SEBI eases compliance norms for REITs and InvITs to enhance ease of doing business

SEBI has lowered the minimum allotment size in the primary market for privately placed InvITs to Rs 25 lakh, down sharply from the earlier thresholds of Rs 1 crore or Rs 25 crore, depending on the nature of the underlying assets.

In a move aimed at improving operational flexibility and broadening participation in real estate and infrastructure investment vehicles, the Securities and Exchange Board of India (SEBI) board has cleared amendments to the SEBI (Real Estate Investment Trusts) Regulations, 2014 and the SEBI (Infrastructure Investment Trusts) Regulations, 2014 for the ease of doing business. The changes follow a discussion paper issued on May 2, 2025, and incorporate feedback from public consultations as well as inputs from SEBI’s Hybrid Securities Advisory Committee.

One of the key reforms is the clarification and revision of the definition of "public" unitholders in REITs and InvITs. SEBI has ruled that related parties of the REIT/InvIT, sponsors, investment managers, and project managers will not be considered part of the public unitholder category, unless they are Qualified Institutional Buyers (QIBs). However, the sponsor, sponsor group, investment manager, and project manager will always be excluded from the “public” definition regardless of QIB status. The revision allows units held by related parties who are QIBs to be included in public float, aiding in compliance with minimum public holding norms without compromising governance standards.

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The regulator has also introduced greater flexibility in the distribution of cash flows. According to the release, holding companies (HoldCos) are now allowed to adjust negative net distributable cash flows using positive cash inflows received from underlying Special Purpose Vehicles (SPVs).

Previously, HoldCos were required to distribute 100% of the cash flows received from SPVs to the REIT or InvIT, regardless of their own financial position. The amendment gives these intermediaries more leeway in managing cash distributions without breaching regulatory obligations.

To further streamline compliance, SEBI has also harmonised the reporting timelines for various regulatory submissions, including quarterly reports and valuation disclosures. These will now align with the timelines for financial results filings, thereby reducing the burden of staggered submissions and avoiding duplication of effort. Since financial and valuation disclosures are interdependent, the synchronization is expected to enhance efficiency and reduce administrative complexity for fund managers.

Additionally, SEBI has lowered the minimum allotment size in the primary market for privately placed InvITs to Rs 25 lakh, down sharply from the earlier thresholds of Rs 1 crore or Rs 25 crore, depending on the nature of the underlying assets. This revision brings primary issuance norms in line with the existing Rs 25 lakh trading lot size in the secondary market, creating consistency across market segments and making such products more accessible to institutional and high net worth investors.

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