‘REITs, InvITs set to gain from Sebi move on follow-on rules’ – ET Infra


The Securities & Exchange Board of India‘s plan to roll out norms for follow-on offers by real estate investment trusts (REITs) and infrastructure investment trusts (InvITs) is expected to provide an additional avenue for fundraising and liquidity to these business trusts.

The move, along with its recent decisions to introduce the concept of self-sponsored REITs and allowing REIT unit holders to appoint representatives to the boards, will boost retail investors’ confidence and enhance the depth of the market.

“REIT and InvITs act as a platform for institutional and retail investors to diversify their investment portfolio to real estate and infrastructure projects, respectively. Sebi‘s move to allow follow-on-offer on both these products will optimise avenues for fundraising and liquidity through a structured and well-governed mechanism, which will overall drive the future growth of India in the infrastructure sector,” said Hemal Mehta, partner, Deloitte India.

Since April 2019 REITs and InvITs have raised over ₹1.07 lakh crore through public issues, private placements, preferential issues, institutional placements and rights issues in India, showed Sebi data.

“Follow-on offers are a strong measure to increase depth and acceptance for the product. REIT is in its nascence with just four REITs serving the large investing community; hence measures such as this help bring more retail participation in the sector,” said Dalip Sehgal, CEO, Nexus Select Trust.

The country’s maiden REIT listing took place in April 2019 with Embassy Office Parks REIT. Following this, two more REITs – K Raheja Group’s Mindspace Business Parks REIT and Brookfield India Real Estate Trust REIT – listed on the bourses in 2020. In May this year, the Blackstone Group-backed India’s maiden retail assets-led REIT, Nexus Select Trust, listed on stock exchanges.

“This is a welcome move by the regulator. Currently, private placements, preferential allotment and rights issue as a mode of fund raise by an InvIT is allowed. Inclusion of FPOs as an option kind of completes all the avenues available to the trust vehicle to raise funds and is akin to the options available to a listed company,” said Arka Mookerjee, partner at legal firm JSA.

According to him, the sponsor lock-in criteria may need to be reviewed as this will create further dilution for the existing unit holder.

  • Published On Aug 28, 2023 at 07:26 AM IST

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