SEBI has introduced new rules for Real Estate Investment Trusts and Infrastructure Investment Trusts, including allowing Depository Receipts in the International Financial Services Centre. The regulator also lowered voting thresholds for resolutions and simplified sponsor exit processes to help boost foreign capital and operational ease.
The Securities and Exchange Board of India (SEBI) has announced a significant update for Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs), aimed at simplifying operations and attracting more foreign capital. The most notable change allows these trusts to issue Depository Receipts (DRs) through the International Financial Services Centre (IFSC). By using the IFSC, these trusts can now tap into a broader pool of global and non-resident Indian investors, providing a formal route for them to invest in Indian real estate and infrastructure assets.
Governance and Voting Changes
Beyond capital access, SEBI has made a structural change to how unitholders vote on resolutions. Previously, passing a resolution required 75% of all outstanding units to vote in favor, which often led to stalemates if participation was low. The regulator has now revised this to 75% of the total votes cast. While this makes it easier for trusts to pass important business resolutions, it also shifts the burden toward minority unitholders. Investors should note that because resolutions are now easier to pass, staying informed and active during voting periods is more critical than before.
Simplifying Sponsor Exits
SEBI has also refined the framework for when a sponsor decides to exit a trust. Previously, the burden of providing an exit offer to unitholders fell heavily on the exiting party. Under the new rules, this responsibility can now be shared among the exiting sponsor, its group entities, or the remaining sponsors. Additionally, the regulator has mandated that all units tendered during an exit process must be accepted by the sponsor. While this may temporarily push the public float below required levels, SEBI has provided a one-year grace period for the trust to restore its public shareholding. This change prioritizes liquidity for individual unitholders who want to exit during management changes.
What This Means for Investors
The primary goal of these changes is to reduce friction in how these trusts operate and to make them more attractive to global capital. The move toward international standards for hybrid securities may assist in better price discovery and liquidity over the long term. However, the governance changes mean that the control dynamic between sponsors and minority unit holders has shifted slightly in favor of the former. Investors should track how individual trusts use these new voting thresholds in upcoming AGMs and whether the easier access to foreign capital actually leads to new fund-raising activities in the IFSC.