Sebi likely to approve norms for listing REITS on August 10

The Narendra Modi government is set to issue the notification for allowing the setting up of Real Estate Investment Trusts (REITS) and Infrastructure Investment Trusts on August 10.

According to sources, the Securities and Exchange Board of India (Sebi) is likely to approve the final norms for the listing of Real Estate Investment Trusts (REITS) and Infrastructure Investment Trusts on the stock exchanges on August 10 and immediately after that the finance ministry will issue the notification allowing the setting up of these trusts.

Once aproved, REITS are expected to draw $20 billion fund flow by 2020.

Finance Minister Arun Jaitley is also scheduled to hold the customary post-Budget meeting with the boards of Sebi and RBI on Sunday to impress upon the them the need to be proactive to promote financial inclusion and boost growth.

The finance minister is expected to brief the boards of the two financial sector regulators on his Budget announcements which include setting up of REITS, common KYC, easier funding for start ups and boost to infrastructure funding.

Jaitley had announced tax incentives for REITS in his Budget speech in order to give a fillip to the real estate sector. The minister had pointed out that " REITS have been successfully used as instruments for pooling investments in several countries" and would be introduced in the country.

Jaitley also announced that as an innovation, a modified REITS structure for infrastructure projects would also be introduced with "a similar tax efficient pass through status" which would cover the public private partnership (PPP) projects as well. REITS investments are typically in completed properties such as shopping malls, office buildings, apartments, warehouses and hotels which provide regular income to the investors from the rentals.

REITS are beneficial to both the investors and the industry. On one hand, REITS provide the investors with an investment avenue, which is comparatively less risky than investing in underconstruction properties and provides regular Income. On the other hand, REITs provide the sponsor usually a developer or a private equity fund avenues of monetising their assets to enable them to invest in other projects.

According to the initial norms drawn up by Sebi, the REITS will have to be registered with the regulator.

For coming out with an initial offer, it has been specified that the size of the assets under the REITS shall not be less than Rs 1000 crore which is expected to ensure that initially only big players enter the market.

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