Looking to attract more investments into the capital market, the Securities and Exchange Board of India (Sebi) has proposed listing of Real Estate Investment Trusts (REITs).
REITs are a popular instrument for raising funds in the realty sector.
Issuing draft norms for REITs on Thursday, the capital market watchdog said the evolution of such investment vehicles is "crucial" for the rapidly growing real estate industry.
"REITs would be allowed to list on stock exchanges through Initial Public Offer (IPO) and can raise funds further through Follow-On Offers (FPOs)," according to the consultation paper and draft norms issued by Sebi. "REIT shall be set up as a Trust under the provisions of the Indian Trusts Act, 1882," it said.
However, the trusts would not be allowed to launch any schemes.
The move is aimed at providing investment avenues for investors by way of trading units of REITs, similar to mutual fund and Exchange Traded Fund (ETF) structures for stocks, bonds and other securities.
The Trust needs to initially apply for registration with Sebi in the specified format. After being satisfied on the eligibility conditions, the regulator would grant registration to it.
"The REIT shall have parties such as trustee (registered with Sebi), sponsor, manager and principal valuer," it added.
According to Sebi, REITs can issue units of their investment schemes through a public offer and list them thereafter on a stock exchange in a way similar to the issuance and listing of shares during an IPO. Thereafter, the units can be traded on the stock exchange platform just like shares.
Sebi further said that listing of units will be mandatory for all REITs.
The regulator said REIT may raise funds from any investors, resident or foreign. However, initially, till the market develops, it is proposed that the units of REITs may be offered only to HNIs /institutions.
Consequently, it is proposed that the minimum subscription size would be Rs 2 lakh and unit size shall be Rs 1 lakh.
For coming out with an IPO, Sebi said the size of the assets under the REIT need to be at least Rs 1,000 crore, in a bid to ensure that initially only large assets and established players enter the market.
Further, minimum initial offer size of Rs 250 crore and minimum public float of 25 per cent is specified to ensure adequate public participation and float in the units.
The regulator has sought public comments on draft REIT Regulations by October 31, 2013.