Sebi revises norms on REITs, InvITs

New Delhi: To promote ease of doing business (EoDB), markets regulator Sebi has tweaked the framework involving the nomination rights of unitholders of real estate investment trusts (REITs) and infrastructure investment trusts (InVITs) to appoint directors. Under the current rules, unitholders who exceed a specified ownership threshold can nominate one director to the Board of the REIT’s or InvITs’ Manager. If an entity has the right to nominate directors as a shareholder or lender, it cannot use its unitholder status to nominate directors. The regulator has added an exception to this. Now, if the right to appoint a nominee director is due to certain conditions specified in the Sebi (Debenture Trustees) Regulations, 1993 (like defaults on payments or security creation), the restriction on unitholders does not apply, according to two circulars issued by the regulator.

The new circulars will come into force with immediate effect. This came after market participants requested Sebi to provide clarity on the availability of the right to nominate a director on the board of directors of the Manager of REIT or InVIT, to a unitholder where such nomination right is also available to a unitholder in the capacity of lender to the Manager or the REIT/InvIT (or its HoldCos or SPVs). REITs allow investors to pour funds in commercial real estate options, while the InvIT provides the option of investing in a portfolio of infrastructure assets.