SEBI Releases the Encumbrance Guidelines for REITs and InvITs
Mar 25, 2020 Real Estate News
On Monday, the market regulator, SEBI, placed the framework for the encumbrance and invocation on the units of real estate and infrastructure investment trusts. SEBI released a separate circular extending the regulatory due date for filing and compliance for InvITs and REITs for the financial year ending March 31, by one month on the wake of the coronavirus pandemic.
The circular released that addressed the situation developing surrounding the outbreak of COVID-19 stated that a need for temporary relaxation in compliance requirements for REIT and InvIT is warranted.
SEBI explained further in the circulars released, that the entities required to hold units of REITs and InvITs may create the encumbrance on the units during the mandatory holding period wherein the encumbrance will include pledge, lien, non- disposal undertaking or any other covenant, negative lien, transaction, condition or arrangement in nature of encumbrance. The conditions are applicable under the conditions that for the creation and invocation of encumbrance are also included in the agreement executed for creation of such encumbrance.
SEBI explained that encumbrance will not be permitted to be invoked during the holding period unless the person invoking the encumbrance directly or through any trustee or agent acting in his behalf, will get itself or its nominee to become a re-designated sponsor. The mentioned conditions will not be applicable if the person invoking such encumbrance is already a member of a sponsor group.
SEBI sponsor and sponsor group creating encumbrance will have to provide details of the encumbrance to the manager for REIT and InvIT within two working days from the date of creation of such encumbrance in a specified format.
The circular further mentioned that if there are any changes in the information or the details of a pursuant to release or invocation of encumbrance, or in any other manner, need to be informed to the manager of REIT and InvIT within two working days from the date of such event.
Within two working days from the receipt of details, the REIT and InvIT will have to disclose the information to every stock exchange where the units of such trusts are listed. The market experts have first notified REIT and InvIT Regulations in 2014, allowing setting up and listing of such trusts which are popular in some advanced markets.
The circular released that addressed the situation developing surrounding the outbreak of COVID-19 stated that a need for temporary relaxation in compliance requirements for REIT and InvIT is warranted.
SEBI explained further in the circulars released, that the entities required to hold units of REITs and InvITs may create the encumbrance on the units during the mandatory holding period wherein the encumbrance will include pledge, lien, non- disposal undertaking or any other covenant, negative lien, transaction, condition or arrangement in nature of encumbrance. The conditions are applicable under the conditions that for the creation and invocation of encumbrance are also included in the agreement executed for creation of such encumbrance.
SEBI explained that encumbrance will not be permitted to be invoked during the holding period unless the person invoking the encumbrance directly or through any trustee or agent acting in his behalf, will get itself or its nominee to become a re-designated sponsor. The mentioned conditions will not be applicable if the person invoking such encumbrance is already a member of a sponsor group.
SEBI sponsor and sponsor group creating encumbrance will have to provide details of the encumbrance to the manager for REIT and InvIT within two working days from the date of creation of such encumbrance in a specified format.
The circular further mentioned that if there are any changes in the information or the details of a pursuant to release or invocation of encumbrance, or in any other manner, need to be informed to the manager of REIT and InvIT within two working days from the date of such event.
Within two working days from the receipt of details, the REIT and InvIT will have to disclose the information to every stock exchange where the units of such trusts are listed. The market experts have first notified REIT and InvIT Regulations in 2014, allowing setting up and listing of such trusts which are popular in some advanced markets.
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