The Securities and Exchange Board of India (SEBI) has released rules that would enable Real Estate Investment Trusts (REITs) and infrastructure investment trusts (InvITs) to achieve minimum public unitholding compliance. The rule requires listed REITs and InvITs to have a public unitholding of at least 25% within a period of three years from the date of listing. SEBI has provided suggestions, such as an offer for-sale mechanism, rights issues, and issuance of bonuses, for unitholders of REITs and InvITs to attain the 25% public holding requirement. Additional methods also include offerings of units to the public, OFS of units held by the sponsor, and allotment of units under institutional placement. The new rules aim to facilitate compliance from managers of these trusts and ensure transparency in the methods adopted by REITs and InvITs.
REITs and InvITs are relatively new investment instruments, but they are prevalent in foreign financial markets. A REIT comprises a commercial real asset portfolio, while InvITs consist of infrastructure assets, such as highways and power transmission assets. The SEBI has directed stock exchanges to monitor the methods being adopted and to report non-compliance on a quarterly basis. By implementing these new guidelines, SEBI aims to increase transparency and compliance that will benefit all stakeholders.
