SEBI implements significant changes to REIT regulations

August 18, 2023

Market regulator SEBI has now implemented several significant amendments to the regulatory regime around Real Estate Investment Trusts (REITs), little over a month-and-a-half after its board gave its nod to these changes.

REITs are investment pooling vehicles that invest in revenue-generating real estate assets.

The changes now notified by SEBI — effective August 17 — include introduction of nomination rights at the board of the Manager of REITs for unit-holders of REITs.

Also, it has now been stipulated that any unit-holder holding not less than 10 per cent of the total outstanding units of the REIT should comply with a Stewardship Code.

Sponsors’ unit-holding norms

Another significant amendment that has been implemented now by SEBI relates to changing the requirement of minimum unit-holding by Sponsors. 

Now, SEBI has implemented a regime where during the life of the REIT, the Sponsor would be required to hold a certain minimum unit-holding on a reducing scale for the entire life of the REIT. Also the mandatory unit-holding of the Sponsor shall always be locked in and be unencumbered.

Prior to the latest change, SEBI had stipulated that a Sponsor shall hold not less than 15 per cent of the total units for a period of not less than three years from the date of listing of units issued or initial offer.

After three years, there was no mandatory unit-holding requirement for a Sponsor. This minimum unit-holding requirement regime has now been revamped to ensure that Sponsors have their “skin in the game” at all times.

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