SEBI Proposes New Rules to Facilitate Operations of Small and Medium REITs

The Securities and Exchange Board of India on Wednesday proposed new rules to make it easier for small and medium-sized real estate investment trusts to operate and share vital information with investors.

A REIT must make its initial unit offering only through a public offering. The capital markets regulator said asset ownership compliance requirements can be met at any point prior to unit allocation, as long as a binding agreement exists.

This will need to be disclosed in the offer document sent to SEBI and stock exchanges, according to the consultation document seeking suggestions from the public on proposals related to reviewing the regulatory framework for SM REITs.

The first offer must be made within one year of receiving the SEBI observation. If not, you will need to submit a new draft of the key information document. In case of oversubscription, you will not be able to allocate more units than provided and additional units will be distributed proportionately, ensuring that minimum bid lots are honored.

The price of the units will be determined through the book building process or any other method established by SEBI. The minimum subscription required will be at least 90% of the new issue size.

For the general purpose stated in the offer, this cannot exceed 10% of the total amount raised. Existing unit holders, excluding investment management companies, must hold their units for at least one year after listing.

Investment managers are required to deposit a certain percentage of their post-offer holdings into a cash escrow account before the offer is initiated to ensure transparency in the allocation process.