Real Estate Investment Trust (REITs) is a type of real estate Company modeled after mutual funds. REITs may invest in the properties themselves, generating income through the collection of rent, or they may invest in mortgages tied to the properties, helping them to finance the properties and generating interest income.
To safeguard investor’s interest, new norms for the launch of REITs in India will require such bodies to take adequate insurance cover for their realty assets. The detailed norms will also contain strict provisions for any misleading claims and will require a strict 10 point code of conduct for fair business.
Besides, any change in the sponsor group, which will be listed on stock exchanges and their units would need approval from a vast majority of unit holders. Failing which, they would need to be given an exit option from the new sponsor. At the same time, Sebi has decided to keep the disclosure requirements simpler for REITs, while registration fees would also be on lower side to raise funds from the capital markets. The new REIT regulations, which were clearly stated by Sebi, would be notified soon after. The new norms would allow formation of REITs to invest largely in completed and income generating real estate assets.
The value of total assets of such trusts would need to be Rs 500 crore, while at least 25 per cent of total number of units would need to be offered to the public investors. These trusts would not be allowed to invest in vacant or agricultural land.
REITs would be liable to unit-holders for their acts of commission or omissions, notwithstanding anything contained in a contract or agreement. Like any other listed entity, REITs would need to hold an annual meeting of unit- holders at least once a year. Also, they would need to provide their unit holders with an annual report within three months from the end of the financial year.
For a change in sponsor, or a change in control of sponsor, a prior approval would be required from unit holders, wherein the votes cast in favour of the resolution would need to be at least three times of the votes against such a proposal. If such a resolution fails to pass through, the new sponsor would need to give the dissenting unit- holders an option to exit by buying their units. The offer can remain open for maximum 30 days, while the listing would be mandatory within 12 working days from the closure of the offer.
Before listing, REITs would need to get registered with SEBI after paying Rs 1 lakh as application fees and further Rs 10 lakh as registration fees at the grant of certificate
Before listing, REITs would need to get registered with SEBI after paying Rs 1 lakh as application fees and further Rs 10 lakh as registration fees at the grant of certificate
