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SEBI has proposed modifications to guidelines governing REITs and InvITs whereby sponsors can be required to personal a sure share of items in these funding automobiles.
Popping out with a session paper on the topic, the markets regulator mentioned the modifications are being proposed holding in thoughts the curiosity of unit holders and the structural vulnerabilities related to absence of a sponsor for Actual Property Funding Trusts (REITs) and Infrastructure Funding Trusts (InvITs).
The watchdog has urged that the sponsors of REITs/InvITs ought to maintain 15 per cent of the capital for a interval of three years from the date of itemizing as there isn’t a obligatory unit holding requirement after three years.
It has additionally been proposed to mandate sponsors to carry 5 per cent of the unit capital after 3-5 years, 3 per cent from 5-10 years, 2 per cent from 10-20 years and 1 per cent after 20 years.
“… it’s felt that there’s a have to have a minimum of one sponsor all through the lifetime of the REIT/ InvIT and the sponsor wants to carry sure share of items on a perpetual foundation with a purpose to guarantee that there’s some alignment of curiosity with the unitholder,” Sebi mentioned within the session paper dated February 23.
Because the REIT/InvIT business is in a nascent stage and repeatedly evolving, there’s a have to have a minimum of one sponsor all through the lifetime of the funding managers, it added.
SEBI famous that many of the sponsors have important shareholding in managers of REITs/InvITs which provides them the precise to nominate administrators and likewise has a say within the financing associated choices of the funding managers particularly in debt financing.
In response to the regulator, a sponsor of a REIT/InvIT whose items have been listed on the inventory exchanges for a interval of three years could be permitted to declassify because the sponsor topic to sure situations, together with that there needs to be a brand new inducted sponsor rather than present sponsor getting declassified.
At current, there are 5 REITs and 19 InvITs registered with Sebi. Out of them, 3 REITs and 15 InvITs have raised funds by preliminary provide and/or additional provide.
Stakeholders can submit their feedback on the session paper until March 8.
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