SEBI’s REIT, InvIT overhaul: What investors can expect

SEBI has approved a series of changes to the regulatory framework for REITs and InvITs, including allowing Depository Receipts (DRs) against their units in permissible overseas jurisdictions, in a move aimed at facilitating foreign capital into these investment vehicles.

Under the revised framework, voting requirements for certain matters will also change. Instead of requiring approval from holders representing at least 75% of all outstanding units, the threshold will be based on 75% of votes cast. SEBI said the change addresses difficulties arising from dispersed ownership and non-participation by some unitholders.

The regulator has also changed the framework governing exit offers when a sponsor changes. Where one of multiple sponsors exits, the offer can be made by the outgoing sponsor or its group entities, or by the continuing sponsor or its group entities. SEBI has also clarified that dissenting unitholders will mean those who vote against the resolution, and not those who do not participate.

All units tendered under an exit offer will have to be accepted. If the minimum public unitholding falls below the prescribed threshold following the offer, compliance will have to be restored within one year.

For investors, the key change is therefore two-fold: REITs and InvITs get a new potential route to tap overseas capital, while changes to voting and exit-offer rules seek to address issues around dispersed ownership and sponsor changes.

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