Guidelines for real estate, infrastructure trust listings

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real estate infrastructure trust listings guidelines

The Securities and Exchange Board of India (Infrastructure Investment Trusts) Regulations, 2014 (InvIT regulations) and the SEBI (Real Estate Investment Trusts) Regulations, 2014 (REIT regulations) were amended on 22 April 2019 which reduced the minimum subscription requirement for publicly offered InvITs and REITs, and increased limits for aggregate consolidated borrowings and deferred payments, net of cash and cash equivalents, to 70% of the value of the InvIT assets. The amended regulations also defined trading lot in terms of the number of units.

Following the amendments, SEBI, through its circular dated 23 April 2019 (circular), prescribed guidelines for determining minimum allotment for publicly offered InvITs and REITs.

The circular states that for the purposes of determining the allotment in an initial public offer, the value of each allotment lot shall not be less than ₹100,000 (US$1,430) for InvITs and ₹50,000 for REITs, where the lot shall consist of 100 units and allotment to investors be made in the multiples of a lot.

In the case of follow-on offers, the minimum allotment should be of lots that are worth not less than ₹1,00,000 for InvITs and ₹50,000 for REITs, and each lot should consist of as many units as in its trading lot and the allotment to an investor should be made in the multiples of a lot.

Further, SEBI has mandated that recognized stock exchanges, in consultation with the publicly offered InvITs and REITs, whose units are listed on the date of the circular, shall determine the number of units in the trading lot for such InvITs and REITs within a period of six months from the date of the circular.

Furthermore, InvITs with aggregate consolidated borrowings and deferred payments above 49%, shall, in addition to already stipulated financial disclosures, be required to disclose the following additional items:

  1. asset cover available
  2. debt-equity ratio
  3. debt service coverage ratio
  4. interest service coverage ratio
  5. net worth

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