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Real Estate Investment Trusts (REITs)

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Real Estate investment Trusts or REITs are mutual fund like institutions that enable investments into the real estate sector by pooling small sums of money from multitude of individual investors for directly investing in real estate properties so as to return a portion of the income (after deducting expenditures) to unit holders of REITs, who pooled in the money.

A REIT in India is allowed to invest mainly in completed and revenue generating assets and other approved investments. Further, REIT will have to distribute majority of its income among the unit holders.

REITS are regulated by the securities market regulator in India- Securities and Exchange Board of India (SEBI). In September 2014, SEBI notified the SEBI (Real Estate Investment trusts) Regulations, 2014 for providing a framework for registration and regulation of REITs in India.

REIT can invest in commercial real estate assets, either directly or through Special Purpose Vehicle (SPVs) which invests more than 80% of its assets in properties. If REIT is investing through an SPV, REIT has to hold controlling interest with not less than 50% of the equity share capital or interest in SPV.

Here "real estate" refers to land and any permanently attached improvements to it, whether on leasehold or freehold, and includes buildings, sheds, garages, fences, fittings, fixtures, warehouses, car parks, etc. and any other assets incidental to the ownership of real estate. But the definition does not include mortgage and any asset falling under the purview of 'infrastructure' as defined vide Notification of Ministry of Finance dated October 07, 2013.

This is because a modified REITs type structure for infrastructure projects is done through Infrastructure Investment Trusts (InvITs) for PPP and other infrastructure projects.

Main Features of REITs in India

Structure of REITs

Offer of units, listing, investments and distribution

Tax treatments of REITs in India

Impact of REITs

International Comparison
Globally, framework for REIT exists in several countries including United States of America, Australia, Singapore, Japan, France, United Kingdom, etc. A comparison of Indian REITs with Singapore REITs is given below.




Legal Structure

Trust, with Trustee, sponsor (s) and manager

Trust with Trustee, sponsor (s) and manager


Manager has to be an external company

Manager has to be an external company

Identification of Assets

A REIT has to identify assets prior to making offer to public of units.

A REIT has to identify assets prior to making offer to public of units.

% of under construction assets allowed

Investments in developmental assets not more than 10% of gross asset value of the REIT which have to be held at least 2 years after completion.

The total contract value of property development activities undertaken and investments in uncompleted property developments should not exceed 10% of the property funds deposited property.
Further, such investment in permitted only if the REIT intends to hold the developed property upon completion.

Such funds are allowed to be listed?

Yes, Mandatory

Yes, but not mandatory

Activities permitted

At least 75% of value of the REIT assets proportionately on a consolidated basis shall be rent generating.

At least 75% of the deposited property should be invested in income-producing real estate
Not more than 10% of revenue from sources other than rental and other specified sources.

Income  Distribution

  • At least 90% of its net distributable income after tax to be distributed.
  • If capital gains from sale of property proposed to be re-invested in another property, no distribution required. If not proposed to be re-invested, 90% of the capital gains to be distributed.
  • At least 90% of its taxable ordinary income to be distributed in the same financial year as it is received to qualify for tax transparency.
  • Not required to distribute capital gains

Permissible investments

  • Real estate assets (freehold or leasehold) includes assets incidental to ownership and operation of such real estate assets (Only Indian assets). Investment may be directly in the properties or through an SPV controlled by the REIT having at least 80% of their assets in real estate. A REIT is not allowed to invest in units of another REIT.


  • Listed or unlisted debt of investee companies/mortgage backed securities. Investment also allowed in equity shares of companies listed on a recognized stock exchange in India which derive not less than 75% of their operating income from Real Estate activity





  • Government Securities and Money market instruments/Cash equivalents




  • Investments in developmental assets not more than 10% of gross asset value of the REIT which have to be held at least 2 years after completion.
  • Real estate, whether freehold or leasehold, in or outside Singapore. An investment in real estate may be by way of direct ownership or a shareholding in an unlisted special purpose vehicle (“SPV”) constituted to hold or own real estate. An investment in another property fund that is authorised will be considered as an investment in real estate;


  • Real estate-related assets (listed or unlisted debt securities and listed shares of or issued by property corporations, mortgage-backed securities, other property funds, and assets incidental to the ownership of real estate (e.g. furniture).), wherever the issuers/assets/securities are incorporated/located/issued/traded; Investment also allowed in listed or unlisted debt securities and listed shares of, or issued, by local or foreign non-property corporations;
  • Government Securities (issued on behalf of the Singapore Government or governments of other countries) and securities issued by a supranational agency or a Singapore statutory board and cash and cash equivalent items.


  • Investments in uncompleted property developments not exceeding 10% of the property funds deposited property subject to holding of the developed property upon completion.

Concentration of investments

Minimum 2 projects with not more than 60% of the value of the assets, proportionately on a consolidated basis, in one project.

  • No minimum limit on no. of projects.
  • except for non-real estate investments (5% in any one issuer's securities or any one manager's funds)
  • For Listing – Not more than 30% of gross assets invested in unlisted securities

Restrictions on Shareholding

  • At least 25% of the REIT's outstanding units must be held by public at all times post-listing with at least 200 public unit holders.


  • Minimum Investment of Rs. 2 lakh per investor
  • Trading lot size of Rs. 1 lakh in the secondary market
  • No restriction on maximum shareholding
  • Approval of unit holders required if shareholding of a non-sponsor crosses 50%.
  • If listed, at least 25% of the REIT's share capital or units is held by at least 500 public shareholders


  • No minimum investment limit per investor.
  • No minimum trading lot size.


  • No restriction on maximum shareholding


  • Takeover code applies.
  • Maximum Gearing Ratio
  • Maximum 50% of the aggregate gross asset value on a consolidated basis,  with requirement of credit rating and unit holder approval post 25%
  • 60% (with credit rating) 35% without credit rating

Regular Disclosure requirements

  • Annual and Half yearly disclosures


  • Disclosures in initial offer document/follow-on offer document/other offer document
  • Regular disclosures in terms of the listing agreement with the exchanges



  • Event-based disclosures


  • Disclosures for related party transactions
  • Yearly disclosure (apart from financials)


  • Disclosures in offer documents
  • Listed REITS must announce net tangible assets per share or per unit on a quarterly basis via SGXNET and must comply with other regular disclosure requirements in listing rules.


  • Event-based disclosures
  • Disclosures for related party transactions

Valuation of assets

  • Assets to be valued fully (including site inspection) by an independent external valuer on a yearly basis. Updation required on half-yearly basis. Full Valuation including site inspection required for every purchase of asset and issue of new units.
  • Valuer to be registered valuer under Companies Act, 2013 and valuation in accordance with International Valuation Standards/ICAI standards


  • In case of a sale/ purchase of assets from a related party, two independent valuations of those assets to be conducted.
  • Full valuation of real estate assets at least once a financial year and may be required in case of issue of new units/redemption of units.


  • The Valuer must be independent, reputed, be authorized under any law of the state or country where the valuation takes place to practice as a valuer.


  • For related party transactions, two independent valuations required with one of the valuers commissioned independently by the trustee.

Sponsor Holding

  • Multiple sponsors allowed, subject to maximum 3, where each holds minimum of 5%.
  • Sponsor(s) to hold, collectively, minimum 25% of the units of the REIT for a period of atleast 3 years.
  • Minimum 15% of the units to be held by sponsor(s) always.
  • Sponsor may sell stake to another person post 3 years subject to minimum holding of 5% and maximum number of sponsors at 3. Approval required from 75% unit holders for any new sponsor/change in control of the sponsor.
  • Sponsor units greater than 25% and non-sponsor holding prior to initial offer locked-in for a period of 1 year.

No restrictions

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