SEBI New Proposals Seek To Make It Easier For SM REITs To Operate

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

An REIT must conduct its initial offer of units exclusively through a public issue. The compliance requirements for ownership of assets can be fulfilled at any point before the unit allotment, as long as there is a binding agreement in place, the capital markets regulator said.

This must be disclosed in the offer documents sent to SEBI and stock exchanges, according to the consultation paper that seeks suggestions from the public on the proposals related to review of regulatory framework for the SM REITs.

The initial offer must occur within a year of receiving SEBI's observations. If it does not, a new draft of the key information documents will need to be submitted. In the event of oversubscription, no more units can be allocated than what was offered, and any extra units will be distributed proportionately, while ensuring that minimum bid lots are respected.

The pricing for the units will be determined through a book-building process or other methods established by SEBI. The minimum subscription required will be at least 90% of the new issue size.

For the general purposes outlined in the offer, this cannot exceed 10% of the total amount raised. Existing unit holders, aside from the investment manager, must retain their units for at least one year following the listing.

The investment manager is required to deposit a specific percentage of post-offer holdings in a cash escrow account before the offer opens, ensuring transparency in the allotment process.