SEBI Board Approves Easing of Rules for REITs and InvITs, Expands Investment Options in Liquid Funds

SEBI Eases REIT and InvIT Norms

Key Takeaways

• SEBI has relaxed norms for REITs (Real Estate Investment Trusts) and InvITs (Infrastructure Investment Trusts) to enhance operational flexibility and ease of doing business.
• InvITs can now retain Special Purpose Vehicles (SPVs) post-concession expiry for up to 1 year with disclosures.
• Investment in liquid mutual funds has been broadened to include Class B-I schemes, allowing for improved diversification.
• Privately listed InvITs can now invest up to 10% in greenfield projects, aligning with public InvITs.
• The use of borrowings by InvITs has been expanded to include capital expenditure, road maintenance, and refinancing with safeguards.

InvIT SPV Norms Relaxation

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SEBI has amended the SPV definition to address the gap in existing regulations. InvITs can now retain SPVs post-concession expiry for up to 1 year, subject to a one-year exit or reinvestment timeline and enhanced disclosure requirements. Currently, SPVs are required to maintain at least 90% of their value in infrastructure assets, a condition that cannot be met once a concession ends.

Investment in Liquid Mutual Funds

The SEBI board has cleared the proposal to ease norms for REITs and InvITs to invest in liquid mutual fund schemes. The minimum credit risk value (CRV) threshold has been lowered from 12 to 10, allowing investments in both Class A-I and Class B-I schemes. This aims to balance safety, liquidity, and diversification.

Greenfield Projects for Privately Listed InvITs

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SEBI has allowed privately listed InvITs to invest up to 10% of their asset value in under-construction or pure greenfield projects. This aligns with the investment norms for publicly listed InvITs and broadens investment avenues while maintaining prudential limits.

Borrowings for InvITs

SEBI has permitted the use of borrowings by InvITs where net borrowings exceed 49% of asset value. The additional uses for borrowings include capital expenditure, road maintenance, and refinancing of existing debt originally taken for permitted purposes. Refinancing will be allowed only if it does not increase net borrowings and is limited to the principal component.