Rules For Real Estate: New Norms For REIT and InvITs
Rules For Real Estate: New Norms For REIT and InvITs
The much sought after Real Estate Investment Trusts (REITs) have finally been created. Investors can now go in for REIT. Market regulator SEBI has indicated that new norms would help entities with at least 2 lakh rupees investment to earn from completed real estate projects.
New norms for REITs and Infrastructure Investment Trusts (InvITs) have been cleared by the board of SEBI . Final notification for the same will be made within one to two months from now, according to media reports.
"The idea is that even if somebody can invest as low as Rs 2 lakh, such a person can get the benefit of the income from the completed projects," SEBI Chairman U K Sinha has been quoted by the media as saying. The REIT guidelines will allow creation and listing of such trusts as well as their units . Trading can be done on the stock exchange just like equity shares. "Primarily REIT is with regard to completed projects, revenue generating projects," Sinha has been quoted as saying.
"As you may be aware that the government in the Finance Bill has already provided for tax treatment for REITs and InvITs. So with those tax treatments in place and Sebi regulations in place we can hope that there will be some progress in the real estate market and in the infrastructure market," the SEBI chairman has told leading dailies.
The SEBI chief has explained the modalities and said if "somebody creates a Special Project Vehicle (SPV) and has made an investment in an real estate project, units of that will be used to form the REIT and that Trust will issue shares". He has discussed how SEBI has waited for tax treatment to be cleared so that the regulations could be framed. The SEBI chairman also indicated that new norms may come into effect by October. The new norms will pave the way for 1 lakh crore rupees fund inflows from international as well as domestic investors. The new guidelines will herald a new investment avenue for the nation.
It will also help the Indian market to reach the same peaks as the developed markets such as US or Singapore. Through this step, trading in units of REITs and InvITs will be akin to any other security on stock exchanges. The REITs can singlehandedly attract 8 to 10 billion dollars worth of funds, according to some media reports. These new investment avenues will also reduce pressure on the banking system while ensuring the availability of fresh equity via long-term financing from foreign as well as domestic courses. Cash is king and money talks. With these new norms, investors have one more reason to celebrate.
