SEBI extends deadline till March 15 to submit public comments on proposal on REITs, InvITs sponsors

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Capital markets regulator Securities and Exchange Board of India (SEBI) on March 9 extended the timeline till March 15, for submission of public comments on a proposal pertaining to higher responsibility for sponsors of investment vehicles — REITs and InvITs.

The regulator had put in place a consultation paper on holding of sponsors in Real Estate Investment Trust (REITs) and Infrastructure Investment Trust (InvITs) on February 23 and sought public comments on the same by March 8.

“It has been decided to extend the timeline for submission of comments to March 15, 2023,” the SEBI said in a public notice. In its consultation paper, the regulator proposed changes to rules governing REITs and InvITs whereby sponsors will be required to own a certain percentage of units in these investment vehicles.

The changes were proposed keeping in mind the interest of unit holders and the structural vulnerabilities associated with absence of a sponsor for REITs and InvITs.

The watchdog suggested that the sponsors of REITs/InvITs should hold 15% of the capital for a period of three years from the date of listing as there is no mandatory unit holding requirement after three years.

It was also proposed to mandate sponsors to hold 5% of the unit capital after 3-5 years, 3% from 5-10 years, 2% from 10-20 years and 1% after 20 years.

As per SEBI, the REIT/InvIT industry is in a nascent stage and continuously evolving, there is a need to have at least one sponsor throughout the life of the investment managers. REITs and InvITs are relatively new investment instruments in the Indian context but are extremely popular in global markets.

While a REIT comprises a portfolio of commercial real assets, a major portion of which is already leased out, InvITs comprise a portfolio of infrastructure assets, such as highways and power transmission assets.