funds.
“We expect this to be
a positive move for capital markets. It could free up some liquidity for real
estate and infrastructure players,“ said Mr. Bhairav Dalal, Associate Director,
PwC.
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