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Revised Sebi norms to improve liquidity for REIT market

On Tuesday, Sebi revised the minimum subscription and trading lot for publicly issued Reits and InvITs, with the minimum application value to be brought down from  ₹50,000 now to a range of Rs10,000-15,000 and the revised trading lot shall be of one unit.Premium
On Tuesday, Sebi revised the minimum subscription and trading lot for publicly issued Reits and InvITs, with the minimum application value to be brought down from 50,000 now to a range of Rs10,000-15,000 and the revised trading lot shall be of one unit.

  • Real estate companies commend the proactive initiative by the regulator to reduce the trading lots of both REITs and InVITs

The relaxation in investment norms real estate investment trusts by Securities and Exchange Board of India (Sebi) is expected to improve liquidity for Indian Reits and investors, bring in more retail investors and encourage more public listings in the future.

On Tuesday, Sebi revised the minimum subscription and trading lot for publicly issued Reits and infrastructure investment trusts (InvITs), with the minimum application value to be brought down from 50,000 now to a range of Rs.10,000-15,000 and the revised trading lot shall be of one unit.

“We welcome Sebi’s regulation to reduce the minimum application value from 50,000 to Rs. 10,000-15,000, and trading lot to one unit. The earlier 50,000 cap restricted participation to only a certain set of investors. We believe that this amendment makes investment in REITs at par with other equity options in India. Reduction in minimum application amount will further bring in more investors thus improving the liquidity in REITs," said Vinod Rohira, CEO, Mindspace Business Parks REIT

In July 2020, Mint first reported that Sebi was considering opening up Reits and InvITs to small investors by lowering the minimum trading lot size of REIT units from 50,000 to the value of just a single unit, much like how stocks are traded.

Currently, there are three public listed office Reits in the country – Embassy REIT, Mindspace Business Parks REIT and the most recently listed Brookfield India REIT.

Michael Holland, CEO, Embassy REIT said, “We commend this proactive initiative by the regulator to reduce the trading lots of both REITs and InVITs. Embassy REIT’s listing in 2019, coupled with our strong and resilient performance since then, has paved the way for Indian REITs to evolve a mainstream asset class. With approximately $2 billion of primary REIT equity having listed in India in the last two years, leading global and domestic asset managers and growing numbers of retail holders now form the foundation of REIT unit holder registers. The reduction in lot size will increase liquidity for the entire REIT market, enable REITs to be included into benchmark domestic indices and allow greater participation from newer pools of institutional and retail investors."

India’s largest developer DLF Ltd is already gearing up for an office Reit and has appointed advisors. More office developers are expected to join in the coming years even as the overall commercial office market stares at uncertainty in the wake of the covid-19 pandemic.

“…We have India’s best grade A office portfolios in the three listed REITs and there is no reason why retail and small investors should be denied an opportunity of earning returns in these rent generating assets. This move will improve the trading liquidity in units of existing REITs. REITs are transparent, well- governed investment assets for regular dividend income and a far superior way of owning commercial real estate. I believe this will also accelerate new REIT listings by developers like DLF and Prestige Group among others," said Gagan Randev, Executive Director, India Sotheby's International Realty.

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