Real estate enthusiasts would now have more reasons to smile. Market regulator Sebi has amended minimum subscription norms for Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs).
The guidelines relate to the determination of trading lot size and allotment in case of REITs and InvITs. These amendments will be effective from 23 April 2019.
Presently, an investor needs to subscribe to at least Rs 2 lakh worth of initial public offer of an REIT issue. The minimum subscription limit for an InvIT is Rs 10 lakh, generally.
After Sebi’s amendment, the minimum subscription has been brought down to Rs 1 lakh for InvITs and Rs 50,000 in case of REITs respectively.
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For the initial listing, Sebi has prescribed the trading lot size to be of 100 units. In case of a follow-on offer, the underlying REIT/InvIT should follow the same lot size.
Sebi has also asked the exchanges to estimate the number of units in the trading lot for such REITs/InvITs. It can only be done after consulting the underlying institution and be implemented within six months from the date of circular.
Further, there has been a change in limits for aggregate consolidated borrowings and deferred payments. These are expressed as net of cash and cash equivalents. As per the circular, the limits have been hiked to 70% of the value of InvITs assets.
Additionally, SEBI also increased the leverage limit for InvITs from 49% to 70%. Also, those InvITs who are planning to increase their leverage beyond 49% will be subject to enhanced disclosure requirements.
This includes giving specific details of available asset cover, debt-equity ratio, interest service coverage ratios, debt service coverage ratios and net worth.
These amendments will provide the issuers higher flexibility at the time of fundraising. The investors will also get better access to these investment vehicles.