Sebi to unveil norms for real estate MFs, REITs

In a move that could potentially change the way people invest in the real estate sector - market regulator Sebi has issued draft guidelines for real estate investment trusts or REITs. CNBC-TV18's Payal Bhattar reports....

Realty might just emerge as Dalal Street's delight in the coming year. 

Regulator Sebi has proposed guidelines that permit these instruments in India.

A REIT is a listed real estate company that manages groups of income generating properties like malls and commercial properties.

SEBI has suggested that Indian REITS be listed, rated and appraised and not offer guaranteed returns.

It has proposed that Trustees of such schemes either be scheduled banks, trust companies of scheduled banks, public financial institutions, insurance companies, or body corporates.

And the minimum net worth criterion for Real Estate Trusts and management companies has been set at 5 crores rupees. 

That's not all. SEBI wants each scheme to have a Principal Valuer who will disclose the net asset value of the scheme annually. Every Principal valuer and every appraiser has to be empanelled with SEBI and the rating agency has to be registered with the market regulator. 

From the structure and management of these schemes to the limitations on investment - SEBI has proposed these schemes invest only in income generating real estate and not in vacant land.

Incomplete units in a building and work in progress cannot exceed 20% of the scheme's NAV.

The overall exposure of each trust to single projects is limited to 15%. And the exposure for projects undertaken by the same group of companies is limited to 25%.

But as of now - these are just proposed guidelines and are open to public comments until January 10.

For more Mutual Fund News click here