8/11/2019 Note on SEBI(Real Esate Investment Trusts) Regulations, 2014.docx

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SEBI (Real Estate Investment Trusts) Regulations 2014

Note on SEBI (Real Estate Investment Trust) Regulations, 2013 (in my words)

A Real Estate Investment Trust (REIT) is essentially a trust registered under Indian Trusts Act, 1972. It

basically operates by buying completed and revenue generating properties for primarily renting it/

subletting it so as to provide regular income to the investors from the rentals received from such

properties.

Now,

A REIT typically has 3 parties Trustee, Manager and Sponsor(s)

The sponsor is usually a Developer or Private equity fund and it is the party responsible for setting up a

REIT.

A trustee is a SEBI registered debenture trustee who is not an associate of the sponsor/manager. He is

appointed by the Sponsor for holding the REIT and its assets in trust for the benefit of the investors and

in compliance with the SEBI Regulation.

A Manager is a company which manages assets and investments of the REIT.

Some pre requisites:

There cannot be more than 3 sponsors of the REIT and each of them needs to hold at least 5% of

the units of REIT. Collectively they should hold 25% for at least three from the date of listing and

after that they can hold minimum 15% of the units of the REIT.

So how does a REIT function?

It starts with getting a certificate of registration from SEBI after applying to SEBI for the same

and complying with all the eligibility conditions.

Registration is usually followed by raising funds through initial offer provided that the value of

assets owned/proposed to be owned by REIT shall be of value not less than Rs 500 crore and

also the minimum issue size for initial offer should be Rs 250 crore.

After that it has to make sure that it invests in atleast two projects with not more than 60% of

the value of assets invested in one project.

Assuming revenues are generated, it has to make sure that atleast 90% of the net distributable

cash flows should be distributed.

This should be followed by full valuation of the assets through a valuer on a yearly basis and

updation of the same every 6 months including declaring of NAV within 15 days from the date of

such valuation/updation.

Some post requisites:

8/11/2019 Note on SEBI(Real Esate Investment Trusts) Regulations, 2014.docx

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SEBI (Real Estate Investment Trusts) Regulations 2014

The REIT has to make sure that 80% of the value of the REIT assets is generated by completed

and revenue generating properties. The rest can be generated by investing in mortgaged back

securities, developmental properties, government securities etc.

The borrowings and deferred payments should not exceed 49% of the value of the REIT Assets

and after such borrowings and deferred payments exceed 25%, approval from unit holders and

credit rating is necessary.