SEBI approved Real Estate Investment Trust (REIT) formation in India

The Securities and Exchange Board of India (SEBI) on Sunday approved the setting up of real estate investment trusts (REITs), a move that may offer a new source of financing to India’s cash-strapped property developers.

REITs are listed entities that mainly invest in income-producing real estate assets, the earnings of which are mostly distributed to their shareholders. They generally get special tax treatment.

At its board meeting in New Delhi, the SEBI said REITs should operate with an asset pool of at least 5 billion rupees ($81.78 million) and have an initial issue size of at least 2.5 billion rupees for shareholders.

REITs will be allowed to invest only in commercial properties, SEBI said.

The regulator also approved allowing infrastructure investment trusts — A REIT-like structure that would allow developers to monetize their infrastructure assets through a stock exchange listing.

SEBI had announced plans to introduce REITs last October, but the plan was delayed amid uncertainty about the taxation structure for the new instrument.

In his budget address last month, Finance Minister, Jaitley cleared the way for REITs and infrastructure trusts by announcing tax benefits for both.

Separately, the regulator said it will simplify registration for stock brokers and clearing members, allowing them to obtain a unified registration for doing business in all the stock exchanges and depositories in the country.

(1 U.S. dollar = 61.1400 rupee)

Source: Reuter India Website / 2014 Aug 10

As of January 2010, India was formulating legislation for REITs in the Indian real estate market. Once introduced, these Indian REITs (country specific/generic version I-REITs) will help individual investors enjoy the benefits of owning an interest in the securitised real estate market. The greatest benefit will be that of fast and easy liquidation of investments in the real estate market unlike the traditional way of disposing of real estate. The government and Securities and Exchange Board of India through various notifications is in the process of making it easier to invest in real estate in India directly and indirectly through foreign direct investment, through listed real estate companies and mutual funds.

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