Sebi clears norms to tap investments worth Rs 1 lakh cr

Paving the way for Rs 1 lakh crore fund inflows from foreign and domestic investors, the Securities and Exchanges Board of India (Sebi) on Sunday cleared new norms for setting up and listing of Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs).

The new guidelines, which herald a new investment avenue in India on the lines of the ones in developed markets like the US, the UK, Japan, Hong Kong and Singapore, will allow trading in units of REITs and InvITs like any other security on stock exchanges.

The norms were cleared by Sebi’s board at a meeting that was also addressed by Finance Minister Arun Jaitley. The step takes forward the government’s proposals in this regard, as outlined in last month's Union Budget, where Jaitley had announced significant tax incentives for these products.

The new norms, into which the REITs and InvITs have been incorporated, are expected to come into force in a month or two after necessary notifications.

However, small investors will have to wait for some time before they are allowed to invest in these new products, as the minimum investment amount for REITs has been fixed at Rs 2 lakh and at Rs 10 lakh for InvITs for now, given the complex nature and potential risks associated with them.

The industry and experts welcomed the guidelines, saying they would help attract investment to the tune of $15-20 billion (over Rs 1 lakh crore) from foreign as well as domestic investors.

The REITs alone can attract funds worth $8-10 billion. 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).

Talking to reporters after the board meeting, Sebi Chairman U K Sinha said these trusts would help in the progress of the real estate and infrastructure sectors.

The government feels the new investment avenues would reduce the pressure on the banking system, while simultaneously making available fresh equity in the form of long-term finance from foreign and domestic sources, including NRIs.

One-time registration

The Sebi board also cleared a proposal for putting in place a simplified procedure for one-time registration of brokers to help them trade on different bourses with a single approval from the regulator.

In his first interaction with Sebi’s board after assuming charge as finance minister in May, Jaitley also asked the regulator to be vigilant about possible violations in the marketplace, and suggested more measures to attract retail investors and address their grievances.

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 the form of taxes.