REITs, InvITs & Emerging SEBI Regulatory Frameworks

Supplementary Topic — Real Estate Investment Trusts, Infrastructure Investment Trusts & New-Age Securities | SEBI Law Officer

Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs) are SEBI-regulated investment vehicles that allow retail and institutional investors to participate in real estate and infrastructure assets — traditionally accessible only to large direct investors. Both are governed by specific SEBI regulations. Additionally, SEBI has been progressively expanding its regulatory perimeter to cover newer instruments — social stock exchanges, security receipts, and sovereign green bonds. These are increasingly tested in SEBI Law Officer examinations as 'contemporary' questions.

1. REITs — Real Estate Investment Trusts

SEBI (REIT) Regulations, 2014: REITs are trusts registered with SEBI that invest in income-generating real estate assets — commercial properties, office spaces, shopping malls — and distribute the income to unit holders.

Feature	REIT Rule
Legal structure	Trust registered with SEBI + listed on recognised stock exchange
Minimum asset value	₹500 crore at the time of initial offer
Minimum initial offer size	₹250 crore
Minimum unit size (initial offer)	₹10,000 per unit (retail accessible)
Mandatory income distribution	Minimum 90% of distributable cash flows to unit holders — semi-annual
Investment restriction	At least 80% of assets must be in completed, income-generating real estate
Leverage limit	Net debt not to exceed 49% of value of REIT assets
Tax treatment	Pass-through for dividends and interest distributions from underlying assets

2. InvITs — Infrastructure Investment Trusts

SEBI (InvIT) Regulations, 2014: InvITs are trusts registered with SEBI that invest in income-generating infrastructure projects — roads, power plants, telecom towers, pipelines — and distribute the income to unit holders.

Feature	InvIT — Public Issue	InvIT — Private Placement
Investor eligibility	Any investor including retail (if listed)	Only institutional investors + HNIs
Minimum subscription	₹10,000 per unit (listed publicly)	₹1 crore per investor
Income distribution	90% of distributable cash flows — quarterly	90% — quarterly
Asset requirement	80% in completed, revenue-generating infrastructure	80% same
Leverage limit	Net debt max 49% of InvIT asset value	Same
Listing	Mandatory — listed on recognised exchange	Private — not necessarily listed

3. REITs vs InvITs vs Mutual Funds — Key Differences

Feature	REITs	InvITs	Mutual Funds
Asset focus	Real estate	Infrastructure projects	Securities (equity/debt/hybrid)
Regulation	SEBI (REIT) Regulations 2014	SEBI (InvIT) Regulations 2014	SEBI (MF) Regulations 1996
Minimum distribution	90% cash flows — semi-annual	90% cash flows — quarterly	No mandatory minimum
Listing	Mandatory on exchange	Mandatory/optional (depends on type)	Open-ended: not listed; Close-ended: listed
Minimum investment	₹10,000 per unit	₹10,000 (public)/₹1 crore (private)	₹500 per SIP; ₹1,000 lump sum (standard)
Direct asset investment	Yes — in real estate directly	Yes — in infrastructure projects	No — in securities (shares, bonds)

4. Social Stock Exchange (SSE) — SEBI's New Frontier

SEBI introduced the Social Stock Exchange (SSE) framework in 2021 — a dedicated platform for non-profit organisations (NPOs) and for-profit social enterprises (FPSEs) to raise capital from impact investors:

SSE is not a separate exchange — it is a separate segment within existing recognised exchanges (NSE, BSE).
NPOs can list on SSE through issuance of Zero Coupon Zero Principal Instruments (ZCZP bonds) — instruments that raise donations but do not carry interest or principal repayment.
FPSEs can raise equity capital through SSE — subject to SEBI's social impact assessment requirements.
All SSE-listed entities must demonstrate social impact through annual Social Audit — mandatory disclosure of social impact metrics.

5. Security Receipts — SEBI Regulation

Security Receipts (SRs) are instruments issued by Asset Reconstruction Companies (ARCs) representing an undivided interest in financial assets acquired from banks:

Governed by the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI).
SRs that are listed on recognised exchanges are regulated by SEBI — they are 'securities' under SCRA Section 2(h).
SEBI has issued listing/disclosure norms for listed SRs to ensure transparency in the ARC market.

6. SEBI & Sovereign Green Bonds

The Government of India issued Sovereign Green Bonds (SGrBs) starting 2022-23 — to finance green infrastructure projects. SEBI's role:

Green bonds are 'securities' under SCRA — SEBI regulates their listing, disclosure, and trading.
SEBI issued a framework for green bonds requiring: use of proceeds for defined green projects; independent third-party verification; annual disclosure of funds utilisation.
SGrBs are listed on NSE/BSE — SEBI's LODR and SCRA apply to ongoing disclosure obligations.

7. Model Examination Questions

Q1. What are REITs and InvITs? Discuss their key features and how they are regulated by SEBI.

REITs & InvITs — Structure, Features & SEBI Regulation

Model Answer — REITS (Real Estate Investment Trusts — SEBI (REIT) Regulations 2014): Trust structure registered with SEBI; listed on recognised exchange; minimum asset value ₹500 crore; minimum initial offer ₹250 crore; minimum unit size ₹10,000 (retail-accessible). MANDATORY: distribute minimum 90% of distributable cash flows semi-annually to unit holders; at least 80% of assets in completed income-generating real estate; net debt ≤ 49% of REIT assets. InvITs (Infrastructure Investment Trusts — SEBI (InvIT) Regulations 2014): Trust structure investing in income-generating infrastructure projects (roads, power, telecom, pipelines). Two types: Public InvITs (retail accessible, minimum ₹10,000, listed) and Private InvITs (minimum ₹1 crore, institutional investors only). Both: 90% distribution quarterly; 80% in completed revenue-generating assets; leverage cap 49%. DIFFERENCES: REITs → real estate; InvITs → infrastructure. REITs → semi-annual distribution; InvITs → quarterly. Both differ from mutual funds: direct asset investment (not securities); mandatory income distribution; listed on exchange. TAX: pass-through for qualifying distributions. SOCIAL STOCK EXCHANGE (SSE): SEBI 2021 framework — segment within NSE/BSE for NPOs (ZCZP bonds) and FPSEs (equity) raising capital from impact investors; mandatory Social Audit.

🎯 EXAM POINTERS — Topic 84: REITs, InvITs & Emerging Frameworks

REITs: SEBI (REIT) Regulations 2014. Trust + listed. Min asset ₹500 crore; min offer ₹250 crore; unit ₹10,000.
REITs: 90% distribution SEMI-ANNUALLY; 80% in completed income-generating real estate; debt ≤ 49%.
InvITs: SEBI (InvIT) Regulations 2014. Public (₹10,000; retail; listed) vs Private (₹1 crore; institutional).
InvITs: 90% distribution QUARTERLY; 80% in completed revenue-generating infrastructure; debt ≤ 49%.
REITs vs InvITs: semi-annual vs quarterly distribution. Real estate vs infrastructure.
Both REITs and InvITs vs Mutual Funds: direct asset investment (not securities); mandatory distribution; different minimum investment.
Social Stock Exchange (SSE): SEBI 2021; segment within NSE/BSE; NPOs use ZCZP bonds; FPSEs use equity; Social Audit mandatory.
Security Receipts (SRs): issued by ARCs; listed SRs regulated by SEBI; governed by SARFAESI Act primarily.
Sovereign Green Bonds (SGrBs): Government-issued; listed on NSE/BSE; SEBI regulates listing/disclosure; green bond framework with use-of-proceeds requirements.
All REITs and InvITs are listed on recognised exchanges — SEBI's LODR obligations apply for ongoing disclosure.

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