SEBI proposes Real Estate Investment Trusts (REITs)

Securities and Exchange Board of India (SEBI) has proposed introduction of Real Estate Investment Trusts (REITs).

Securities and Exchange Board of India (SEBI) has released the draft guidelines for the introduction of Real Estate Investment Trusts (REITs) in India. These guidelines have been published to get feedback from the public before they are finalized.

As per these guidelines, scheduled banks, insurance companies, public financial institutions and corporates would be eligible to become trustees of REITs. The minimum initial net worth has been stipulated as Rs. 5 Crores.

REITs would be close ended, and would be listed on the stock exchanges. The NAV of an REIT would be disclosed once a year. (Both AMFI (Association of Mutual Fund Industry) and ICAI (Institute of Chartered Accountants of India) have already firmed up the valuation norms for these products).

REITs would not be allowed to offer guaranteed returns, and would need to distribute at least 90% of their income as dividends.

REITs would be allowed to borrow only up to 20% of the gross assets of the scheme. Their investment in unfinished / under construction properties would also be limited to 20% of the total asset value.

REITs would not be allowed to invest in vacant land. Investment in a single project would not be allowed to exceed 15%, and investment in projects by a developer group would not be allowed to exceed 25% of the total asset value.

The REITs would be managed by separate real estate investment management companies, which would need to register with SEBI. All REITs would also need to get a credit rating.

Please click here to read more on Real Estate Investment Trusts (REITs) and how they can help you.

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