The Securities and Exchange Board of India (SEBI) has introduced a new unit-based employee benefit scheme for Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs), effective July 12, 2024. Instead of cash bonuses, employees will receive units in their respective trusts, with their value tied to market performance. The scheme will include a dedicated Employee Benefit Trust (EBT) to manage these units, which must come from existing units, not new issuances. This move aims to align employee interests with the trust's performance, enhancing both attraction and retention of talent. SEBI has set rules to ensure transparency and prevent insider trading.
Employees of Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs) may soon see a new benefit option. The Securities and Exchange Board of India (SEBI) recently introduced a framework for "unit-based employee benefit schemes" effective from July 12, 2024.
Under this scheme, employees would receive units in the REIT or InvIT they work for, rather than a traditional cash bonus. The value of these units would fluctuate with the market performance of the trust. If the trust performs well, the value of the units increases, potentially offering employees a significant reward.
A separate Employee Benefit Trust (EBT) will be created to manage the employee units. The investment manager of the REIT or InvIT can contribute units to the EBT in lieu of some management fees. These units must not be from additional issuances but rather a portion of existing units.
This scheme offers potential advantages for both employees and employers. Employees have the chance to share in the success of the trust they work for, with the value of their units potentially increasing. Employers benefit by offering a competitive and performance-based benefit option, potentially attracting and retaining top talent.
SEBI has established rules to ensure transparency and prevent insider trading. The EBT cannot sell the units they hold, except to provide benefits to employees. Additionally, insider trading regulations apply to those involved in the scheme, including the manager/investment manager, directors, key personnel and recipients of benefits.
REITs and InvITs are a relatively new but growing investment option in India. Globally, they offer investors a way to gain exposure to real estate and infrastructure projects without directly owning the assets. The introduction of unit-based employee benefits could make working for these trusts an even more attractive proposition.