Sebi modifies mutual fund trading rules on the RFQ platform

An Overview

Markets regulator SEBI has amended regulations for REITs and InvITs with regards to dissenting unit holders’ exit options in certain instances, such as acquisition and change of sponsors. Infrastructure Investment Trusts (InvITs) and Real Estate Investment Trusts (REITs) are two new investment vehicles.

According to two separate circulars issued by SEBI, in such situations, the exit option price would be increased by an amount equivalent to a sum determined at a rate of 10% per year for the duration between the first and second notification dates.

The activities related to the exit option/offer have been summarised in accordance with SEBI’s deadlines. In such circumstances, the regulator has defined “relevant date” as the date of the acquisition’s public notification in accordance with the Substantial Acquisition of Shares and Takeover Regulations, 2011.

Further Key Takeaways

SEBI announced a mechanism in July 2020 to offer dissenting REIT and InvIT unitholders an escape option. The inclusion of REITs and InvITs in the Nifty indices has been placed on hold, according to the NSE.

The NSE announced in a circular that the inclusion of real estate investment trusts (REITs) and infrastructure investment trusts (InvITs) in Nifty indexes has been placed on hold. The exchange established revised eligibility requirements on August 23 that will allow REITs and InvITs to be included in Nifty indexes starting September 30.

“A few stakeholders have raised concerns about the inclusion of REITs/InvITs in Nifty indexes in conversations with NSE indices. These are being investigated, and a final decision on whether or not REITs/InvITs should be included will be made when the review and consultations with stakeholders are completed,” NSE stated.

According to the NSE, the previous announcement on the inclusion of REITs and InvITs in Nifty indexes has been postponed.

How can REITs and InvITs assist investors?

It provides a more scientific and trustworthy alternative for investors to invest in real estate. They can benefit from the growth of real estate assets without having to go through the inconveniences of purchasing a physical property. It’s nearly like owning real estate in demat form for investors.

This product is also ideal for high-net-worth individuals and retirees seeking a steady income. REITs are often obligated to distribute the majority of their revenues to investors, and thus can be a solid source of safe and consistent income, similar to debt funds.

It provides risk diversification from traditional asset classes such as stock, debt, and gold for retail investor portfolios. Even in the real estate industry, investors can get their hands on a high-quality, well-diversified portfolio of real estate assets. This is something that a single person cannot do on their own.

It’s not only about investors and developers. From a macroeconomic standpoint, it is also a significant gain. It facilitates the flow of financing for important infrastructure projects without putting the government’s finances under strain. Infrastructure, after all, has a multiplier effect on GDP and industrial growth. That will be the cherry on top!

Frequently Asked Questions (FAQs)

Q1. Who should put money into a Fund of Funds?

Small investors that do not want to take on more risk might consider the Fund of Funds. Diversification of funds can help to mitigate risk. This is also a good investment option for someone who just has a modest quantity of money to invest each month.

Q2. What are the differences between InvITs and REITs?

Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs) are a new investment vehicle that allows investors to invest in finished real estate and infrastructure projects with a small initial investment and plenty of flexibility.

Q3. Is it wise to invest in real estate investment trusts (REITs)?

REITs usually provide significant dividends and have a moderate chance of long-term financial appreciation. Due to the low connection of listed REIT dividend yields with the returns of other stocks and fixed-income assets, REITs are also a good asset class.