SEBI Allows REITs and InvITs To Raise Funds By Issuing Bonds

Market regulator Securities and Exchange Board of India has allowed real estate and infrastructure investment trusts to access the debt market by issuing bonds, in an attempt to make these instruments more attractive to investors.

SEBI amended its regulations to allow REITs and InvITs to raise debt capital by issuing debt securities, it said in a media statement after a board meeting on Monday.

The watchdog had notified the regulations for REITs and InvITs back in 2014. It allowed setting up and listing of such trusts, which are mutual fund-like listed instruments that pool income generating projects to raise funds. Such investment vehicles are popular in some advanced markets. Despite further relaxation of norms and the Reserve Bank of India permission to banks for investing in such instruments, only two InvITs – IRB InvIT Fund and Sterlite Power’s IndiGrid Trust – have been listed on the stock exchanges so far.

“Allowing REITs and InvITs to raise funds through debt securities is expected to broaden the fund raising market and eventually boost investor returns,” said Bhairav Dalal, partner at PWC India, in an emailed statement.

Besides, SEBI has allowed strategic investors like registered non-banking financial firms, scheduled commercial banks, and financial institutions to take part in the issues of REITs. Such a provision is already in place for InvITs.

Also Read: Banks’ Investment In REITs And InvITs Will Boost Real Estate, Infrastructure Funding

The regulator has also done away with the requirement of at least two assets for floating a REIT. Such trusts can now be launched with a single asset, like InvITs.

The board “after deliberations” will also let the REITs lend to an underlying holding company, or special purpose vehicle, the statement said. It will, however, have further consultation on allowing these trusts to invest at least 50 percent of the equity capital or interest in the underlying holding company or SPVs, the statement added.

“If SEBI is to consider this proposal positively, it would help the current 50:50 JV structures to qualify for REITs,” Dalal said. Through these decisions the SEBI has “reiterated its intent” to make REITs and InvITs successful investment platforms in the country, he added.

(With inputs from PTI)