Sebi allows infrastructure, real estate trusts to enter debt market

The Securities and Exchange Board (Sebi) has tweaked rules to facilitate growth of infrastructure investment trusts (InvITs) and real estate investment trust (REITs), allowing increased flows of funds to the sector.

Accordingly, Sebi has allowed REITs and InvITs to raise debt capital by issuing debt securities.  It has also introduced the concept of strategic investor for REITs on similar lines of InvITs.

Sebi announced the changes after a meeting of its board on Monday approved certain changes in the Sebi (Infrastructure Investment Trusts) Regulations, 2014 and Sebi (Real Estate Investment Trusts) Regulations, 2014.

Further, Sebi has now allowed single asset REIT on similar lines of InvIT  and has allowed REITs to lend to underlying holding company (Holdco) or special purpose vehicle (SPV) .

While amending the definition of valuer for both REITs and InvITs, the board also decided to have further consultation with the stakeholders on a proposal of allowing REITs to invest at least 50 per cent of the equity share capital or interest in the underlying Holdco / SPVs, and similarly allowing Holdco to invest with at least 50 per cent of the equity share capital or interest in the underlying SPVs.

The move could help attract investors to the capital-starved property sector.

InvITs and REITs are vehicles that allow investors to take exposure to an income-generating infrastructure project or real estate property.

REITS and InvITs were earlier allowed to raise capital only via equity that offer only indicative yields, not fixed yields. Debt-oriented REITs and InvITs offer fixed returns to investors.

While real estate companies have not gained much market attention, it is hard to believe that these entities will be able to raise funds through issue of debt securities.