SEBI Forms the Framework for REITs
Apr 07, 2020 Real Estate News
On March 13, 2020, the market regulator SEBI put in place the framework for the emerging investment instruments REITs and InvITs for the issuance of units under e fast track right mode. Earlier this month the regulator allowed the fast track rights issued by the REITs and InvITs without filing the draft with SEBI.
The regulator issued a circular which stated that the listed REITs and InvITs desirous of issuing units under fast-track rights issue will have to comply with certain guidelines. It also stated that the units of these instruments should mandatorily be listed on the stock exchange for at least three years immediately preceding the record date and all the units of REIT and InvIT will be held in Demat form on the record date.
Other conditions included that the average market capitalization of public unit holdings of REIT and InvIT should be at least Rs 250 crore each. These investment instruments will have to address 95 percent of the complaints received from the investors until the end of the quarter immediately preceding the month of the record date.
SEBI mentioned that there should not be any regulatory action imposed on REIT and InvIT in the three years preceding the year in which the rights issue has been proposed. The imposition of monetary fines by the stack exchange will not be the ground for ineligibility for undertaking issuance under this clause.
The circular also mentioned that there should not be any show-cause notices or prosecution proceedings initiated or pending against these instruments or their promotors or their directors. They also should not have settled any alleged violation under the settlement mechanism and the units in REITs and InvITs should not be suspended from trading as a disciplinary measure during the last three years immediately the record date.
SEBI issued a notice stating that the sponsor(s) shall mandatorily subscribe to their rights entitlement and shall not renounce their rights, except to comply with minimum public shareholding norms prescribed under the InvIT/REIT Regulations.
Sebi stated that the units allotted to sponsor, and an associate will be locked- in for three years from the date of trading approval granted for units. This is applicable when not more than 25 percent of the total unit capital of InvIT and REIT will be locked- in for three years and units allotted more than 25 percent need to be locked in for one year.
The lead merchant banker will also have to ensure that the information contained in the draft document and the particulars as per the audited financial statements are not more than six months old from the issue opening date.
The regulator issued a circular which stated that the listed REITs and InvITs desirous of issuing units under fast-track rights issue will have to comply with certain guidelines. It also stated that the units of these instruments should mandatorily be listed on the stock exchange for at least three years immediately preceding the record date and all the units of REIT and InvIT will be held in Demat form on the record date.
Other conditions included that the average market capitalization of public unit holdings of REIT and InvIT should be at least Rs 250 crore each. These investment instruments will have to address 95 percent of the complaints received from the investors until the end of the quarter immediately preceding the month of the record date.
SEBI mentioned that there should not be any regulatory action imposed on REIT and InvIT in the three years preceding the year in which the rights issue has been proposed. The imposition of monetary fines by the stack exchange will not be the ground for ineligibility for undertaking issuance under this clause.
The circular also mentioned that there should not be any show-cause notices or prosecution proceedings initiated or pending against these instruments or their promotors or their directors. They also should not have settled any alleged violation under the settlement mechanism and the units in REITs and InvITs should not be suspended from trading as a disciplinary measure during the last three years immediately the record date.
SEBI issued a notice stating that the sponsor(s) shall mandatorily subscribe to their rights entitlement and shall not renounce their rights, except to comply with minimum public shareholding norms prescribed under the InvIT/REIT Regulations.
Sebi stated that the units allotted to sponsor, and an associate will be locked- in for three years from the date of trading approval granted for units. This is applicable when not more than 25 percent of the total unit capital of InvIT and REIT will be locked- in for three years and units allotted more than 25 percent need to be locked in for one year.
The lead merchant banker will also have to ensure that the information contained in the draft document and the particulars as per the audited financial statements are not more than six months old from the issue opening date.
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