SEBI reduces minimum application amount in REITs and InvITs

In a board meeting held on Tuesday, SEBI has amended the Real Estate Investment Trusts (REITs) Regulations, and Infrastructure Investment Trusts (InvITs) Regulations, 2014 to reduce the minimum application value in case of REITs and InvITs to ₹10,000 and ₹15,000 while trading can be done in a lot of one unit.

“The Board considered and approved the amendments to SEBI (Real Estate Investment Trusts) Regulations, 2014 and SEBI (Infrastructure Investment Trusts) Regulations, 2014, for revision in minimum subscription and trading lot for publicly issued REITs and InvITs. The revised minimum application value shall be within the range of INR 10,000-15,000 and the revised trading lot shall be of one unit,” said the SEBI circular.

Experts believe that it’s a move in the right direction as it will help in better participation from investors and will improve liquidity.

“REITs need to be treated as equity if we want to see more participation from India. The ₹50,000 cap restricted participation to only a certain set of investors. We welcome this move by SEBI. Reduction in minimum application amount in the range of Rs.10,000-15,000, and reducing trading lot to one unit, will bring in more investors thus improving the liquidity in REITs,” said Vinod Rohira, CEO, Mindspace Business Parks REIT

Right now the minimum investment amount in case of REITs is ₹50,000 while in case of InVITs it is ₹1 lakh. The reduction in lot size will allow investors with lower sum to invest in REITs and InvITs. It will help more retail participation apart from institutional and high net worth individuals.

However, experts are awaiting clarity on the reduction of lot size to one unit. If the lot size is reduced to one unit then the minimum application amount may be reduced further.

REITs invest in commercial real estate. They earn rental income from their holdings which is passed on to investors. It has to distribute 90% of its cash flows to investors at least once in six months. Investors also benefit from capital appreciation in the underlying assets.

An infrastructure InVIT invests in infrastructure projects and has a similar structure.

Right now, there are three listed REITs— Mindspace Business Parks, Embassy Office Parks, and the recently listed Brookfield India Real Estate Trust while there are two InVITs— IndiaGrid Trust and IRB, listed in India.