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SEBI's Changes to REITs and InvITs



  Aug 30, 2023

Reits and InvITs:Sebi Changes


Q: What are Reits and InvITs?

A: Reits (Real Estate Investment Trusts) and InvITs (Infrastructure Investment Trusts) are investment vehicles that pool funds from investors to invest in real estate and infrastructure projects, respectively. They operate similarly to mutual funds but focus on these specific asset classes.
 

Q: How do Reits and InvITs function?

A: Reits invest in income-generating real estate properties, such as office parks and shopping malls. InvITs invest in infrastructure projects like transportation, energy, and communication. Both generate income from their investments, which is distributed to unit holders as dividends.
 

Q: What changes have been made to Reits and InvITs by Sebi?

A: The Securities and Exchange Board of India (Sebi) has introduced several changes. Unit holders of InvITs and Reits now have board nomination rights. Minimum unit holding requirements for sponsors have been modified, and the concept of "self-sponsored investment managers" has been introduced. Sebi also aims to expedite public listings for these investment vehicles.
 

Q: Why are these changes important?

A: These changes aim to improve corporate governance, enhance investor rights, and streamline the operation of Reits and InvITs. Retail unit holders now have a say, and sponsors are required to maintain a minimum number of units for the trust's duration.
 

Q: How have Reits and InvITs performed so far?

A: Since their launch in 2019, Reits have gained popularity, generating steady rental income even during challenges like the pandemic. InvITs, with a broader scope, have also shown growth. By early 2023, Sebi-registered InvITs and Reits managed assets worth over ₹3.5 trillion.
 

Q: What's the future outlook for Reits and InvITs?

A: Reits and InvITs have gained global acceptance as asset classes with reliable long-term yields. Their successful performance has attracted investor interest. The future could see more Reits and InvITs, potentially larger and diversified, emerging with strong governance frameworks.
 

Q: Why are Reits and InvITs important?

A: Reits and InvITs allow investors, including retail investors, to access income-generating real estate properties and infrastructure projects that might otherwise be financially inaccessible. They offer a way to participate in these sectors' growth while providing stable returns through dividends.


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