Explainer: SEBI modifies application value for REITs and InvITs

Mumbai: SEBI, the markets regulator in two seperate notifications dated July 30 has modified the investment scope for in REITs (Real Estate Investment Trusts) and InvITs (Infrastructure Investment Trusts).

Previously the minimum application value for retail investors in a REIT or an InvIT was reserved at Rs 50,000 and Rs 1 lakh respectively. This has been revised to a range of Rs 10,000 to Rs 15,000.

The revisions have also been made in listing which necessitated 100 units. The word 100 units has been replaced with the word one unit.

This means that retail investors need not subscribe to lots of 100 but only one unit.

The digital-note signed by SEBI Chairman Ajay Tyagi also says, “The  minimum  number  of  unit  holders  in  an  InvIT,  other  than  the sponsor(s), its related parties and its associates, shall be five, together and collectively holding at least twenty-five percent  of the total units of the InvIT, at all times.”

The note further explains, “for the purposes of this sub-regulation, a unit holder along with its associates and related parties, shall be considered as asingle unit holder.”

SEBI’s latest policy is anticipated to drive better liquidity and enable price discovery for investors. Retail investors can benefit from stable yields and growth potential.

Anshuman Magazine, Chairman & CEO for CBRE, India in a note explained the benefits. “This decision to revise the minimum price of the application and reduction in the lot size for the two emerging real estate instruments can be expected to bring more liquidity through increased trading volumes.”

“The move will widen the investor base by allowing more retail investors to enter the market, thereby encouraging companies who are planning to float their InvITs and REITs,” he added.