REITs and InvITs were introduced in India with the aim of offering investors chances to engage in real estate and infrastructure ventures.
Regarding REITs and InvITs, the Securities and Exchange Board of India (SEBI) is contemplating the enforcement of regulations for subsequent offers made by Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs), with the intention of strengthening the market for these emerging investment tools.
What are REITs and InvITs
REITs and InvITs were introduced in India with the objective of providing investors the chance to invest in real estate and infrastructure projects, which in turn allows for risk diversification through pooled investments.
Generally, REITs primarily focus on completed real estate assets that generate income, whereas privately placed InvITs have the flexibility to invest in both ongoing and finished revenue-generating assets. Publicly offered InvITs mostly direct their investments toward completed revenue-generating assets.
In its 2022-23 Annual Report, the Securities and Exchange Board of India (Sebi) highlighted its acknowledgment of the potential of REITs and InvITs in shaping India's future infrastructure. To foster the growth of these investment tools, Sebi aims to enhance the market through policy measures, including the contemplation of regulations for subsequent offers made by REITs and InvITs.
Krishnan S Iyer, the CEO of NDR InvIT Managers, underscored the significance of greater involvement in infrastructure investments by domestic institutions, mutual funds, and retail investors. This is due to the capital requirements associated with infrastructure expansion. He emphasized that REITs and InvITs are well-structured, transparent, and well-regulated vehicles that offer avenues for consistent cash flows.
Iyer remarked, "These vehicles are well-structured, regulated, and transparent, providing them with a means to develop a continuous stream of cash flows."
Enhancing the regulatory framework
Sebi has been actively working on enhancing the regulatory framework and streamlining procedures for REITs and InvITs.
Steps have been taken to speed up the process of allotment and listing following the conclusion of public offerings, aiming to boost liquidity and align these instruments with equity options.
Furthermore, the Offer for Sale (OFS) mechanism has been extended to unitholders of listed REITs and InvITs, enabling them to sell their holdings through stock exchanges.
Sebi has highlighted that REITs and InvITs represent innovative mechanisms for funding real estate and infrastructure projects, with the potential to positively impact India's economic growth.
Recent developments from Sebi include the introduction of regulations that grant special rights to REIT unitholders, permitting them to nominate representatives to serve on boards. The concept of self-sponsored REITs has also been introduced.
These investment tools have continued to generate interest in the market, as evidenced by the registration of several new InvITs and REITs over the past year.
As of March 2023, the net asset value of REITs stood at Rs 70,614 crore, while InvITs managed Rs 1.77 lakh crore.
In the same timeframe, InvITs managed to raise Rs 6,360 crore in capital, whereas REITs did not secure any fresh capital.
About PropReturns:
PropReturns stands as India's premier marketplace for Commercial Real Estate, boasting a wide array of opportunities such as commercial property investment and leasing, including the option of preleased property investments.
In the context of preleased properties, this term denotes those already occupied by tenants. Consequently, when an investor acquires such a property, they not only gain ownership of the physical structure but also inherit the existing lease agreement. This transition enables investors to begin earning passive income from the property immediately upon purchase.
If you wish to explore these compelling investment opportunities, click on this link: Preleased Properties.
