Realty stocks rally as Sebi approves regulations for REITs

NEW DELHI: Shares of real estate developers surged up to 6 per cent in trade on Monday, after capital markets watchdog Sebi approved regulations for Real Estate Investment Trusts ( REITs) and Infrastructure Investment Trusts (InvITs).

Reacting to the news Puravankara Projects Ltd surged as much as 6.5 per cent, followed by Oberoi Realty which rose by 5.6 per cent, Phoenix Mills rose 4.6 per cent, and DLF was rose nearly 4 per cent in trade today.

Final guidelines were issued after a meeting of the capital market regulator's board in New Delhi on Sunday that also eased registration requirements for stock brokers and clearing members. Finance minister Arun Jaitley also addressed the board on Sunday.

The new norms for setting up of real estate and infrastructure investment trusts will help attract more foreign investors to these key sectors and facilitate inflows worth $ 15-20 billion from domestic and overseas sources, according to industry experts and officials.

Sebi has said Reits and Invits should have a starting asset value of at least Rs 500 crore and the initial offer has to be Rs 250 crore or more, ET reported.

Importantly, Reits will be allowed to invest only in commercial property. They have to be listed on a recognised stock exchange and would have to meet stringent disclosure norms.

Trading lot will be Rs 1 lakh with minimum subscription size ofRs 2 lakh. For Invits, this will be Rs 5 lakh andRs 10 lakh, respectively, added the ET report.

Additionally, Reits will invest in commercial real estate through special purpose vehicles (SPVs) in which they must hold a controlling stake of more than 50 per cent. The SPV in turn must hold at least 80 per cent of its assets directly in properties and won't be allowed to invest in other SPVs.

Invits will allow infrastructure developers to monetise specific assets, helping them use proceeds for completing projects of theirs stalled for want of funds, explains ET report.