Sebi relaxes InvITs, REITs rules; sops to foreign investors

The Securities and Exchange Board of India (Sebi) board meeting on Friday amended the regulations for infrastructure investment trusts (InvITs) and real estate investment trusts (REITs) to facilitate their growth and allowed foreign portfolio investors (FPIs) to directly trade in debt markets.

The regulator also discussed floating a consultation paper on corporate governance issues in compensation agreements such as non-compete fees at the board meeting held at the new National Institute of Securities Market campus in Navi Mumbai.

Sebi amended the rules for FPIs to trade directly in corporate bonds. According to the new rules, Category I and Category II FPIs can now access debt markets directly without any brokers, while direct participation for Category III would be allowed only through e-book platform of stock exchanges.

"It could boost foreign inflows in the Indian capital markets. From an ease of doing business perspective, it is a step ahead as it will also streamline tax computation and deepen the Indian debt market. It may also have an undesirable impact on the Indian broking sector, as this facility will not bring revenue to them," said Sumit Agrawal, partner, Suvan Law Advisors.

According to the new regulations, InvITs and REITs can now invest in a two-level special purpose vehicle (SPV) structure through the holding company. The holding company in both vehicles would have to distribute 100 per cent cash flows realised from the underlying SPVs and at least 90 per cent of the remaining cash flows.

Sebi also reduced mandatory sponsor holding in InvITs to 15 per cent, removed the limit on the number of sponsors and rationalised the requirements for private placement of InvITs.

For REITs, the regulator removed the limit on the number of sponsors, introduced the concept of sponsor group, and allowed investment up to 20 per cent in under-construction assets.

Securities and Exchange Board of India ( SEBI )