Market regulator SEBI has approved ease of doing business norms for SM (small and medium) REITs, according to an announcement made after the markets regulator's board meeting on December 18.
In a press release, the regulator noted that the Board had approved standardizing the disclosures in scheme offer document including bifurcation of the scheme offer document into Key Information of the Trust (KIT) and Key Information of the Scheme (KIS), manner of filing and processing of KIT and KIS, manner of updation of KIT and preparation of scheme offer document in a manner which facilitates automated processing.
Approvals were also in place for guidelines for public issue of units by a scheme of SM REIT including allocation in public issue, subscription period, price band, allotment procedure in case of oversubscription and minimum subscription amount. The third approval was for alignment of certain provisions pertaining to investment conditions and borrowings for SM REITs vis-à-vis REITs.
The SEBI board also approved several ease-of-doing-business measures for REITs and InvITs, aimed at streamlining operations and enhancing flexibility. Key changes include allowing the transfer of locked-in units among sponsor group entities, defining "common infrastructure" within REIT Regulations, and permitting investments in interest rate derivatives for hedging purposes.
Additionally, the board introduced investor protection measures to safeguard unitholders. REITs and InvITs will now be allowed to invest in unlisted equity shares, but only in companies that provide property management, maintenance, housekeeping, project management, and other incidental services related to REIT/InvIT assets, subject to specific conditions. Furthermore, investments in liquid mutual fund schemes will be restricted to those with a credit risk value of at least 12 and classified under Class A-I in the potential risk class matrix. The board also expanded the roles and responsibilities of trustees to strengthen their oversight and enhance unitholder protection.
In an October 2024 consultation paper, the regulator sought comments on several proposed updates for REITs, InvITs, and SM REIT Schemes under Ease of Doing Business and Investor Protection.
Under Ease of Doing Business, the proposals included permitting the transfer of locked-in units among sponsors and sponsor groups for REITs and InvITs, defining "Common Infrastructure" under REIT Regulations, amending governance norms for quarterly reporting by InvITs, allowing REITs, SM REIT Schemes, and InvITs to use Interest Rate Derivatives for hedging, and reviewing conditions for enhanced borrowings beyond 49% for InvITs.
The paper also suggested setting timelines for filling board vacancies in the Managers of REITs (including SM REIT Schemes) and Investment Managers of InvITs, clarifying credit rating requirements for borrowings by REITs, InvITs, and SM REIT Schemes, and including fixed deposits as cash and cash equivalents in leverage computation for these entities.
The deadline for comments on the paper were November 13, 2024.
SM REITs were introduced in March 2024. These are similar to REITs but have a minimum asset value of Rs 50 crore compared to Rs 500 crore for regular REITs.
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