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Real Estate and Infrastructure Investment Trust

Real Estate Investment Trust (REIT)

Real Estate Investment Trust (REIT) is a trust that owns and manages income generating developed properties and offers its unit to public investors.

Salient features:

  • REITs typically offer investors regular yields coupled with capital appreciation and a liquid method of investing in real estate.
  • Globally, the concept of REITs was first introduced in the United States and is present in Australia, UK, Germany, Singapore, Japan, Hong Kong among other nations.
  • In India, REITs were first introduced by the Securities & Exchange Board of India in 2007 as draft REIT Regulations. However, due to inherent limitations in the draft regulations, the final regulations were never announced.
  • In September 2013, SEBI released a revised set of draft REIT Regulations for public comments. The REIT regulations have been recently approved by SEBI after a few modifications and the final regulations were released on 26th September 2014.
  • Introduction of REIT regulations by SEBI and providing a tax framework by the MoF is a great step in the right direction and clearly illustrates the vision of the Government.

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Infrastructure Investment Trust (InvIT)

Infrastructure Investment Trust (InvIT) provides additional framework for investment in infrastructure in the country and would own and manage income generating infrastructure projects.

Salient features:

  • InvITs typically offer investors regular yields and a liquid method of investing in infrastructre projects. They would reduce the pressure on the banking system while also making available fresh equity to finance / refinance infrastructure projects. Further, they will also assist in un-locking tied up capital of developers, lowering domestic financial institutions’ loan exposure and attracting foreign capital.
  • SEBI had received various suggestions for coming out with a framework for InvIT in India on the lines of the frameworks present in countries like Singapore, Hong Kong, USA, etc. Based on the suggestions received, SEBI formally introduced InvIT through the consultation paper released on 20 December 2013 which was open for public comments.
  • Draft regulations for InvIT were issued on 17 July 2014. The draft regulations explain the regulatory framework of the proposed InvITs regime in India and were kept open for public comments till 24 July 2014. The final regulations were issued on 26 September 2014.

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