Sebi Extends Deadline Till Mar 15 to Submit Comments on Proposal on REITs, InvITs Sponsors

Capital markets regulator Sebi on Thursday prolonged the timeline until March 15, for submission of public feedback on a proposal pertaining to increased duty for sponsors of funding autos — REITs and InvITs.

The regulator had put in place a session paper on holding of sponsors in Real Estate Investment Trust (REITs) and Infrastructure Investment Trust (InvITs) on February 23 and sought public feedback on the identical by March 8.

“It has been determined to prolong the timeline for submission of feedback to March 15, 2023,” the Securities and Exchange Board of India (Sebi) said in a public notice.

In its consultation paper, the regulator proposed changes to rules governing REITs and InvITs whereby sponsors will be required to own a certain percentage of units in these investment vehicles.

The changes were proposed keeping in mind the interest of unit holders and the structural vulnerabilities associated with absence of a sponsor for REITs and InvITs.

The watchdog suggested that the sponsors of REITs/InvITs should hold 15 per cent of the capital for a period of three years from the date of listing as there is no mandatory unit holding requirement after three years.

It was also proposed to mandate sponsors to hold 5 per cent of the unit capital after 3-5 years, 3 per cent from 5-10 years, 2 per cent from 10-20 years and 1 per cent after 20 years.

As per Sebi, the REIT/InvIT industry is in a nascent stage and continuously evolving, there is a need to have at least one sponsor throughout the life of the investment managers.

REITs and InvITs are relatively new investment instruments in the Indian context but are extremely popular in global markets.

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.

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