MUMBAI: Capital markets regulator Sebi on Monday allowed Real Estate Investment Trusts (Reits) and Infrastructure Investments Trusts (InvITs) to raise debt capital by issuing debt securities.
Reits are investment vehicles that can be used by real estate players to attract private investment, while investors can gain dividends generated from income-producing real estate assets like office buildings, shopping malls, etc. Though introduced some time ago, Reits are yet to see large-scale adoption considering the limitations, which the regulator has now eased.
Reits were required to have a holding company with 51 per cent stake; this was marginally lowered to 50 per cent on Monday. Like InvITs, they are allowed to invest in single assets and can also lend to an underlying holding company.
“Further, the board, after deliberations, decided to have further consultation with the stakeholders on a proposal of allowing Reits to invest at least 50 per cent of the equity share capital or interest in the underlying Holdco/SPVs, and similarly allowing Holdco to invest with at least 50 per cent of the equity share capital or interest in the underlying SPVs,” Sebi said in a statement. It added that the regulator will hold further consultation with stakeholders on allowing Reits to invest at least 50 per cent of equity share capital or interest in underlying holding company.
Sebi will introduce the concept of strategic investor for Reits on similar lines of InvITs. According to industry estimates, approximately $121 billion or 1.73 billion sq ft of occupied commercial real estate could benefit from Reits. It may be noted that RBI had allowed banks to invest in Reits in April to attract institutional investors and to expand the investment scope for banks. Early this year, Sebi had permitted mutual funds to invest in Reits and InvITs.