The Securities and Exchange Board of India (SEBI) on August 17, 2023, issued the Securities and Exchange Board of India (Real Estate Investment Trusts) (Second Amendment) Regulations, 2023 to further amend the Securities and Exchange Board of India (Real Estate Investment Trusts) Regulations, 2014.
The following amendments have been stated:
• In regulation 11 which states’ Rights and responsibilities of sponsor(s) and sponsor group(s), the existing sub-regulation (3) shall be substituted by the following sub-regulation namely, -
“(3) The sponsor(s) and sponsor group(s) shall collectively hold not less than -
(i) Fifteen per cent of the total units of the REIT, for three years from the date of listing of units in the initial offer:
Provided that any holding by the sponsor(s) and sponsor group(s) exceeding fifteen Per cent shall be held for a period of not less than one year from the date of listing of units issued in the initial offer;
(ii) five per cent of the total units of the REIT, from the beginning of the fourth year and till the end of the fifth year from the date of listing of the units issued in the initial offer;
(iii) three per cent of the total units of the REIT, from the beginning of the sixth year and till the end of the tenth year from the date of listing of the units issued in the initial offer;
(iv) two per cent of the total units of the REIT, from the beginning of the eleventh year and till the end of the twentieth year from the date of listing of the units issued in the initial offer;
(v) one per cent of the total units of the REIT, after completion of the twentieth year from the date of listing of units issued in the initial offer:
Provided that the maximum value of the units to be held by the sponsor(s) and sponsor group(s) for compliance with clauses (ii) to (v) of this sub-regulation shall not exceed five hundred crore rupees or such other value as may be decided by the Board from time to time and such valuation shall be based on the latest available net asset value of the REIT:
Provided further that an assessment of compliance of requirements under clauses (ii) to (v) of this sub-regulation shall be done at the time of each fresh issuance of units and at the beginning of a change in the threshold of the percentage for minimum unitholding requirement as specified in this sub-regulation:
Provided further that for REITs that have already issued units pursuant to an initial offer as of the date of coming into effect of the Securities and Exchange Board of India Securities and Exchange Board of India (Real Estate Investment Trusts) (Second Amendment) Regulations, 2023, the provisions contained in clauses (i) to (v) of this sub-regulation shall be applicable only for the additional units issued by the REIT after such date and the units that are locked in at the time of the initial offer shall continue to be locked in till the completion of three years from the date of listing of units in such initial offer.”
• In regulation 11, After sub-regulation (3), the following sub-regulation shall be inserted namely, -
“(3A) The units required to be held in terms of sub-regulation (3) shall be locked in and shall not be encumbered: Notwithstanding the above, any encumbrance created on units held to comply with the minimum unit holding requirement applicable before the date of coming into effect of the Securities and Exchange Board of India (Real Estate Investment Trusts) (Second Amendment) Regulations, 2023, may continue if the encumbrance exists on such date.”
• In regulation 22 which states’ Rights and meetings of unit holders, after sub-regulation (8), the following sub-regulation shall be inserted namely, -
“(9) The existing sponsor(s) proposing to disassociate as a sponsor(s) by seeking to convert the Manager to a Self-Sponsored Manager shall comply with the following conditions:
(i) the REIT has been listed for a period of at least five years;
(ii) the REIT has undertaken not less than twelve distributions on a continuous basis and has complied with the distribution norms as per these Regulations in the preceding five years;
(iii) the REIT is rated AAA by a registered credit rating agency for a continuous period of five years immediately preceding the exit of the sponsor;
(iv) During the period of the preceding five years, the REIT has not breached, at any time, the maximum leverage thresholds specified in these regulations;
(v) the Manager is meeting the net worth criteria for the sponsor as specified in these regulations;
(vi) the minimum unitholding requirement applicable to sponsor(s) and sponsor group(s) shall be complied with, on or after the date of conversion of the Manager to Self Sponsored Manager, by the Manager, shareholders of the Manager and/or group entities of Manager:
Explanation: The manager, shareholders of the Manager and/or group entities of the Manager may acquire units of the REIT for the purpose of compliance with the above condition.
(vii) the sponsor(s) or its associate(s) do not own or control the Manager of the REIT on or after the date of conversion of the Manager to a Self-Sponsored Manager;
(viii) the Sponsor has not transferred/sold assets to the REIT in the last three years and no assets/ projects shall be acquired by the REIT from the outgoing sponsor(s) for a period of one year from the date of conversion to Self-Sponsored Manager;
(ix) at least one of the sponsor(s) proposing to disassociate should have been a sponsor of the REIT for a minimum period of five years;
(x) the REIT shall not have any under-construction properties acquired from the sponsor that have not commenced commercial operations;
(xi) unitholders approval in terms of sub-regulation (8) of this regulation and consent of the Trustee has been obtained for conversion to Self-Sponsored Manager;
(xii) such other condition as may be specified by the Board.”
• After Schedule VIII, the Schedule IX: STEWARDSHIP CODE has been inserted.
They shall come into force on August 17, 2023.
[Notification No. SEBI/LAD-NRO/GN/2023/144]
