Special Rights for Unitholders of REITs and InvITs

May 17, 2023

The Securities and Exchange Board of India (Sebi) has put forth a proposal aimed at granting special rights to unitholders of Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs), thereby expanding their participation in the decision-making process.

Empowering Unitholders

Under the proposal, Sebi suggests providing unitholders with the right to nominate a representative on the boards of REITs and InvITs. This move aims to empower unitholders and enable them to monitor their investments more effectively while assisting in crucial decision-making processes.

Introduction of Self-Sponsored REITs and InvITs

In addition to the special rights for unitholders, Sebi has also proposed the concept of self-sponsored REITs and InvITs. This new framework would create opportunities for mature and independent professional managers to emerge and provide an additional exit option for sponsors.

Applying Stewardship Code

Sebi proposes applying the principles of the stewardship code to the members nominated by unitholders on the boards of directors of investment managers of REITs and InvITs. This application aims to ensure responsible and diligent management of investments.

The Significance of REITs and InvITs in India

The introduction of REITs and InvITs in India has opened up avenues for investors to gain exposure to real estate and infrastructure projects while mitigating risks through pooling arrangements. REITs primarily invest in completed and rent-generating real estate assets, while InvITs have the flexibility to invest in under-construction assets, as well as completed and revenue-generating assets.

Participation in Decision-Making Process

To ensure the participation of unitholders in the decision-making process, Sebi proposes constituting a distinct unitholders council. The council’s members would be nominated by unitholders holding a minimum of ten percent of units, providing them with a platform to voice their opinions and contribute to key decisions.

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