By Dr Sanjay Chaturvedi, LLB, PhD
Accommodation Times News Services
Security and Exchange Board of India have relaxed norms for Real Estate Investment Trust. ever since it was announced there was hardly any takers because of many rules which were restricting normal process including NAV and regular valuation. The investment through SPV and two tier investment process will now be more practical.
Maadhav Poddar, tax partner – real estate practice, EY – “Allowing REITs and InvITs to invest in two level SPV structure through a holding company will remove the need for a restructuring in many cases prior to creation of a REIT / InvIT thereby reducing transaction costs and timelines; this will also ensure liquidity to investors and developers who had invested at the Hold Co level. Increasing the percentage which a REIT can invest in under construction property from 10% to 20% will allow for more portfolios to be listed which hitherto could not be considered as their under construction portion was greater than 10%. Reducing the mandatory sponsor holding in an InvIT from 25% to 15% will allow for more liquidity to Sponsors. Apart from the above SEBI has made changes in regulations relating to number of sponsors, requirements for private placement of InvITs, definitions of associates, related parties etc. One will need to wait for the fine print to see the impact of these changes.
World over, REITs are best bet for securitised form of real estate because its units are classified as exchange traded products. It has more advantage then Mutual Funds because its management structure and distribution of dividends. It has more transparent process and get good liquidity form for real estate.