SEBI Proposes Stringent Framework for REITs and InvITs

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VoM News Desk | December 9, 2023 | 10:10 PM IST | Breaking News | Follow on Google News

SEBI Proposes Stringent Framework for REITs and InvITs. Image/SebiOnline

SEBI Proposes Stringent Framework for REITs and InvITs.

The Securities and Exchange Board of India (SEBI) is considering a robust regulatory framework for Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs), focusing on subordinate unit issuance. The proposed framework aims to address power imbalances, restrict transfers among sponsor entities, and enhance transparency.

Balancing Power Dynamics through Subordinate Units

SEBI suggests that subordinate units should have inferior voting rights and limited transferability exclusively among sponsor entities. This measure aims to prevent potential exploitation and maintain fairness within REITs and InvITs.

Conditions for Subordinate Unit Issuance

The consultation paper outlines strict conditions for subordinate unit issuance. Any issuance beyond the initial offer requires three-quarters approval from unitholders by value, excluding sponsor and related party votes. This emphasizes transparency and fairness in decision-making.

Conversion Criteria and Employee Benefit Schemes

Clear conversion criteria for subordinate units to ordinary units are proposed, allowing a one-time extension of the conversion date under specific conditions. SEBI also introduces a framework for unit-based employee benefit schemes (UBEB), managed through a separate Employee Benefit Trust (EBT) with limited unit transferability.

Public Comments Open Until December 29

Stakeholders have until December 29 to provide feedback on the proposed framework. This initiative marks a significant move toward refining the regulatory environment for REITs and InvITs, impacting investors and the broader real estate and infrastructure sectors.

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