Sebi approves listing of REITs, InvITs on bourses

The Securities and Exchange Board of India (Sebi) has cleared the new norms for setting up and listing of Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs) on stock exchanges, opening the way for fresh investment in the two sectors.

REITs invest primarily in completed properties such as shopping malls, office buildings, apartments, warehouses and hotels, which provide regular income to investors from rentals received from such properties.

"The idea is that even if somebody can invest as low as Rs 2 lakh, such a person can get the benefit of the income from completed real estate projects," Sebi chairman U.K. Sinha said.

The REITs guidelines would allow creation and listing of such trusts and their units can be traded on the stock exchange like equity shares.

However, small investors will 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, to give time for the market to settle down.

When asked if the new norms can come into effect by October, the Sebi chairman said: "We will take about a month or two. So, October 1 is a reasonable time period for the notification. The Union Budget has already made provisions for tax concessions to REITs and InvITs."

Explaining the modalities, the Sebi chief said that if somebody creates a special project vehicle (SPV) and makes an investment in a real estate project, units of that will be used to form the REITs and that Trust will issue shares.

"On tax pass-through, we have realised that when the SPV is transferred to the REITs, at that stage there will be a tax deferral. That means at that stage, tax will not have to be paid. When the investor in that original project SPV finally disposes of his property at that stage he will be paying the tax," Sinha explained.

Describing the approval as very good news for the realty sector, real estate services major Jones Lang LaSaelle India chairman and country head Anuj Puri said that up to $10 billion is expected to be raised through REITs in the next five years.