The Securities and Exchange Board of India (SEBI) in its 208th board meeting held on December 18, 2024 considered and approved the various measures towards ease of doing business and investor protection for infrastructure investment trusts (InvITs), real estate investment trusts (REITs), and small and medium REITs (SM REITs). SEBI’s approvals follow up on recommendations on ease of doing business and investor protection for InvITs, REITs, and SM REITs in two separate consultation papers dated October 30, 2024. Key amendments announced by SEBI including measures to revise compliance requirements and operational frameworks governing InvITs, REITs and SM REITs, have been discussed below:
- Approval of measures promoting ease of doing business and investor protection for InvITs and REITs
SEBI has approved ease of doing business and investor protection proposals for InvITs and REITs which inter alia include:
- permitting transfer of locked-in units between sponsor and any member if its sponsor group with the condition that lock-in period requirement continues for transferee who shall not be eligible to transfer the units till the expiration of the remaining period;
- approval of addition of definition of the word ‘common infrastructure’ in the under SEBI (Real Estate Investment Trusts) Regulations, 2014 (REIT Regulations);
- allowing InvITs, REITs and SM REITs to participate in interest rate derivatives solely for the purpose of hedging an underlying interest rate risk (either as a user or client), subject to applicable guidelines issued by Reserve Bank of India (RBI);
- providing three months to fill vacancy in the office of the board of directors of the manager / investment manager when such vacancy does not arise due to expiration of the term of office of director;
- permitting InvITs and REITs to invest in: (A) unlisted equity shares provided investee company provides property management or maintenance services, housekeeping, or other incidental services to the InvIT or REIT assets; and (B) liquid mutual funds schemes where credit risk value is at least 12 and is given under Class A-I in the potential risk class matrix under SEBI master circular for mutual funds dated May 19,2023; and
- approval on formally defining the principles governing trustee responsibilities, emphasizing transparency, accountability, due diligence, and impartiality.
- Approval of ease of doing business proposals for SM REITs
- SEBI has approved standardizing the disclosures in scheme offer documents of SM REITs along with bifurcating the document into : (A) key Information of the trust (KIT), which would contain details of the SM REIT, investment manager, trustee and trust level details; and (B) key Information of the scheme (KIS), which will capture information on scheme of SM REIT and its assets. Accordingly, SEBI has also inter alia approved revisions in the processing of KIT and KIS along with the information which will be disclosed in the said documents, manner of updating KIT where KIT has to be amended with any material change (by way of an addendum) and has to be updated every six months. These documents will be prepared in a manner which will facilitate automated processing such as the documents will have plain background, specific formatting, summaries of key information, summary of the scheme in tabular format, appropriate referencing of regulations and circulars;
- SEBI has also approved aligning the provisions governing public issue of units of SM REITs with provisions governing public issue of units by REITs. Accordingly, SEBI has extended chapter 2 of the master circular for REITs dated May 15, 2024, to be applied mutatis mutandis to SM REITs along with provisions on allocations in public issue, subscription period, price band, allotment procedure in cases of oversubscription and minimum subscription amount; and
- approval has also been given to extend certain provisions concerning investment conditions and borrowings under chapter V of REITs Regulations to apply to SM REITs as well.
Conclusion:
SEBI is likely to notify amendment regulations and/or circulars in respect of these decisions in the coming days.