Market regulator Securities and Exchange Board of India (SEBI) has reduced the minimum application value of real estate investment trusts (REITs) and infrastructure investment trusts (InvITs), while revising trading lot to one unit for these investment instruments to make them more attractive for retail investors.
The minimum application value has been cut down to the range of Rs10,000-Rs15,000 for both REITs and InvITs, compared with the earlier requirement of Rs50,000 for REITs and Rs1 lakh for InvITs, SEBI said in two separate notifications. SEBI also said the revised trading lot will be of one unit for REITs and InvITs.
Earlier, for initial listing, a trading lot was required to be of 100 units. SEBI’s move is expected to offer better liquidity, more efficient price discovery and will provide an attractive opportunity for retail investors to earn stable yields with growth potential. Further, SEBI has also introduced a minimum unit holders’ requirement for unlisted InvITs.
"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 25% of the total units of the InvIT, at all times," the market regulator said.
While clarifying on this, SEBI said a unit holder along with its associates and related parties will be considered as a single unit holder.
REITs and InvITs are relatively new investment instruments in India but are extremely popular in global markets. Market experts say that in developed countries REITs have generated returns somewhere between bonds and stocks-- the same is expected to be the case in India. While a REIT comprises a portfolio of commercial real assets, a major portion of which is already leased out, InvITs comprise a portfolio of infrastructure assets such as highways and power transmission assets.
As of March 2021, a total of 15 InvITs and four REITs were registered in India out of which six InvITs and three REITs were listed on the stock exchanges.
These investment vehicles collectively raised close to Rs55,000 crore in financial year (FY) 20-21, taking their net assets to Rs1.64 lakh crore. The funds were raised through the initial offer, preferential issue, institutional placement and rights issues.
In a separate notification, SEBI has also permitted banks, other than scheduled banks, to act as a banker to such issues, to provide easy access to investors to participate in public and rights issues by using various payment avenues.
Bankers to an issue mean a scheduled bank or such other banking company as may be specified by SEBI from time to time, carrying activities including acceptance of application money, acceptance of allotment or call money, refund of application money and payment of dividend or interest warrants, the regulator said. The new rules have become effective from 30 July 2021.