SEBI (Securities and Exchange Board of India) has proposed measures to enhance transparency and fairness in the Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs) sector. The proposals include limiting the number of subordinate units issued by REITs and InvITs, ensuring uniformity in the rights granted to these units, and imposing a ceiling on the extent of subordinate units that can be issued. SEBI aims to foster a more balanced and standardized market environment by introducing these measures. The regulator has invited insights and feedback from market participants and stakeholders on these proposals until January 31.
In a stride towards enhancing transparency and fairness in the Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs) sector, SEBI has introduced proposals in its latest consultation paper, unveiled last week.
SEBI's suggestions encompass not only limiting the number of subordinate units issued by REITs and InvITs but also ensuring uniformity in the rights granted to these units. This strategic approach aims to foster a more balanced and standardized market environment.
Building upon the consultation paper issued last December, SEBI now proposes to impose a ceiling on the extent of subordinate units that can be issued. The regulator suggests that the number of subordinate units issued at the time of asset acquisition should not exceed 10% of the acquisition price, with the total outstanding subordinate units not surpassing 10% of the total number of outstanding ordinary units.
Moreover, SEBI advocates for clarity regarding the nature of inferior rights associated with subordinate units. The proposal emphasizes that subordinate units should be limited to having either inferior voting rights, inferior distribution rights, or a combination of both. To bring cohesion to the rights conferred by subordinate units, SEBI insists on uniformity, prohibiting the existence of multiple classes of subordinate units.
SEBI's proposals extend to the terms and conditions of subordinate units, which are mutually agreed upon between the asset seller (sponsor) and the asset buyer (REIT/InvIT) at the time of acquisition. To maintain transaction certainty and prevent disruptions, SEBI suggests disallowing any alterations to these terms and conditions after the issuance of subordinate units.
Market participants and stakeholders are encouraged to share their insights on these visionary proposals until January 31. SEBI's unwavering commitment to refining the REITs and InvITs landscape sets the stage for a more robust and equitable market. Stay connected with Prop News Time for exclusive updates as this story continues to evolve.
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