Draft REIT regulations introduced

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India’s securities regulator, the Securities and Exchange Board of India (SEBI), recently released the draft SEBI (Real Estate Investment Trusts) Regulations, 2013. Some of the key features are captured below.

Rupee_house_with_statistitics_in_backgroundInvestment Restrictions: Real estate investment trusts (REITs) are required to invest such that 90% of the value of the assets of the REIT are invested in “completed properties” (defined to mean properties which have received occupancy certificates) and “rent generating properties” (defined to mean properties not less than 75% of the area of which has been rented or leased out). The remaining 10% may be invested in “developmental properties”, listed or unlisted debt of companies, mortgage-backed securities, government securities and money market instruments or cash equivalents, etc. Developmental properties has been defined to mean properties that are under construction (i.e. for which an occupancy certificate has not been received). For investment in such developmental properties, a REIT’s investment must be locked in for a minimum of three years after completion and the property should be leased out.

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The business law digest is compiled by Nishith Desai Associates (NDA). NDA is a research-based international law firm with offices in Mumbai, Bangalore, Silicon Valley, Singapore, New Delhi and Munich. It specializes in strategic legal, regulatory and tax advice coupled with industry expertise in an integrated manner.

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