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SEBI clears REIT, InvIT Norms to Tap Rs. 1-Trillion Investments
Aug 14, 2014

Market regulator SEBI cleared new norms for setting up and listing of Real Estate and Infrastructure Investment Trusts, which will pave the way for Rs 1 lakh crore fund inflows from foreign and domestic investors. The new guidelines, which herald a new investment avenue in India on the lines of one in developed markets like the US, UK, Japan, Hong Kong and Singapore, would allow trading in units of REITs and InvITs like any other security on stock exchanges.

However, small investors would have to wait for some time before they are allowed to invest in these new products, as minimum investment amount for REITs has been fixed at Rs 2 lakh and at Rs 10 lakh for InvITs for now, given the complex nature and potential risks associated with them.

The industry and experts welcomed the guidelines and said it would help attract investments to the tune of $15-20 billion (over Rs. one lakh crore) through such trusts, from foreign as well as domestic investors. The REITs alone can attract $8-10 billion worth funds. 

The Government feels that these new investment avenues would reduce the pressure on the banking system while also making available fresh equity in form of long-term finance from foreign and domestic

The SEBI board also cleared a proposal for putting in place a simplified procedure for a one-time registration of brokers to help them trade on different bourses with one single approval from the regulator.

Through InvITs, the government is aiming to create a new avenue for raising funds to meet infrastructure investment requirements to the tune of Rs. 65 lakh crore for the 12th Five Year Plan (2012-17). Despite significant tax benefits for the sponsors of these business trusts, these new regulations would also be revenue accretive for the Government in form of taxes.

The new norms would enable listing and trading of REITs and InvITs as any other security on the stock exchange platforms and also help create new platforms for raising of funds by real estate and infrastructure companies, respectively.

Certain changes or amendments and additional guidelines would be required by the government and other regulators for development of REITs and InvITs in India. These include allowing foreign investment into the units of REITs and InvITs at the time of IPO and for acquisition from secondary markets, and for allowing insurance companies, pension funds and provident funds to invest. 

Infrastructure and construction sectors have a significant role in the economy and the Government feels that growth in these sectors is necessary to revive the economy and generate jobs.


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http://www.drishtiias.com/upsc-current-affairs-article-SEBI-clears-REIT-InvIT-Norms-to-Tap-Rs.-1-Trillion-Investments