SEBI a bridge between infra & market; better liquidity needed in InvITs, REITs: TK Pandey

SEBI Chairman Tuhin Kanta Pandey said on Friday that the country's infrastructure space will require nearly Rs 700 lakh crore worth of investments in the coming years, and the role of the regulator is to bridge the gap between the sector and the capital market. The domestic capital market, he said, provides short-, medium- and long-term investment alternatives.

REITs and InvITs still in early stages: SEBI Chairman

Acknowledging that the country's real estate investment trusts (REITs) and infrastructure investment trusts (InvITs) are still in their early stages with low retail participation, Pandey said that their overall assets under management (AUMs) amount to about Rs 9.25 lakh crore. He also urged retail individual investors (RIIs) to consider including REITs and InvITs in their portfolios.

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The REIT and InvIT market has been growing about 20-22 per cent annually, he said.

REITs and InvITs are two broad alternative investment categories offering exposure to real estate and infrastructure cash flows rather than traditional equities or debt. They are pooled investment vehicles that enable investors to put money into income-generating real estate or infrastructure assets.

REITs and InvITs generate returns mainly through rental income, tolls, user charges or long-term cash flows from completed projects, and are required to distribute at least 90 per cent of their net distributable cash flows to investors.

The SEBI chief said that several steps have been taken to ease compliance norms for REITs and InvITs under the Ease of Doing Business framework.

SEBI to consider REIT inclusion in indices?

Pandey also said that SEBI is engaged in discussions with the Ministry of Finance and state governments to bring more public assets into the market. The regulator is also considering including REITs in market indices in a calibrated manner and expanding liquid mutual funds to include REITs and InvITs, he said.

Their index inclusion will depend on certain eligibility criteria, noted Pandey.

India is the world’s fourth-largest REIT and InvIT market: TK Pandey

Emphasising the need to expand the investor base in the country’s REITs and InvITs, the SEBI chief pitched for better liquidity in both instruments.

India is the world’s fourth-largest REIT and InvIT market, he underlined.

Higher public asset monetisation through InvITs will help grow the investor base in this instrument, according to Pandey.

InvITs and REITs are broadly placed in the hybrid category because they combine features of both equity and debt through stable cash flows and market-linked returns.

However, for mutual fund investors, SEBI classifies them differently: REIT units are treated as equity investments, given their underlying realty ownership, while InvITs are categorised as hybrid instruments because they derive income from a mix of infrastructure assets, user charges and long-term cash flows.