SEBI Introduces Key Amendments to REIT and InvIT Regulations

The Securities and Exchange Board of India (SEBI) has issued two circulars on November 13, 2024, introducing significant updates to the regulatory framework for Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs). These amendments, outlined in circulars SEBI/HO/DDHS/DDHS-PoD-2/P/CIR/2024/158 and SEBI/HO/DDHS/DDHS-PoD-2/P/CIR/2024/159, focus on providing relaxations for unit-based employee benefit schemes (UBEB), standardization of quarterly reports and compliance certificates, and the alignment of timelines for making distributions.

Highlights of the Circulars:

• SEBI has amended the REIT and InvIT regulations to facilitate the implementation of ‘unit-based employee benefit’ (UBEB) schemes.
• Units allotted to employee benefit trusts for UBEB schemes are exempt from the lock-in provisions previously outlined under paragraphs 10.6.2 and 10.6.3 of the Master Circular for REITs and paragraphs 7.6.2 and 7.6.3 of the Master Circular for InvITs, both issued on May 15, 2024.
• The restrictions on preferential allotments specified in paragraph 10.7.1 of the Master Circular for REITs and paragraph 7.7.1 of the Master Circular for InvITs will not apply to units allotted to employee benefit trusts under the UBEB scheme.
• The Indian REITs Association and the Bharat InvITs Association, in collaboration with SEBI, will develop a standardized format for quarterly reports and compliance certificates to be submitted by the REIT manager or InvIT investment manager to the trustee. This standardized format is intended to ensure consistency and adherence to the following applicable regulations:

1. Regulation 9(3) of the SEBI (REIT) Regulations, 2014, and Regulation 9(3) of the SEBI (InvIT) Regulations, 2014, requires the trustee to obtain a quarterly compliance certificate from the REIT manager or InvIT investment manager.
2. Regulation 10(18)(a) of the REIT Regulations, 2014, and Regulation 10(18)(a) of the InvIT Regulations, 2014, mandate the REIT manager or InvIT investment manager to submit quarterly reports on financial activities and compliance with key regulations within 30 days from the end of each quarter.

• If any distribution remains unclaimed, the amount must be transferred to an ‘unpaid distribution account’ within seven working days after the expiration of the specified distribution timeline. This measure aims to efficiently handle unclaimed distributions.

Effective immediately, the circulars aimed to streamline the regulatory processes for REITs and InvITs, reduce the compliance burden, and enhance operational efficiency across the industry. REITs and InvITs are urged to ensure timely compliance with these new regulations to avoid penalties and ensure smooth operational functioning.