SEBI has new plans for REITs, InVITs unitholders

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The Securities and Exchange Board of India (SEBI) has recently unveiled new norms for real-estate investment trusts (REITs) and Infrastructure Investment Trusts (InvITs). Per the new norms, all unitholders who, either collectively or individually, own up to 10% of all outstanding units of InvITs will be known as eligible unitholders. 

They will have the power to appoint a non-independent director to the board of directors of the investment manager. The same conditions will apply to REITs as well, with immediate effect. 

Here are a few other conditions laid down by SEBI to enhance small unitholder’s participations in the regulation and governance of these REITs and InVITs :

• The manager will have to conduct a monthly review of whether the unitholders who have appointed the director to the board continue to hold the required 10% holding.
• Starting 30th September, the manager will have to write to all unitholders within 10 days, seeking their submission for eligible unitholders.
• If multiple unitholders come together to become a single eligible unitholder, the group will have to designate 2 unitholders amongst them as their representatives. They will be responsible for receiving and disseminating any official information received from the manager.
• While the eligibility of this nominated director should be confirmed within 10 days of receiving the notice from eligible unitholders, the appointment of this director to the board should be completed in no more than 30 days.
• If the nominated director is found ineligible, the manager should communicate the same to all the eligible unitholders within 10 days. 

Both REITs and InVITs offer regular investors an affordable, liquid way to dabble with real estate. You can begin investing in both these instruments with the minimum amount ranging between Rs 10,000 and Rs 15,000. Currently, Indian markets have 5 registered REITs and 20 InVITs

REITs generate income via the rental income and property appreciation they receive from operating real estate properties. On the other hand, InVITs focus on long-term infrastructure development by investing in highways, roads, power plants and warehouses. Here, unitholders earn by means of dividends. Naturally, owing to where both REITs and InVITs invest in, REITs are far more liquid and easily tradable on the stock exchange. Former SEBI faculty Anil Upadhyaya notes that “while these regulations are welcome, the need to have more unitholder opinion on board is far greater when it comes to InVITs than REITs, since they demand a larger and more illiquid amount for investment purposes”