SEBI Plans Phased Inclusion of REITs in Benchmark Indices
Why in the news
SEBI is working to link infrastructure financing more closely with capital markets, against the backdrop of the National Monetisation Pipeline (NMP) and reforms to lift liquidity and investor participation in REITs and InvITs.
Key facts
- Index plan: REIT units may enter market indices in phases.
- Expected gain: passive flows through index funds and ETFs, improving liquidity.
- Mutual funds: can now count REITs as eligible equity investments.
- Further step: SEBI plans to widen the set of mutual fund schemes in which REITs and InvITs can invest.
REITs versus InvITs
| Feature | REIT | InvIT |
|---|---|---|
| Holds | Completed commercial property such as offices, malls, warehouses | Operational infrastructure such as highways, transmission lines, renewables, telecom towers |
| Income | Rent and capital appreciation | Tolls, tariffs and other infrastructure cash flows |
| Trading | Listed units trade on exchanges | Listed units trade on exchanges |
| Entry ticket | Much lower than owning property | Open to retail, though often higher than REITs |
| Rulebook | SEBI (REITs) Regulations, 2014 | SEBI (InvITs) Regulations, 2014 |
Significance
- Deeper participation in infrastructure and real estate financing.
- Better liquidity and market efficiency.
Exam angle
- Regulator: SEBI.
- Full forms: Real Estate Investment Trust and Infrastructure Investment Trust.
- Both regulations date from 2014.