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REIT: New Way To Invest in Real Estate

On 10 October 2013, the Securities and Exchange Board of India (SEBI) issued draft Real Estate Investment Trusts (REITs) Regulations, 2013. REITs pool investment, like a mutual fund, but invest primarily in real estate of completed and revenue-generating properties. The rentals received from these properties are distributed among investors as dividend. Each investment in real estate is large. REITs are a means for people to invest smaller amounts in real estate and also achieve portfolio diversification.

SEBI has mandated that at least 90% of the value of an  REIT’s assets shall be in completed revenue-generating properties. No REIT will be allowed to invest in vacant or agricultural land or mortgages other than mortgage-backed securities. To provide flexibility, REITs can invest 10% in other assets as specified in the proposed regulations—under-development properties, listed or unlisted debt of companies, mortgage-backed securities, equity shares of companies deriving not less than 75% of their revenue from real estate activities, government securities, money market instruments or cash. It has been specified that the size of assets under management of the REIT should not be less than Rs1,000 crore. An REIT can invest its entire corpus in one project only if the size of the project is at least Rs1,000 crore. For investors, minimum subscription shall be Rs2 lakh while the unit size shall be Rs1 lakh.

Not less than 75% of the revenues of the REIT, other than gains arising from disposal of properties, shall be from rentals, leasing and letting out real estate assets, at all times. To ensure regular income to investors, at least 90% of the net income after tax has to be distributed to the investors.

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Payment System: ‘New RTGS system to improve financial market efficiency

RBI governor Raghuram Rajan said the new real time gross settlement (RTGS) system for fund transfers will improve the efficiency of the country’s financial markets. “With its advanced liquidity and queue management features, the new RTGS system is expected to significantly improve the efficiency of financial markets,” Dr Rajan said.

The RTGS system is used to settle inter-bank fund transfers and is critical in facilitating orderly settlement of payment obligations. It will have features such as a facility to accept future value dated transactions and options to process multi-currency transactions.

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