Sebi clears final guidelines for investments into realty, infra trusts

To help attract greater foreign and domestic investments into real estate and infrastructure, markets regulator Sebi on Sunday cleared final guidelines for creation and listing of business trusts for these key sectors.

The norms were cleared by Sebi’s board at a meeting, which was also addressed by Finance Minister Arun Jaitley, and takes forward the government’s proposals in this regard as outlined in the Union Budget presented last month.

Talking to reporters after the meeting, Sebi Chairman U K Sinha said that the proposals with respect to Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs) were cleared by the board.

The other proposal cleared by the board was about a simplified one-time procedure for registration of brokers.

Jaitley had said in his budget speech last month that “REITs have been successfully used as instruments for pooling of investment in several countries” and necessary tax incentives would be given for these products, as also for InvITs.

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“These structures would reduce the pressure on the banking system while also making available fresh equity. I am confident these two instruments would attract long term finance from foreign and domestic sources including the NRIs,” Jaitley had said.

Infrastructure and construction sectors have a significant role in the economy and the government feels that growth in these sectors is necessary to revive the economy and generate jobs.

Along with foreign investors, domestic institutions like insurers, pension funds and provident funds would also be allowed to invest in these trusts.

Through InvITs, the government is aiming to create a new avenue for raising funds to meet infrastructure investment requirements to the tune of Rs 65 lakh crore for the 12th Five Year Plan (2012-17).

The new norms would enable listing and trading of REITs and InvITs as any other security on the stock exchange platforms and also help create new platforms for raising of funds by real estate and infrastructure companies, respectively.

Despite significant tax benefits for the sponsors of these business trusts, these new regulations would also be “revenue accretive” for the government in form of taxes.

The new norms would help in channelising domestic investments into real estate and infrastructure sectors, and also help attract foreign capital for these fund-starved segments of the economy.

Certain changes or amendments and additional guidelines would be required the government and other regulators for development of REITs and InvITs in India.

These include allowing foreign investment into the units of REITs and InvITs at the time of IPO and for acquisition from secondary markets, and for allowing insurance companies, pension funds and provident funds to invest.

PTI