New Delhi: Sebi Aims to Attract Investors into REITs with Tax Incentives
The market regulator, the Securities and Exchange Board of India (Sebi), is exploring ways to modify its norms to offer tax reductions in an effort to attract investors into Real Estate Investment Trusts (REITs). The regulatory body believes that this move will significantly aid cash-strapped companies in raising funds.
Efforts to Make REITs Successful
To ensure the success of REITs, Sebi plans to solicit consideration for tax incentives for the trusts from tax officials. Following a five-year period since the initial draft norms for REITs were issued, Sebi took the step to release the norms for the trusts on October 10. This initiative is anticipated to inject much-needed capital into the cash-strapped real estate sector.
Regulatory Framework Similar to IPOs
Sebi has formulated a regulatory framework for REITs akin to that of Initial Public Offerings (IPOs). The norms include provisions for minimum offer size, public float, and the size of assets eligible to be part of REITs. The trusts are proposed to be allowed to list on exchanges through IPOs and through offers, thereby enabling them to raise funds. However, REITs will not be permitted to float additional offers.
Eligibility Criteria for Unit Investments
As per the rules, only those units that have a minimum of 90% investments in completed, revenue-generating projects will be eligible. The REITs may raise funds from both domestic and foreign investors, at least initially, until the market develops. Furthermore, it is proposed that the units of REITs may be offered exclusively to high net-worth individuals (HNIs) and institutional investors.
