Securities and Exchange Board of India

On 8-3-2024, the Securities and Exchange Board of India (‘SEBI’) notified the Securities and Exchange Board of India (Real Estate Investment Trusts) (Amendment) Regulations, 2024 to amend the Securities and Exchange Board of India (Real Estate Investment Trusts) Regulations, 2014. The provisions came into force on 8-3-2024.

Key Points:

  1. The amendment increases the ambit of the meaning of the Real Estate Investment Trust (‘REIT’).

    Earlier, REIT meant a trust registered under the SEBI (REIT) Regulations, 2014.

    Now, a person must pool at least Rs. 50 crores for issuing units to 200 investors to acquire and manage real estate assets/ properties. The investor will be entitled to receive the income generated but the day-to-day control of management and operation will not be given to them.

    Any company which acquires and manages real estate assets/ properties and offers or issues securities to the investors, will not be construed as a REIT.

  2. REIT will now include Small and Medium Reits (‘SM REIT’) which has been inserted in these regulations under Chapter VI-B.

  3. The following provisions will not be applicable to SM REIT:

    • Chapter II– Registration of REITs;

    • Chapter IV– Issue and Listing of Units;

    • Chapter V- Investment Conditions, Related Party Transactions, Borrowing and Valuation of Assets;

    • Chapter VI Regulation 22- Rights and meeting of unit holders.

  4. For these regulations wherever the words “manager” or “sponsor” will come, it will mean “investment manager” which will be applicable to SM REITs.

    “Investment manager” means a company incorporated in India, which sets up SM REIT and manages assets and investments of the SM REIT and undertakes operational activities of the SM REIT.

  5. The Registration of SM REIT will be made by the Investment Manager on behalf of the Trust in Form-A.

  6. The Board will consider the following for granting the certificate of Registration to the SM REIT:

    • the applicant is the investment manager on behalf of the 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;

    • the trust deed has its main objective as undertaking activity of SM REIT through one or more schemes in accordance with these regulations and includes responsibilities of the trustee in accordance with these regulations;

    • separate persons have been designated as investment manager of the SM REIT and trustee of the SM REIT under these regulations;

    • the trustee is not an associate of the investment manager;

    • no unit holder of the scheme of the SM REIT enjoys superior voting;

    • the rights of each unitholder in the scheme are pro-rata and pari-passu;

    • If any previous application has been rejected by the Board;

    • whether any disciplinary action has been taken by the Board or any other regulatory authority against the SM REIT.

  7. The certificate granted under this Chapter will be subject to the following conditions which has to be followed by SM REIT:

    • Abide by the provisions of the Act and Regulations;

    • Adhere to migration plan;

    • 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;

    • In case SM REIT fails to make an initial offer of a scheme within 3 years from date of registration then it will have to surrender its certificate.

  8. In case the application gets rejected by the Board, it has to be communicated to the applicant within 30 days of rejection.

  9. The investment manager will have to appoint 1 or more merchant bankers registered with the Board.

  10. Schedule IA has been inserted which have the following forms:

    • Form A- Application for Grant of Certificate of Registration as Small and Medium (SM) Real Estate Investment Trust

    • Form B- Certificate of registration as a SM REIT

  11. Schedule IIA has also been inserted which talks about the fees to be paid with respect to Registration of SM REIT.

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