The Securities and Exchange Board of India (SEBI) on Sunday approved the setting up of real estate investment trusts (REITs), a move that may offer a new source of financing to India’s cash-strapped property developers.
REITs are listed entities that mainly invest in income-producing real estate assets, the earnings of which are mostly distributed to their shareholders. They generally get special tax treatment. At its board meeting in New Delhi, the SEBI said REITs should operate with an asset pool of at least five billion rupees ($81.78 million) and have an initial issue size of at least 2.5 billion rupees for shareholders.
REITs will be allowed to invest only in commercial properties, SEBI said. The regulator also approved allowing infrastructure investment trusts – a REIT-like structure that would allow developers to monetise their infrastructure assets through a stock exchange listing.
SEBI had announced plans to introduce REITs last October, but the plan was delayed amid uncertainty about the taxation structure for the new instrument.
In his budget address last month, Finance Minister Arun Jaitley cleared the way for REITs and infrastructure trusts by announcing tax benefits for both.
Separately, the regulator said it will simplify registration for stock brokers and clearing members, allowing them to obtain a unified registration for doing business in all the stock exchanges and depositories in the country.