An Overview of REIT Registration with SEBI

REIT in India stands for Real Estate Investment Trust and it can be termed as a company that owns & operates real estate to generate income. REIT Companies in India are corporations that manage the portfolios of high-value real estate properties & mortgages. For example, they lease properties & collect rent thereon. The rent collected is distributed among shareholders in the form of income & dividends. Generally, REITs (Real Estate Investment Trusts) offer investors an opportunity to possess high-priced real estate & enable them to earn dividend income to boost their capital ultimately. This way, investors can utilize the opportunity to appreciate their capital & generate income at the same time.

Both big & small investors in India can park their funds into this investment option & get benefits accordingly. Small investors may attempt to pool their resources along with other investors & invest the same into big commercial real estate projects. Properties included in REITs comprise data centers, health care units, apartments, etc. The REIT Registration is granted to enable institutions & individuals to make investments in large-scale, income-generating real estate & construction projects. REIT Registration Online in India is regulated under the framework of the SEBI (Real Estate Investment Trusts) Regulations, 2014. The REIT Registration has extensively opened up various investment options in the real estate sector without direct purchase. Moreover, REIT Registration promotes transparency & liquidity options for investors who are making investments.

Different Types of REITs in India

There are 3 different types of REITs in India:

• Mortgage REITs: These types of REITs are not the owners but get EMIs against the property from the builders & owners. The earnings are through Net Interest Margin (i.e., difference of interest earned on mortgage & cost of funding the loan) which they distribute among the REIT investors as a dividend.
• Equity REITs: They are owners of real estate properties & lease them to individuals or companies to make money. Then the income is distributed among REIT investors as a dividend.
• Hybrid REITs: It invests in both Equity & Mortgage REITs.
• Private REITs: These types of REITs function as private placements, which mainly cater to only a selective list of investors. Generally, private REITs are not traded on NSEs (National Securities Exchanges) & are not registered with the SEBI.
• Publicly Traded REITs: These types of REITs extend shares that are enlisted on the NSE & are regulated by SEBI. Individual investors can sell & purchase such shares through NSE.
• Public Non-Traded REITs: These are non-listed Real Estate Investment Trusts which are registered with the SEBI. However, they aren’t traded on the NSE. Also, when pitted against public non-traded REITs these options are less liquid. Moreover, they are more stable as they aren’t subjected to market fluctuations.

What are the Objectives of REITs (Real Estate Investment Trusts)?

The main role of REITs or Real Estate Investment Trusts is to give investors the dividends generated from capital gains that are accrued from the selling of commercial assets. Real Estate Investment Trust allocates 90% of its income as dividends to its investors. It basically provides a safe & varied investment opportunity to get into real estate investments.

• Real Estate Investment Trusts in India are transparent and there is a full valuation of the REIT every year along with a half-yearly audit;
• According to the guidelines, Real Estate Investment Trusts (REITs) have to invest in at least 2 projects with the value of one asset comprising 60% of the investment
• There is a low risk involved in Real Estate Investment Trusts as a minimum of 80% of the assets are invested in revenue-generating projects that are completed and the remaining 20% is allocated to investments in under-construction properties, mortgage-based securities, equity shares deriving at least 75% of income from real estate activities, government securities, money market instruments, cash equivalents & so on.

Benefits of REIT Registration with SEBI in India

The following are the benefits of REIT Registration in India:

• REITs or Real Estate Investment Trusts as regulated by SEBI, therefore chances of fraud are very rare;
• It is very easy to invest in real estate using REITs;
• REITs have lower liquidity risk as compared to direct investment in real estate;
• Real Estate Investment Trusts are not as capital intensive as a direct investment in property. Moreover, there are not many profitable investment opportunities left at present;
• These offer a relatively higher dividend as approximately 90% of income is paid as a dividend to the REIT investors;
• REITs are transparent as they disclose the capita portfolio semi-annually and annually.

Eligibility Criteria for a Company to Qualify as a REIT

To qualify as a REIT a company must meet some specific requirements as mentioned below:

• Must have at least 100 shareholders;
• A minimum of 75% of investment assets must be in real estate;
• Extends completely transferable shares;
• Managed by a team of trustees or BODs (Board of Directors);
• The entity needs to be structured as a business trust/corporation;
• Less than 5 individuals shouldn’t have held 50% of its share during each taxable year;
• At least 95% of REITs total income should be invested;
• Maximum 20% of the corporation’s assets contain stock under taxable REIT subsidiaries;
• Ensue a minimum of 75% of gross income from mortgage interest or rents;
• It is required to pay a minimum of 90% of the taxable income as a dividend.

Documents Required for REIT Registration with SEBI in India

To register as a REIT in India, you have to submit the following documents to the SEBI:

• Form A or an online application through the SEBI portal.
• You need to provide the details of the REIT, Trust, Trustee, investment strategy, business plan & more.
• Declaration by the parties & sponsor to the REIT.
• Need of offer document for the REIT.
• Trust Deed for the REIT.
• Any additional information/clarification request by SEBI.
• Any other documents required by Schedule II of the REIT Regulations.

Process for REIT Registration under SEBI

The following is the step-by-step process for REIT Registration:

Step 1: First, you need to file an application in Form A or simply apply for online REIT Registration via SEBI Intermediary Portal as mentioned in Schedule I of the SEBI (Real Estate Investment Trusts) Regulations, 2024.

Step 2: The applicant looking for the REIT Registration must fulfill the eligibility criteria as mentioned under Regulation 7 of the SEBI (Real Estate Investment Trusts) Regulations, 2014.

Step 3: After that, the applicants need to make payment of non-refundable application fees as mentioned under Schedule II of the SEBI (Real Estate Investment Trusts) Regulations, 2014.

Step 4: Then, the Board further required the applicants to provide any such information/clarification required for the application process.

Step 5: After that, SEBI may require the applicant or any authorized representative to appear before the Board for personal representation for the issuance of the Registration Certificate.

Step 6: Once the Board is satisfied with the Requirements & payment of fees as mentioned under Schedule II of the SEBI (Real Estate Investment Trusts) Regulations, 2014, the Board sends an intimation regarding the grant of REIT Registration Certificate in Form B to the trust.

How to Invest in REITs (Real Estate Investment Trusts)?

There are 3 different ways to invest in REITs:

• Mutual Funds: By choosing this way, individuals would be able to expand their investment portfolio significantly, as it’s an indirect investment method, investors would be required to invest in such a fund through a mutual fund company.
• Stocks: Individuals who are looking for a more direct way to invest in REITs should consider doing so through stocks.
• Exchange-Traded Funds: With this particular investment option, investors would avail indirect ownership of properties & would further benefit from its diversification.

Difference Between Real Estate Mutual Funds and Real Estate Investment Trusts (REITs)

These two are different but similar as they both offer liquidity & a cheap way to get exposure to diversified & substantial capital real estate assets. Long-term investors have the potential to reap the rewards of dividend income & capital appreciation over a long period. For retail or short-term investors with a low investible surplus, these real estate funds present an opportunity to invest in properties that otherwise may not be feasible to invest in. A real estate fund can invest in REIT to offer benefits to investors making Real Estate Investment Trusts a part of the investment.

• Real Estate Investment Trusts or REITs distribute a higher amount of dividend every year to shareholders/investors than real estate mutual funds;
• REITs or the Real Estate Mutual Fund Investment should be spread across several real estate categories/funds so as to minimize the risk & it should not be more than 10% of the portfolio;
• The real estate’s value tends to increase during the time of inflation as property prices & rent goes up, thus giving a better return to the REIT investor;
• Real Estate Mutual Funds offer extensive diversification than the Real Estate Investment Trusts based on the investment strategy & have the benefit of experts & professionals managing their portfolio, unlike the Real Estate Investment Trusts.

The proposal of RBI to allow banks to invest in REITs will propel a lot of companies to bring in their REITs & get them listed on the stock exchange, Real Estate Investment Trusts have also been approved by the SEBI & thus are looked upon as a measure by the Government of India to pool in greater investment to the realty sector of India. Once the Real Estate Investment Trusts are up & ready for the investment we may hope to see an increase in the retail sector participation.

Why Whizseed for Online REIT Registration?

We at Whizseed are proud of having a team of professionals who have years of industrial experience with a deep knowledge of the REIT Framework. The following are some reasons why most of our clients consider our services for online REIT Registration with SEBI:

• Immense knowledge & expertise in India’s growing Real Estate Investment sector;
• 95% Success Rate;
• Analyze Company’s Role;
• Professional Support;
• Verifying REITs;
• Post-Registration Compliance Support;
• Avoid any delays and complications.