Chapter 2 Real Estate Investment Trust – Corporate Funding and Listing in Stock Exchange ICSI Study Material is designed strictly as per the latest syllabus and exam pattern.
Real Estate Investment Trust – Corporate Funding & Listing in Stock Exchange Study Material
Question 1.
What is a Real Estate Investment Trust (REIT)? What are the eligibility criteria for granting a certificate to an applicant to act as REIT as per SEBI guidelines in this regard? (Dec 2016, 8 marks)
Answer:
(I) Definition of Real Estate Investment Trust(REIT): “REIT’ or “Real Estate Investment Trust” shall mean a trust registered as such under these regulations i.e. SEBI (Real Estate Investment Trusts)Regulations, 2014.
(II) Eligibility criteria [Regulation 4]:
For the purpose of the grant of certificate to an applicant, the Board shall consider all matters relevant to the activities as a REIT, namely,
(a) the applicant is a trust and the instrument of trust is in the form of a deed duly registered in India under the provisions of the Registration Act, 1908;
(b) the trust deed has its main objective as undertaking activity of REIT in accordance with these regulations and includes responsibilities of the Trustee in accordance with Regulation 9;
(c) persons have been designated as sponsor(s), manager and trustee under these regulations and all such persons are separate entities;
(d) with regard to sponsor(s):
- there are not more than 3 sponsors each holding or proposing to hold not less than 5% of the number of units of the REIT on post-initial offer basis;
- the sponsor(s), on a collective basis, have a net worth of not less than one ₹ 100 crores: Provided that each sponsor has a net worth of not less than ₹ 25 crores; and
- the sponsor or its associate(s) has not less than 5 years experience in development of real estate or fund management in the real estate industry: – Provided that where the sponsor is a developer, at least 2 projects of the sponsor have been completed;
(e) with regard to the manager:
- the manager has a net worth of not less than ₹ 10 crores, if the manager is a body corporate or a company or net tangible assets of value not less than ₹ 10 crores in case the manager is a LLP;
- the manager or its associate has not less than 5 years experience in fund management or advisory services or property management in the real estate industry or in development of real estate;
- the manager has not less than two key personnel who each have not less than 5 years experience in fund management or advisory services or property management in the real estate industry or in development of real estate;
- the manager has not less than half, of its directors in the case of a company or of members of the governing Board in case of an LLP, as independent and not directors or members of the governing Board of another REIT; and
- the manager has entered into an investment management agreement with the trustee which provides for the responsibilities of the manager in accordance with Regulation 10;
(f) with regard to the trustee:
- the trustee is registered with the Board under SEBI (Debenture Trustees) Regulations, 1993 and is not an associate of the sponsor(s) or manager; and 10
- the trustee has such wherewithal with respect to infrastructure, personnel, etc. to the satisfaction of the Board and in accordance with circulars or guidelines as may be specified by the Board;
(g) no unit holder of the REIT enjoys preferential voting or any other rights over another unit holder;
(h) there are no multiple classes of units of REIT;
(i) the applicant has clearly described at the time of application for registration, details pertaining to proposed activities of the REIT;
(j) the applicant and parties to the REIT are fit and proper persons based on the criteria as specified in Schedule 11 of the Securities and Exchange Board of India (Intermediaries) Regulations, 2008;
(k) whether any previous application for grant of certificate by the applicant or any related party has been rejected by the Board;
(l) whether any disciplinary action has been taken by the Board or any other regulatory authority against the applicant or any related party under any Act or the regulations or circulars or guidelines made thereunder.
Question 2.
Who is the sponsor of a Real Estate Investment Trust? What are the provisions with respect to the holding of units by the sponsor in the REIT? Describe, (Dec 2017, 7 marks)
Answer:
(I) Definition of “Sponsor group”:
As per SEBI (Real Estate Investment Trust) Regulation, 2014, “Sponsor Group” – includes:
(i) the sponsor(s);
(ii) in case the sponsor is a body corporate:
(a) entities or person(s) which are controlled by such body corporate;
(b) entities or person(s) who control such body corporate;
(c) entities or person(s) which are controlled by person(s) as referred at clause b.
(iii) in case sponsor is an individual:
(a) an immediate relative of such individual (i.e., any spouse of that person, or any parent, brother, sister or child of the person or of the spouse); and
(b) entities or person(s) which are controlled by such individual.
(II) Investment by sponsor:
Each sponsor shall hold or propose to hold not less than 5% of the number of units of the REIT on post-initial offer basis. Each sponsor and sponsor group shall be clearly identified in the application of registration to SEBI and in the offer document/placement memorandum, as applicable.
However, for each sponsor group not less than one person shall be identified as a sponsor.
Question 3.
Regulation 11 of SEBI (Real Estate Investment Trust), Regulations, 2014 provides for rights and responsibilities of sponsor(s). Explain. (Dec 2018, 5 marks)
Answer:
Regulation 11 of SEBI (Real Estate Investment Trusts) Regulations, 2014, provides for the rights and responsibilities of the sponsor(s) which are as follows:
1. The sponsor(s) shall set up the Real Estate Investment Trusts (REIT) and appoint the Trustee of the REIT.
2. The sponsor(s) shall transfer or undertake to transfer, subject to a binding agreement and adequate disclosures in the initial offer document, their entire shareholding or interest and rights in the holdco (holding company) and/or Special Purpose Vehicle (SPV) or entire ownership of the real estate assets to the REIT prior to allotment of units of the REIT to the applicants.
However, this shall not apply to the extent of any mandatory holding of shares or interest and rights in the holdco and/or SPV by the sponsor(s) and sponsor group(s) as required under any Act or regulations or circulars or guidelines of government or regulatory authority as specified from time to time.
3. With respect to holding of units in the REIT,-
(a) the sponsor(s) shall collectively hold a minimum of twenty five percent of the total units of the REIT after initial offer on a post-issue basis: However, the minimum sponsor(s) holding specified in this clause shall be held for a period of atleast three years from the date of listing of such units.
Further, any holding of the sponsor (s) exceeding the minimum holding as specified in this clause, shall be held for a period of atleast one year from the date of listing of such units.
(b) the sponsor(s) together hold not less than fifteen percent of the outstanding units of the listed REIT at all times;
(c) each of the sponsor individually shall hold not less than five percent of the outstanding units of the listed REIT at all times.
4. If the sponsor(s) propose(s) to sell its units below the limit specified in (b) or (c) of Point no. 3 as mentioned above:
(a) Such unit shall be sold only after a period of 3 years from the date of listing of the units;
Prior to sale of such units, the sponsor(s) shall arrange for another person(s) or entity(ies) to act as the re-designated sponsor(s) where the re-designated sponsor shall satisfy the eligibility norms for the – sponsor as specified under the SEBI REIT Regulations;
However, such units may also be sold to an existing sponsor;
(c) The proposed redesignated sponsor shall obtain approval from the unit holders or provide option to exit to the unit holders in accordance with guidelines as may be specified.
However, this clause shall not apply where the units are proposed to be sold to an existing sponsor or member of sponsor group.
5. If re-designated sponsor(s) proposes to sell its units to any other person, condition specified in (a), (b) and (c) of point no. 4 as mentioned above, shall be complied with.
Question 4.
Explain the term ’Strategic Investor’ with reference to the public issue of REITs and InVITs. (Dec 2019, 3 marks)
Answer:
‘Strategic investor’ means:
- an infrastructure finance company registered with RBI as a NBFC ;
- a Scheduled Commercial Bank;
- an international multilateral financial institution;
- a systemically important NBFC with RBI;
- a foreign portfolio investors;
who invest either jointly or severally not less than 5 % of the total offer size of the InvIT or such amount as may be specified by SEBI with applicable provisions of the FEMA Act, 1999 and the rules or regulations or guidelines made there under.
Following other aspects shall also be considered:
- Holding by strategic investors – Minimum 5%, maximum 25%.
- Holding by public, other than strategic investors and sponsors – Minimum 25%
- Holding by sponsor – Minimum 5%, maximum 70%
- The price at which units are offered to the strategic investors must not be less than the price determined in the public issue.
- It must be ensured that the subscription amount is kept in the separate account until the public issue is opened.
- The units subscribed by strategic investors, pursuant to the unit subscription agreement, will be locked-in for a period of 180 days from the date of listing in the public issue.
Question 5.
Explain guidelines issued by SEBI on participation by the strategic investors in InvITs and REITs vide its circular dated 18th January, 2018. (Dec 2020, 5 marks)
Answer:
Participation by the ‘strategic investors’ in the public issue of the REITs
1. Holding requirements
- Holding by strategic investors – Minimum 5%, Maximum 25%.
- Holding by public, other than strategic investors and sponsor- Minimum 25%
- Holding by sponsor – Minimum 5% and maximum 70%
2. Issue price of the units and utilisation of funds
- The price at which units are offered to the strategic investors must not be less than the price determined in the public issue.
- It must be ensured that the subscription amount is kept in the separate account until the public issue is opened.
3. Lock-in period
The units subscribed by strategic investors, pursuant to the unit subscription agreement, will be locked-in for a period of one hundred and eighty days from the date of listing in the public issue.
Question 6.
Explain the meaning of ‘Strategic Investor’ as mentioned in the SEBi (Real Estate Investment Trusts) Regulations, 2014. (Dec 2021, 5 marks)
Answer:
As per Regulation 2(1) (ztb) of the SEBI (Real Estate Investment Trusts) Regulations, 2014 provides the definition of “Strategic Investor”.
It means,-
a. an infrastructure finance company registered with the Reserve Bank of India (RBI) as a Non-Banking Financial Company (NBFC);
b. a Scheduled Commercial Bank;
c. a multilateral and/or bilateral development financial institution;
d. a systemically important Non-Banking Financial Company registered with the Reserve Bank of India;
e. a foreign portfolio investor,
f. an insurance company registered with the Insurance Regulatory and Development Authority of India;
g. a mutual fund.
who invest, either jointly or severally, not less than 5% of the total offer size of the REIT or such amount as may be specified by the SEBI from time to time, subject to the compliance with the applicable provisions, if any, of the Foreign Exchange Management Act, 1999 and the rules or regulations or guidelines made thereunder.
Question 7.
“No person shall act as a Real Estate Investment Trust (REIT), unless it is registered with SEBI under the REIT Regulations”. Structure a REIT with due consideration to Eligibility and basic conditions to be fulfilled under SEBI (REIT) Regulations, 2014. (June 2022, 5 marks)
Question 8.
Define important words used in SEBI (Real Estate Investment Trusts) Regulations. 2014.
Answer:
REIT [Reg. 2]
“REIT” or Real Estate Investment Trust shall mean a trust registered as such under these regulations.
REIT assets [Reg. 2]
REIT assets means real estate assets and any other assets owned by the REIT whether directly or through a special purpose vehicle.
Related party to the REIT [Reg. 2]
“Related party” shall be defined under the Companies Act, 2013 or under the applicable accounting standards and shall also include:
- Parties to the REIT
- Sponsors, directors and partners of the persons in clause I.
“Real Estate” Or “Property” [Reg. 2]
“Real Estate” Or “Property” means land and any permanently attached improvements to It, whether leasehold or freehold and includes buildings, sheds, garages, fences, fittings, fixtures, warehouses, car parks, etc. and any other assets incidental to the ownership of real estate but does not include mortgage.
Apart the above, following captured within the above mentioned definition of infrastructure shall be considered under real estate or property”,
- hotels, hospitals and convention centers, forming part of composite real estate projects, whether rent generating or income generating;
- common infrastructure for composite real estate projects, industrial parks and SEZ;
“Real Estate [Reg. 2]
Assets” means properties owned by REIT whether directly or through a holdco and /or special purpose vehicle.
Holdco or holding company [Reg. 2]
“Holdco” or “holding company” shall mean a company or LLP,
- in which REIT holds or proposes to hold controlling interest and not less than 51% of the equity share capital or Interest and which it in turn has made investments in other SPV(s), which ultimately hold the property(ies);
- which is not engaged in any other activity other than holding of the underlying SPV(s), holding of real estate/properties and any other activities pertaining to and incidental to such holdings.
Associate [Reg. 2]
“Associate” of any person shall be as defined under the Companies Act, 2013 or under the applicable accounting standards and shall also include following:
- Any person controlled, directly or indirectly, by the said person;
- Any person who controls, directly or indirectly, the said person;
- Where the said person is a company or a body corporate, any person(s) who is designated as promoter(s) of the company or body corporate and any other company or body corporate with the same promoter(s);
- Where the said person is an individual, ány relative of the individual;
Special Purpose Vehicle Purpose [Reg. 2]
Special Purpose Vehicle or SPV means any company or LIP, –
- in which the REIT holds or proposes to hold controlling interest and not less than 50% of the equity share capital or interest;
- which holds not less than 80% of its assets directly in properties and does not invest in other special purpose vehicles; and
- which is not engaged in any activity other than holding and developing property and any other activity incidental to such holding or development.
Sponsor [Reg. 2]
“Sponsor” means any person(s) who set(s) up the REIT and designated as such at the time of applicatioñ made to the Board;
Transferable Development Rights [Reg. 2]
Transferable development rights or “TDR” shall mean development rights issued by the competent authority under relevant laws in lieu of the area relinquished or surrendered by the owner or developer or by way of declared incentives by the government or authority;
Registration and eligibility for registration [Regulations 3,4,5 & 6]
Question 9.
Explain the registration and eligibility for registration of REIT as per SEBI (Real Estate Investment Trusts) Regulations, 2014.
Answer:
(I) Mandatory Registration of real estate Investment trusts [Reg.3]:
(a) No person shall act as a REIT unless ¡t is registered with the Board under these regulations.
(b) An application for grant of certificate of registration as REIT shall be made, by the sponsor m Form A as specified in the Schedule I to these regulations and shall be accompanied by a non-refundable application fee of such amount and shall be payable in the manner as specified in Schedule II to these regulations.
(II) Eligibility criteria [Reg. 4]:
For the purpose of the grant of certificate to an applicant, SEBI shall consider all matters relevant to the activities as a REIT, namely, –
(a) Applicant: The applicant is the sponsor on behalf of trust and the instrument of trust is in the form of a deed duly registered in India under the provisions of the Registration Act, 1908.
(b) Sponsor: Each sponsor shall hold or propose to hold not less than 5% of the number of units of the REIT on post-initial offer basis. Each sponsor and sponsor group shall be clearly identified in the application of registration to SEBI and in the offer document/placement memorandum, as applicable. However, for each sponsor group not less than one person shall be identified as a sponsor.
(c) Manager: It must have net worth of not less than ₹ 10 crore; not less than 5 years of experience in fund management/ advisory services/ property management in the real estate industry or in development of real estate; and not less than 2 key personnel who each have not less than 5 years of experience in fund management/ advisory services/ property management in the real estate industry or in development of real estate.
(d) Trustee: It should be registered with SEBI under SEBI (Debenture Trustees) Regulations, 1993; not an associate of the sponsor/ manager/ principal valuer and the trustee has such wherewithal with respect to infrastructure, personnel, etc. to the satisfaction of SEBI.
(e) The unit holder of the REIT shall not enjoys superior voting or any other rights over another unit holder and there are no multiple classes of units of REIT; Apart the above, subordinate units may be issued only to the sponsors and its associates, where such subordinate units shall carry only inferior voting or any other rights compared to other units.
(f) The applicant has clearly described details related to proposed activities at the time of application for registration.
(g) The applicant and parties to the REIT shall be fit and proper persons.
(h) Whether any previous application for grant of certificate by the applicant or any related party has been rejected by SEBI.
(i) Whether any disciplinary action has been taken by SEBI or any other regulatory authority against the applicant or any related party under any Act or regulations or circulars etc.
(III) Furnishing of further information [Regulation 5]: The Board may require the applicant to furnish any such information or clarification as may be required by it for the purpose of processing of the application.
(IV) Procedure for grant of certificate [Regulation 6]: After satisfaction the Board will grant certificate of registration in Form B under Schedule I.
Conditions of certificate [Regulations 7]
Question 10.
What are the conditions for grant of certificate by SEBI under this regulations?
Answer:
The certificate granted under regulation 6 shall, be subject to the following conditions, namely,-
(a) the REIT shall abide by the provisions of the Act and these regulations;
(b) the REIT shall forthwith inform the Board in writing, if any information or particulars previously submitted to the Board are found to be false or misleading in any material particular or if there is any material change in the information already submitted;
(c) the REIT and parties to the REIT shall satisfy with the conditions specified in Regulation 4 i.e. eligibility conditions at all times;
(d) the REIT and parties to the REIT shall comply, at all times, with the code of conduct.
Rights and Responsibilities of Trustee:
Question 11.
What are the rights and responsibilities of Trustee?
Answer:
Regulation 9 of SEBI (REIT) Regulations, 2014, prescribes the rights and responsibilities of a Trustee of a REIT which are discussed below:-
- The Trustee shall hold the REIT assets in trust for the benefit of the unit holders.
- The Trustee shall enter into an investment management agreement with the manager on behalf of the REIT.
- The trustee shall oversee activities of the manager in the interest of the unit holders, and shall obtain compliance certificate from the manager in the form as may be specified on a quarterly basis.
- The trustee shall ensure that the manager complies with the reporting
and disclosures requirements in these regulations and in case of any delay or discrepancy, require the manager to rectify the same on an urgent basis. - The trustee shall review the transactions carried out between the manager and its associates and where the manager has advised that there may be a conflict of interest, shall obtain confirmation from a practising chartered accountant or a valuer, as applicable that such transaction is on arm’s length basis.
- The trustee shall periodically review the status of unit holders’ complaints and their redressal undertaken by the manager.
- The trustee shall make distributions and ensure that the manager makes timely declaration of distributions to the unit holders.
- The trustee may require the manager to set up such systems and submit such reports to the trustees, as may be necessary for effective monitoring of the performance and functioning of the REIT.
- The trustee shall ensure that subscription amount is kept in a separate bank account in name of the REIT and is only utilized for adjustment against allotment of units or refund of money to the applicants till the time such units are listed.
- The trustee shall ensure that the remuneration of the valuer is not linked to or based on the value of the asset being valued.
- The trustee shall ensure that the manager convenes meetings of the unit holders in accordance with these regulations and oversee the voting by unit holders and declare outcome of the voting.
- The trustee may take up with SEBI or with the designated stock exchange, any matter which has been approved in an annual meeting or special meeting, if the matter requires such action.
- The trustee shall obtain prior approval from the unit holders in accordance with these regulation and from SEBI in case of change in control of the manager.
- The trustee of the REIT shall not invest in units of the REIT in which it is designated as the trustee.
- The trustee shall ensure that the activity of the REIT is being operated in accordance with the provisions of the trust deed, the offer document and if any discrepancy is noticed, shall inform the same to SEBI immediately in writing.
- The trustee shall provide to SEBI and to the designated stock exchange such information as may be sought by SEBI or by the designated stock exchange pertaining to the activity of the REIT.
- The trustee shall immediately inform to SEBI in case any act which is detrimental to the interest of the unit holders is noted.
Conditions for issue and allotment of units [Regulations 14]
Question 12.
What are the conditions for issue and allotment of units by REIT under SEBI (REITs) Regulations 2014?
Answer:
1. A REIT shall make an initial offer of its units by way of public issue only.
2. No initial offer of units by the REIT shall be made unless,-
(a) the REIT shall be registered with SEBI under SEBI (Real Estate Investment Trusts) Regulations, 2014;
(b) the value of all the assets owned by REIT is not less than ₹ 500 crores;
(c) the minimum number of unit holders other than sponsor(s), its related parties and its associates forming part of public shall be not less than 200.
(d) the offer size is not less than 250 crore rupees.
3. For an REIT raising funds through an initial offer, the units proposed to be offered to the public through such initial offer:
(a) shall be not less than 25% of the total of the outstanding units of the REIT and the units being offered by way of the offer document, if the post issue capital of the REIT calculated at offer price is less than ₹ 1,600 Crores.
However, the requirement at sub-clause (a) shall be complied along with the requirement under sub-regulation (2) (d) of this Regulation.
(b) shall be of the value of at least ₹ 400 crore, if the post issue capital of the REIT calculated at offer price is equal to or more than rupees one thousand six hundred crore and less than rupees four thousand crore;
(c) shall be not less than 10% of the total of the outstanding units of the REIT and the units being offered by way of the offer document, if the post issue capital of the REIT calculated at offer price is equal to or more than rupees four thousand crore;
However, any units offered to sponsor or the manager or their related parties or their associates shall not be counted towards units offered to the public.
Further that any listed REIT which has public holding below twenty five per cent on account of sub-clauses (ii) and (iii) above, such REIT shall increase its public holding to at least twenty five per cent, within a period of three years from the date of listing pursuant to initial offer.
4. Any subsequent issue of units by the REIT may be by way of follow-on offer, preferential allotment, qualified institutional placement, rights issue, bonus issue, offer for sale or any other mechanism and in the manner as may be specified by SEBI.
5. REIT, through the merchant banker, shall file a draft offer document along with the fee as specified in Schedule II with the designated stock exchange(s) and SEBI, not less than thirty working days before filing the offer document with the designated stock exchange and SEBI.
6. The draft offer document filed with SEBI shall be made public, for comments, by hosting it on the websites of SEBI, designated stock exchanges and merchant bankers associated with the issue for a period of not less than 21 days.
7. The draft offer document and/ or offer document shall be accompanied by a due diligence certificate signed by the lead merchant banker.
8. SEBI may communicate its comments to the lead merchant banker and, in the interest of investors, may require the lead merchant banker to carry out such modifications in the draft offer document as it deems fit.
9. The lead merchant banker shall ensure that all comments received from SEBI on the draff offer document are suitably taken into account prior to the filing of the offer document with the designated stock exchanges.
10. In case no observations are issued by SEBI on the draft Offer document within 21 working days from the date of receipt of satisfactory reply from the lead merchant bankers or manager, the REIT may file the offer document or follow-on offer document with SEBI and the exchange(s).
11. The offer document shall be filed with the designated stock exchanges and SEBI not less than 5 working days before opening of the offer and such filing with SEBI shall be accompanied by filing fees as specified under Schedule II and such filing with SEBI shall be accompanied by filing fees as specified under these regulations.
12. The initial offer or follow-on offer or rights issue shall be made by the REIT within a period of not more than one year from the date of issuance of observations by SEBI.
However, if the initial offer or follow-on offer or rights issue is not made within the specified time period, a fresh draft offer document shall be filed.
13. The REIT may invite for subscriptions and allot units to any person, whether resident or foreign. In case of foreign investors, such investment shall be subject to guidelines as may be specified by RBI and the government from time to time.
14. The application for subscription shall be accompanied by a statement containing the abridged version of the offer document, detailing the risk factors and summary of the terms of issue.
15. Under both the initial offer and follow-on public offer, the REIT shall not accept subscription of an amount less than two lakh rupees from an applicant.
16. Initial offer and follow-on offer shall not be open for subscription for a period of more than 30 days.
17. In case of over-subscriptions, the REIT shall allot units to the applicants on a proportionate basis rounded off to the nearest integer subject to minimum subscription amount per subscriber as specified above.
18. The REIT shall allot units or refund application money as the case may be, within 12 working days from the date of closing of the issue.
19. The REIT shall issue units only in dematerialized form to all the applicants.
20. The price of REIT units issued by way of public issue shall be determined through the book building process or any other process in accordance with the circulars or guidelines issued by SEBI and in the manner as may be specified by SEBI.
21. The REIT shall refund money to –
(a) all applicants in case it fails to collect subscription amount of exceeding 90% of the fresh issue size as specified in the offer document;
(b) applicants to the extent of oversubscription in case the moneys received is in excess of the extent of oversubscription as specified in the offer document.
22. If the manager fails to allot, or list the units, or refund the money within the specified time, then the manager shall pay interest to the unit holders at 15% per annum, till such allotment/ listing/refund and such interest shall not be recovered in the form of fees or any other form payable to the manager by the REIT.
23. Units may be offered for sale to public:-
(a) If such units have been held by the existing unit holders for a period of at least one year prior to the filing of draft offer document with SEBI.
However, the holding period for the equity shares or partnership interest in the holdco and/or SPV against which such units have been received shall be considered for the purpose of calculation of one year period.
(b) Subject to other circulars or guidelines as may be specified by SEBI in this regard.
24. The amount for general purposes, as mentioned in objects of the issue in the draft offer document filed with SEBI, shall not exceed 10% of the amount raised by the REIT by issuance of units.
25. If the REIT fails to make its initial offer within three years from the date of registration with SEBI, it shall surrender its certificate of registration to SEBI and cease to operate as a REIT. SEBI if it deems fit, may extend the period by another one year. Further, the REIT may later re-apply for registration, if it so desires.
Offer document and advertisements [Regulation 15]
Question 13.
What are the requirements for offer document and its advertisements by the REIT?
Answer:
The requirements for offer document of the REIT and its advertisements are given under Regulation 15, which are as:
1. The offer document of the REIT shall contain material, true, correct and adequate disclosures to enable the investors to make an informed decision.
2. The offer document shall:
(a) include all information as specified in Schedule- III to these regulations or as specified in any circulars or guidelines issued by the Board in this regard;
(b) not be misleading and not contain any untrue statements or mis-statements;
(c) not provide for any guaranteed returns to the investors;
(d) include such other disclosures as may be specified by the Board.
3. Any advertisement material relating to any issue of units of the REIT shall not be misleading and shall not contain anything extraneous to the contents of the offer document.
4. If an advertisement contains positive highlights, it shall also contain risk factors with equal importance in all aspects including print size.
5. The advertisements shall be in accordance with the offer document and any circulars or guidelines as may be specified by the Board in this regard.
Listing and trading of units [Regulation 16]
Question 14.
What are the requirements for listing and trading of units REIT?
Answer:
- After the initial offer it shall be mandatory for all units of REITs to be listed on a recognized stock exchange having nationwide trading terminals within a period of twelve working days from the date of closure of the offer.
- The listing of the units of the REIT shall be in accordance with the listing agreement entered into between the REIT and the designated stock exchange.
- The units of the REIT listed in recognized stock exchanges shall be traded, cleared and settled in accordance with the bye-laws of concerned stock exchanges and such conditions as may be specified by the Board.
- Trading lot for the purpose of trading of units of the REIT shall be ₹ 1 lakh.
- The REIT shall redeem units only by way of a buy-back or at the time of delisting of units.
- The units of REIT shall be remain listed on the designated stock exchange unless delisted.
- The minimum public holding for the units of the listed REIT shall be 25% the total number of outstanding units at all times, and the number of unit holders of the REIT forming part of the public shall be 200 at all times, failing which action may be taken as may be specified by the Board and by the designated stock exchange including delisting of units.
- Any person other than the sponsor(s) holding units of the REIT prior to initial offer shall hold the units for a period of not less than one year from the date of listing of the units subject to circulars or guidelines as may be specified by the Board.
- The Board and designated stock exchanges may specify any other requirements pertaining to listing and trading of units of the REIT by issuance of guidelines or circulars.
Real Estate Investment Trust Notes
1. Regulation and its object
- SEBI notifies a new Regulation, which is SEBI (Real Estate Investment Trusts) Regulations, 2014.
- Thi. Regulations has been notified to encourage and invests in real estate directly, either through properties or mortgages.
2. About REIT’s
- REITs shall be set up as a trust and registered with SEBI.
- It shall have parties such as Trustee, Sponsor(s) and Manager.
3. Raising of Funds by REIT’s
- The REIT shall raise funds through an initial offer.
- Subsequent raising of funds may be through follow on offer, rights issue, qualified institutional placement, etc.
4. Contents of Offer document
- The offer document of the REIT shall contain material, true, correct and adequate disclosures to enable the investors to make an informed decision.
5. Submission of Annual Report to unit holders
- The manager shall submit an annual report to all unit holders of the REIT with respect to activities of the REIT, within 3 months from the end of the financial year.
- The manager shall submit a half-yearly report to all unit holders of the REIT with respect to activities of the REIT within 45 days from the end of the half year ending on September 30th.
6. Maintenance of records
- The records may be maintained in physical or electronic form. However, if records are maintained in electronic form it shall be digitally signed.
7. Action for contraventions
A REIT or parties to the REIT or any other person involved in the activity of the REIT who contravenes any of the provisions of the Act or these regulations, notifications, guidelines, circulars or instructions issued thereunder by SEBI shall be liable for one or more actions specified therein including any action provided under SEBI (Intermediaries) Regulations, 2008.
8. Floor Space Index
- It means the buildable area on a plot of land as specified by the competent authority.
9. Occupancy certificate
- It means a completion certificate or such other certificate, as the case may be, issued by the completion authority permitted occupation of any property under any law for the time being in force.