Sebi allows investment up to 25% in REITs/InvITs to attract investors

To make REITs and InvITs more attractive, markets regulator Sebi has allowed strategic investors like registered NBFCs and international multilateral financial institutions to invest up to 25 per cent of the total offer size of such trusts.

"The strategic investor(s) shall, either jointly or severally, invest not less than 5 per cent and not more than 25 per cent of the total offer size," Securities and Exchange Board of India (Sebi) said in a circular.

The units subscribed by strategic investors, pursuant to the unit subscription agreement, will be locked-in for 180 days from the date of listing in the public issue.

Further, Sebi has put in place operational modalities required for the participation by the strategic investors in (Real Estate Investment Trusts) and InvITs (Infrastructure Investment Trusts).

Under the rules, the manager on behalf of the InvIT/REIT, will have to enter into a binding unit subscription agreement with the strategic investor, which propose to invest in the public issue of such trusts.

The draft offer document would disclose details of the unit subscription agreement.

These include names of each strategic investor, number of units proposed to be subscribed by it and the investment amount and proposed subscription price per unit.

The subscription price per unit, payable by the strategic investor would be set out in the unit subscription agreement and the entire subscription price would be deposited in a special escrow account prior to opening of the public issue.

The price at which the strategic investor has agreed to buy units of such trusts should not be less than the issue price determined in the public issue.

In case, the price determined in the public issue is higher than the price at which the allocation is to be made to strategic investor, then such investor would bring in the additional amount within two working days of the determination of price in the public issue.

However, if the price determined in the public issue is lower than the price at which the allocation is to be made to strategic investor, the excess amount will not be refunded to such investor. Further, the strategic investor would take allotment at the price at which allocation was agreed to be made to it in unit subscription agreement.

"The unit subscription agreement shall not be terminated except in the event the issue fails to collect minimum subscription," Sebi noted.

The regulator had notified REITs and InvITs Regulations in 2014, allowing setting up and listing of such trusts which are very popular in some advanced markets.

However, only two InvITs - IRB InvIT Fund and Indiagrid Trust - have got listed on stock exchanges so far and not a single REIT has been listed in the country.

Despite various earlier relaxations, listings have not taken place as they have failed to attract investors.

Last month, Sebi had notified relaxed norms to allow these trusts to raise funds by issuing debt securities.