Sebi to ease entry barriers investment in Reits & InvITs

Capital market regulator Sebi is planning to ease entry barriers for domestic institutional investors like insurers and pension funds to encourage robust inflows into the Reits and InvITs markets.

“Sebi is sitting down with the Irdai and the PFRDA to evolve a set of guidelines to ensure that insurers and pension funds do not face much of an entry barriers into the Reits and InvITs. This is what we are working on now,” Sebi whole-time member G Mahalingam said earlier this week.

An infrastructure investment trust (InvIT) is like a mutual fund that enables direct investment of small amounts from individual/institutional investors into infrastructure to earn a small portion of the income as return.

InvITs, notified by Sebi in September 2014, work like mutual funds or real estate investment trusts and can be treated as the modified version of Reits designed to suit the specific circumstances of the infrastructure sector.

A Reit, or real estate investment trust, is a company that owns or finances income-producing real estate assets.

Modelled after mutual funds, Reits provide investors regular income streams, diversification and long-term capital appreciation. Sebi notified it in November 2014.

Mahalingam was speaking at the Reits and InVits institutional investors seminar organised by the industry body CII in Mumbai. Mahalingam said it can take up to a year for the Reits and InVits markets to become active which is estimated to be worth $20-25 billion.

Mahalingam noted that the markets watchdog Sebi has imposed investment caps on teatime investors as it does not want them to invest in a big way in Reits and InVits initially and burn their fingers.

“This is the evolutionary phase and in this phase we need to adopt a very careful phase of experimentation.

At present though domestic institutional investors are allowed to participate in Reits and InVits, there are some grey areas which the regulator is looking to smoothen their participation.                    —Agencies