REITs, InvITs, And Municipal Bonds

SEBI Chairperson Madhabi Puri Buch emphasized the potential of Real Estate Investment Trusts (REITs), Infrastructure Investment Trusts (InvITs), and Municipal Bonds to match or exceed fundraising in the debt market over the next decade.

About Real Estate Investment Trusts (REITs), Infrastructure Investment Trusts (InvITs), and Municipal Bonds

Aspect	Real Estate Investment Trusts (REITs)	Infrastructure Investment Trusts (InvITs)	Municipal Bonds (Munibonds)
Definition	Entities channeling funds into income-producing real estate.	Collective schemes investing in infrastructure projects.	Debt instruments issued by urban local bodies (ULBs) for infrastructure funding.
Primary Focus	Real estate properties (income-generating or under construction).	Infrastructure projects like roads, energy, and transmission lines.	Socio-economic projects like schools, hospitals, and bridges.
Key Features	90% of income is distributed as dividends. 80% investment in revenue-generating properties. ₹500 crore minimum asset base.	90% of net distributable cash flows are distributed. Leverage capped at 70% of net asset value. Sponsors must hold 15% of units with a 3-year lock-in.	Fixed maturity period. Tax-exempt for investors. Funds used for socio-economic development.
Significance	Offers liquidity and long-term capital appreciation. Enables small investors to participate in real estate.	Recycles capital for developers. Attracts long-term investors like pension funds and sovereign wealth funds.	Provides ULBs with funds for infrastructure projects. Promotes socio-economic development.
SEBI Guidelines	90% income distribution, investment restrictions on agriculture/vacant land.	Restrictions on leverage and sponsor’s stake; 90% income distribution required.	Municipality must have positive net worth, no defaults, and compliant promoters/directors.
Target Investors	Retail and institutional investors seeking real estate exposure.	Institutional investors and long-term investors (e.g., pension funds).	Public investors interested in fixed returns and tax benefits.
Sectoral Examples	Commercial real estate, office spaces, and malls.	Renewable energy projects, highways, and utilities.	Urban infrastructure like sanitation, roads, and schools.

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About SEBI

Statutory Body: Established in 1992 under the Securities and Exchange Board of India Act, 1992.
Predecessor: Replaced the Controller of Capital Issues, which derived authority from the Capital Issues (Control) Act, 1947.
Transition: Formed in 1988 as a non-statutory body under a Government resolution, becoming statutory in 1992.
Headquarters: Located in Mumbai, with regional offices in Ahmedabad, Kolkata, Chennai, and Delhi.
Role: Protects investor interests and regulates/promotes securities markets.
Structure: A 9-member board including 1 Chairperson, 2 government nominees, 1 RBI nominee, and 5 others (at least 3 Whole-Time Members).
Chairperson Appointment: Recommended by the Financial Sector Regulatory Appointments Search Committee (FSRASC).

Significance of these Financial Instruments

Economic Growth: Boosts infrastructure and real estate sectors, contributing to India’s GDP.
Market Potential: Expected to match or exceed debt market fundraising over the next decade.
Investor Benefits: Offers diversified investment opportunities with predictable returns.

SEBI’s Role

Regulatory Framework: Ensures compliance and protection for investors in REITs, InvITs, and municipal bonds.
New Initiatives:
- Introduction of ₹250 bite-size SIPs to increase mutual fund penetration.
- Streamlining approval processes for mutual fund schemes and IPOs.
Impact: Facilitates faster capital formation and promotes financial inclusion.

Additional Reading: REITs, InvITs, and Municipal Bonds

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