Sebi, the capital markets regulator, extended the deadline for public comments on a proposal for increased accountability for sponsors of investment vehicles such as REITs and InvITs until March 15.
On February 23, the regulator issued a consultation paper on the ownership of sponsors in real estate investment trusts (REITs) and infrastructure investment trusts (InvITs), requesting public feedback by March 8.
The Securities and Exchange Board of India (Sebi) announced in a public notice that the deadline for submitting comments has been extended to March 15, 2023.
The regulator recommended modifications to the regulations regulating REITs and InvITs in its consultation document, requiring sponsors to possess a fixed number of units in these investment vehicles.
The amendments were recommended with the interests of unit holders in mind, as well as the structural vulnerabilities associated with the lack of a sponsor for REITs and InvITs.
Since there is no statutory unit holding requirement beyond three years, the watchdog proposed that REIT and INVIT sponsors keep 15% of the capital for three years from the date of listing.
It was also planned to require sponsors to retain 5% of the unit capital after 3-5 years, 3% after 5-10 years, 2% after 10-20 years, and 1% after 20 years.
According to Sebi, the REIT/InvIT business is in its infancy and is constantly developing; thus, at least one sponsor is required throughout the investment manager’s lifetime.
In the Indian context, REITs and InvITs are relatively new financial products, yet they are immensely popular in worldwide markets.
Whereas a REIT is made up of commercial real estate assets, the majority of which are already leased, an INVIT is made up of infrastructure assets such as motorways and electricity transmission facilities.