Overview of REIT Registration

REIT stands for Real Estate Investment Trust and can be described as a company that owns & operates real estate to generate income. REIT companies manage the portfolios of high-value real estate properties & mortgages. For example, they lease properties & collect rent thereon. However, the collected rent is later distributed among shareholders as dividends & income. Generally, Real Estate Investment Trusts offer investors an opportunity to possess high-priced real estate & enable them to earn dividend income to increase their capital eventually. This way, investors can use the opportunity to appreciate their capital & generate income at the same time.

Real Estate Investment Trust registered under REIT regulations facilitates pooled investment in real estate assets/properties & is required to be established as a trust registered with & regulated by SEBI. Also, the minimum value of REIT assets presently mentioned under REIT regulations is Rs. 500 crores. On September 26, 2014 SEBI had notified that there are 5 REITs registered with SEBI. In view of the increasing value of investment & investors with structures providing investments in real estate assets & in order to bring out, inter-alia, regulatory oversight, investor redressal mechanism, adequate disclosures, SEBI issued a consultation paper stated Regulatory Framework for MSM REITs on May 2013 proposing to regulate entities providing fractional ownership of real estate assets as Micro Small and Medium REITs under REIT Regulations, 2014.

Are you really concerned about whether your company qualifies as REIT? Let our professional experts handle it for you!

SEBI (Real Estate Investment Trusts) Regulations, 2014 – New Amendment 2024

This year SEBI had announced an amendment in the SEBI (Real Estate Investment Trusts) Regulations, 2014 which was already effected from March 2024 lays provision on the following points regarding the REIT Registration:

• Modes of raising funds under Small & Medium Real Estate Investment Trust;
• The Registration for Small and Medium Real Estate Investment Trusts;
• Introduced Form A under Schedule IA for the Registration of Small and Medium Real Estate Investment Trust;
• Allotment & listing of units of the Scheme of Small and Medium Real Estate Investment Trust.

What are the Different Types of Real Estate Investment Trust (REIT) under SEBI in India?

The following are the different types of REITs under SEBI in India:

• Mortgage: It is also known as mREITs (Mortgage Real Estate Investment Trust), it is mainly involved with lending money to proprietors & extending mortgage facilities. Moreover, REITs tend to acquire mortgage-backed securities. Mortgage REITs also generate income in the form of interest added on the money they lend to proprietors.
• Publicly traded REITs: Generally, publicly traded real estate investment trusts extend shares that are enlisted on the NSE (National Securities Exchange) & are regulated by SEBI. Individual investors can sell& purchase such shares via the NSE.
• Equity: It is the most popular one. Generally, it is concerned with operating & managing income-generating commercial properties. Noteworthy, the common source of income is rent.
• Publicly non-traded REITs: These are non-listed REITs which are registered with the SEBI. However, they are not traded on the National Stock Exchange (NSE). Also, when pitted against public non-traded REITs, these options are less liquid, Moreover, they are more stable as they are not subjected to market variations.
• Private REITs: These types of REITs function as Private Placements, which serve to only a selective list of investors. Generally, private REITs are not traded on NSE & are not registered with SEBI.

Benefits of Real Estate Investment Trust in India

The following are the benefits of REITs in India:

• Option to Diversify: Since more Real Estate Investment Trusts are traded frequently on the Stock Exchanges, it provides investors with an opportunity to diversify their real estate.
• Liquidity: Most Real Estate Investment Trusts trade on public stock exchanges & are easy to buy & sell, which adds to their liquidity aspect.
• Steady dividend income & capital appreciation: Investing in Real Estate Investment Trust is said to facilitate substantial dividend income & also allows steady capital appreciation over the long term.
• Transparency: Being regulated by the SEBI, Real Estate Investment Trusts are required to file financial reports audited by professionals. It facilitates investors with an opportunity to get information on aspects like ownership, zoning & taxation, hence making the complete process transparent.
• Accrues risk-adjusted returns: Investing in Real Estate Investment Trusts offers individuals risk-adjusted returns & helps generate returns & steady cash flow. It also enables them to have a steady source of income to depend on even when the rate of inflation is high.

What are the qualification criteria for a company to become a REIT?

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

• Must have a minimum of 100 shareholders;
• The entity must be structured as a business trust or a company;
• A maximum of 20% of the company’s assets comprises stock under taxable REIT subsidiaries;
• Less than 5 persons should not have held 50% of its share during each taxable year;
• Extends entirely transferable shares;
• Is managed by trustees’ team or BoDs;
• Increase a minimum 75% of gross income from mortgage interest or rents;
• A minimum of 95% of Real Estate Investment Trusts total income should be invested;
• Company is required to pay at least 90% of the taxable income as a dividend;
• A minimum of 75% of investment assets must be in real estate.

Overall Market Size of REITs in India

Recently, India has observed a quick growth, demonstrating the increasing demand for the REIT model. It represents around 13.7% (that is around Rs. 29,272 crores) of the total listed estate in India. Moreover, an overall growth of 31% has been observed India’s Real Estate Investment Trusts market in 2023 after the listing of 4 Real Estate Investment Trusts, namely Embassy Office Parks Real Estate Investment Trusts (2019), Nexus Select Trust, etc.

Eligibility Criteria for Online REIT Registration in India

The following is the eligibility criteria for REIT Registration in India:

• Net-Worth Requirements: The applicant sponsor must possess a net worth of not less than Rs. 100 crores which is Rs. 20 crores for each sponsor. Moreover, a manager who is a body corporate must have a net worth of not less than Rs. 10 crores.
• Fit & Proper Criteria: The parties of Real Estate Investment Trust must fulfil the fit & proper criteria as specified under Schedule II of the SEBI (Intermediaries) Regulations, 2008.
• Asset Base Requirements: The value of holding a particular portion of Real Estate Investment Trust in an underlying asset base or special purpose shall not be less than Rs. 500 crores or such other value as may be decided by the Board from time to time.
• Investment Requirement: At least 80% of the value of Real Estate Investment Trust must be invested into assets completed or rent/income generating properties. Moreover, at least 20% of the value of Real Estate Investment Trust assets must be invested in assets/properties either under construction or completed but not generating rent.
• Code of Conduct: The parties and Real Estate Investment Trusts who are looking for REIT Registration under SEBI must fulfil the Code of Conduct as mentioned under Schedule IV.
• Hold Units of Real Estate Investment Trust: An individual designated as sponsor, manager & trustee are separate entities eligible to hold not less than 5% of the number of units of Real Estate Investment Trust on a pre-initial offer basis.
• Trust Deed: The individual must incorporate a Trust Deed duly registered under the provisions of the Registration Act, 1908. The Trust Deed ensures undertaking Real Estate Investment Trust activities as per the regulation.
• Entities Involved: Any entities involved in REIT Registration are sponsors (having experience of at least 5 years in he development of real estate or fund management, managers (having a minimum of 5 years of experience in advisory services/fund management/property management and trustee registered with SEBI.

List of Important Documents Required for REIT Registration in India

The following are the important documents required for REIT Registration:

• General details of Real Estate Investment Trust;
• Trust Details;
• Trustee, Manager & Sponsor’s details;
• Business plan;
• Trust Deed;
• Declaration by Sponsor, REIT & Parties to REIT;
• Investment Strategy.

Process to apply for Online REIT Registration

The following is the step-by-step procedure for Online REIT Registration:

• Application Filing: First, the applicants are required to file Form-A for online REIT Registration on SEBI Intermediary portal as mentioned under Schedule I of the SEBI (Real Estate Investment Trusts) Regulations, 2014.
• Check Eligibility: The applicant who is looking fo REIT Registration must fulfil all the criteria as mentioned under Regulation 7 of the SEBI (Real Estate Investment Trusts) Regulations, 2014.
• Pay the Fees: After filing the application for, you have to make payment of non-refundable application fees as specified in Schedule II of the SEBI Regulations, 2024.
• Further Clarification: SEBI require the applicants to provide any such details or clarification required for the purpose of processing the REIT application.
• Get Authorized Representative: SEBI may require the applicant or any authorized representative to appear before the SEBI for personal representation for the issuance of Registration Certificate.
• Issuance of Certificate: Once the Board is satisfied with all the requirements and fee payment, the Board sends an intimation regarding the issuance for Registration Certificate in Form B of the Trust.

Compliance for Real Estate Investment Trust

Real Estate Investment Trust in India are required to comply with the following requirements:

• Hold REIT Assets: The trustee of the Real Estate Investment Trust shall hold the REIT Assets for the benefit of the unit holders as mentioned in the Trust Deed & Securities and the Exchange Board of India (Real Estate Investment Trusts) Regulation, 2014.
• Declaration by Distribution: The trustee must confirm that the timely declaration of distribution of the unit holder by the manager as mentioned in SEBI (Real Estate Investment Trusts) Regulations, 2014.
• Issue & Allotment of Units: The Real Estate Investment Trust must make an IPO (Initial Public Offer) for the issue & allotment of units with an offer size of not less than Rs. 250 crores.
• Make Important Appointment: The Board is authorized to make appointment fo any individual taking charge of records & documents of the Real Estate Investment Trust or the purpose of protecting the investors’ interest.
• Manager Convenes Meetings: The trustee must make sure the conduct of these meetings of the unit holders. Moreover, the trustee is required to monitor the voting by unitholder & declare the outcome of the voting.

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.