Sebi reforms REITs and InvITs norms to align disclosures, cut entry size; allow broader role for merchant bankers
The Sebi board on Wednesday approved a set of amendments aimed at improving ease of doing business for Real Estate Investment Trusts (REITs), Infrastructure Investment Trusts (InvITs), and merchant bankers.
The key changes include greater cash-flow flexibility for REITs and InvITs, a sharper definition of public unitholding, harmonised reporting timelines, and a reduction in the minimum investment size for privately placed InvITs.
Separately, Sebi also allowed merchant bankers to undertake certain non-Sebi-regulated financial services under the same legal entity, subject to regulatory safeguards, PTI reported.
Key changes for REITs and InvITs
Under the revised framework, units held by related parties of the REIT or InvIT, or of the sponsor, investment manager, or project manager, will not be classified as part of the 'public' even if they qualify as Qualified Institutional Buyers (QIBs). This amendment formalises the exclusion and tightens disclosure norms on related-party holdings.
Sebi has also enabled HoldCos to offset negative net distributable cash flows from their own operations against cash inflows from special purpose vehicles (SPVs) before distributing the balance to the REIT/InvIT.
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This marks a shift from the earlier mandate that required 100% onward distribution of SPV inflows.
The regulator has further aligned the timeline for submission of various reports—such as quarterly filings to stock exchanges, trustees, investment managers, and valuation reports—with the schedule for financial results, to streamline compliance and remove redundant delays.
In a bid to widen access to privately placed InvITs, Sebi has approved a uniform minimum allotment size of Rs 25 lakh in the primary market, aligning it with the trading lot in the secondary market.
The earlier thresholds were Rs 1 crore or Rs 25 crore depending on the asset mix.
Merchant bankers get greater flexibility
Addressing long-standing feedback, Sebi revised its stance on the 2024 directive that had required merchant bankers to hive off non-Sebi-regulated business into separate legal entities.
Instead, merchant bankers may now continue to conduct non-Sebi activities under the same entity, subject to two conditions:
If the activity is regulated by another financial-sector regulator, compliance with that regulator's framework is mandatory.
If the activity is not regulated by Sebi or any other financial regulator, it must be fee-based, non-fund-based, and directly related to financial services.
Sebi said these relaxations aim to facilitate more efficient operations and reduce structural overheads for merchant bankers, without compromising regulatory oversight.
The amendments to the REITs Regulations, InvITs Regulations, and Merchant Bankers Regulations were approved during Sebi's board meeting on Wednesday and will be notified shortly.
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