Sebi eases rules related to REIT shareholding

29 Dec 2017

In order to facilitate the growth of REITs and InvITs, market regulator Sebi has decided to allow such trusts to invest at least 50 per cent stake in holding companies subject to certain safeguards.

As per the existing requirements, REITs will have ultimate holding interest of at least 26 per cent in the underlying SPV would remain unchanged.

Sebi had notified REITs regulations in 2014, allowing setting up and listing of such trusts which are very popular in some advanced markets. However, not a single REIT has been listed in the country. Despite various earlier relaxations, listings have not taken place as they have failed to attract investors.

Among other criteria, REIT manager in consultation with the trustee, would need to appoint at least such number of directors on the board of holding company or SPVs, in proportion to the shareholding or interest such entity.

Further, in case of any inconsistencies between any shareholder or partnership agreement and the obligations cast upon REIT in the norms, the provisions of the REIT regulations would prevail.

Besides, Sebi has decided to rationalise the definition of sponsor group in case of REITs. It has proposed to enable investments by REITs in unlisted shares under the 20 per cent investment category. The board of Sebi approved minor amendments to the REIT and InvIT Regulations for harmonisation of the terms and definitions in the norms.

Sebi also said qualified institutional placement for achieving public shareholding norms will be allowed. ''QIP offers a quick solution to listed entities enabling them to meet MPS requirements apart from meeting their funding needs. Also, sale of a certain small percentage of shares through the open market will facilitate quicker and cheaper compliance for listed entities where promoters hold shares marginally above the threshold limit,'' Sebi said in a statement.

The regulator will hold further discussions on its proposed norms mandating listed companies to make immediate disclosure about their loan defaults, Sebi chairman Ajay Tyagi said at a press conference following the board meeting.

In August, Sebi had directed listed companies to disclose from 1 October any payment defaults to banks and financial institutions within one working day of such a miss. Later, the regulator had deferred the implementation of this directive "until further notice" as banks had asked for more time for the new rules, saying the Indian credit market was different from its Western counterparts where such a disclosure is mandatory, according to a PTI report.