India releases draft REIT regulations

The Securities and Exchange Board of India has released draft regulations for developing India’s REIT market, a move expected to boost real estate investment in the country.


The Securities and Exchange Board of India (SEBI) has released its long-awaited draft regulations regarding the establishment of the country’s real estate investment trust (REIT) market, which is expected to further open up the country’s real estate investment market. 

The SEBI is hopeful that REITs in India will provide investors another avenue of investment and give developers and private equity funds “avenues of exit, thus providing liquidity and enabl[ing] them to invest in other projects,” according to an SEBI circular.

SEBI underlined the importance of the improved liquidity, transparency and accountability that REITs have brought to real estate markets elsewhere, it said in the circular, as well as providing retail investors a chance to participate.

“This is a very positive step to improve the structure of the Indian real estate market,” Rahul Rai, head of real estate investment at ICICI Prudential Asset Management Company, said in an APREA statement. “Setting up of REITs will allow investors to participate in quality real estate with transparent pricing and built in liquidity mechanism. This will help in further institutionalization of the market.”

The 58-page circular detailed the structure and registration framework that REITs will operate under. All REITs are required to have listed units, but the regulations have also made some provisions for delisting certain parts of the REIT over time. For registration and listing, a REIT’s assets have to total at least INR10 billion (€120 million; $162 million) and the initial offer must be no less than INR2.5 billion.

Until the market “develops”, SEBI has proposed that the minimum subscription for REITs be as high as INR100,000, in order to limit the REITs to institutional investors and high net-worth individuals. SEBI was unclear how long it would enforce that rule, however.

Yet domestic real estate investors pointed out that India’s government will still need to work out the tax and legal structure for the real estate market in order for REITs to thrive. “Now that SEBI has delivered on its part, it’s up to the Government to focus on the tax regime and get it done to really kick-start the market,” S. Sriniwasan, chief executive of Kotak Realty Fund, said in the statement.