SEBI proposes allowing REITs, listed InvITs to issue depository receipts for overseas investors
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The Securities and Exchange Board of India (SEBI) has proposed allowing Real Estate Investment Trusts (REITs) and publicly listed Infrastructure Investment Trusts (InvITs) to issue depository receipts (DRs) overseas, a move aimed at making it easier for global investors to invest in India's real estate and infrastructure assets. The market regulator has invited public comments on the proposal until August 25.
The proposal comes through a consultation paper issued on Tuesday, in which SEBI said it intends to create a regulatory framework for issuing DRs against units of REITs and publicly listed InvITs. While existing laws already permit such instruments in principle, there is currently no enabling framework under the REIT and InvIT regulations to operationalise them.
What are depository receipts?
A depository receipt is a financial instrument that allows investors in another country to buy and sell an Indian security without directly trading on Indian stock exchanges.
Think of it like this: imagine a cricket card that represents an actual cricket bat locked safely in a cupboard. People can trade the card instead of the bat. Similarly, a depository receipt represents an underlying Indian security, such as a REIT or an InvIT unit, and can be traded on overseas exchanges in foreign currency.
This makes investing simpler for foreign investors, who can buy these instruments through international markets without directly participating in Indian exchanges.
Why does SEBI want this?
According to SEBI, the proposed framework will provide REITs and InvITs with an additional avenue to attract overseas capital. It will also give foreign investors another way to invest in India's growing real estate and infrastructure sectors while allowing them to trade in foreign currency on international exchanges.
The regulator noted that REITs and InvITs are already permitted to accept investments from foreign investors under the Foreign Exchange Management Act (FEMA) framework. However, unlike listed companies, they currently lack a dedicated mechanism to issue depository receipts.
What changes are being proposed?
SEBI has proposed inserting enabling provisions into the REIT and InvIT Regulations to explicitly permit the issuance of depository receipts.
"Depository receipts may be issued against units of a REIT / Publicly Offered InvIT subject to compliance with these regulations and in such manner as may be specified by the Board," the consultation paper said.
The regulator also plans to issue a separate operational framework through a circular. The proposed framework will largely mirror the existing rules governing depository receipts issued by listed Indian companies.
Why only publicly listed InvITs?
The proposal excludes privately listed InvITs.
SEBI explained that privately listed InvITs have a minimum trading lot of ₹25 lakh and can issue units only to institutional investors and corporate bodies. Since such restrictions cannot be effectively enforced once depository receipts begin trading overseas, the regulator has proposed limiting the framework to REITs and publicly listed InvITs.
The consultation paper is based on recommendations made by SEBI's Hybrid Securities Advisory Committee. Stakeholders can submit comments on the proposal until August 25, following which the regulator may finalise the framework.