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Capital markets regulator Securities and Exchange Board of India (SEBI) on March 9 extended the deadline till March 15 for submission of public comments on the proposal related to higher liability for sponsors of investment vehicles – REITs and InvITs.
The regulator had on February 23 put out a consultation paper on sponsors’ holding in real estate investment trusts (REITs) and infrastructure investment trusts (InvITs) and sought public comments till March 8.
“It has been decided to extend the deadline for submission of comments up to March 15, 2023,” SEBI said in a public notice. In its consultation paper, the regulator has proposed changes to the rules governing REITs and InvITs, which would require sponsors to own a certain percentage of units in these investment vehicles.
The changes were proposed keeping in view the interest of the unit holders and the structural weaknesses associated with the absence of a sponsor for REITs and InvITs.
The watchdog suggested that 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.
The sponsors were also proposed to keep 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 at a nascent stage and is constantly evolving, requiring investment managers to have at least one sponsor throughout their life. REITs and InvITs are relatively new investment instruments in the Indian context but are extremely popular in global markets.
While a REIT includes a portfolio of commercial real property, a large portion of which is already leased, InvITs include a portfolio of infrastructure assets, such as highways and power transmission assets.