Real Estate Investment Trusts Framework in IFSC

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CIRCULAR

F. No. 41/IFSCA/SEBI/REITs-InvITs/2020-21

October 21, 2020

To, All Stock Exchanges in the International Financial Services Centre

Dear Sir/Madam,

Sub: Real Estate Investment Trusts (REITs) in International Financial Services Centres (IFSCs)

1. The framework for listing and trading of Real Estate Investment Trusts (REITs) on recognised stock exchanges in International Financial Services Centres (IFSCs) have been provided by Securities and Exchange Board of India (SEBI) vide circular SEBI/HO/DDHS/DDHS/CIR/P/2020/174 dated September 16, 2020.

2. Based on the representations received from market participants, it has been decided to prescribe the following regulatory framework for listing of REITs in IFSCs:

A. Listing of a REIT on a recognised stock exchange in IFSCs

• (a) Any person/entity from India (IFSC or outside IFSC) or a foreign jurisdiction (as defined in Annexure - I) desirous to operate as a REIT in the IFSC shall obtain registration with International Financial Services Centres Authority (IFSCA) and get listed on a recognised stock exchange in IFSC in accordance with the requirements prescribed at Annexure - I of this circular.
• (b) In addition, the recognised stock exchange(s) in IFSC shall specify the detailed framework for REITs including initial disclosure requirements in the offer document, continuous obligations and disclosure requirements, rights of unit holders, trading, clearing and settlement etc. The REIT shall comply with the requirements prescribed by the recognised stock exchange(s).

B. Listing of a REIT listed in India or Permissible Jurisdiction

• (a) A REIT may be allowed to list and trade on a recognised stock exchange in IFSC provided:
  • i. The REIT is listed in India (outside IFSC) or in a permissible jurisdiction as notified or may be notified by the Government of India from time to time pursuant to notification no. G.S.R. 669(E) dated September 18, 2019 in respect of sub-rule 1 of rule 9 of Prevention of Money-Laundering (Maintenance of Records) Rules, 2005; and
  • ii. The REIT is in compliance with the law of its home jurisdiction.
• (b) The recognised stock exchange(s) in IFSC may exempt the continuous obligations and disclosure requirements for REITs (under clause B) listed on the recognised stock exchange(s) in IFSC, provided that the REIT releases all information and documents in English to the recognised stock exchange(s) in IFSC at the same time as they are released to the home exchange where it has a primary listing.
• (c) The application for secondary listing of REIT shall be filed with the recognised stock exchange(s) in the format and manner prescribed by the stock exchange(s).

3. The detailed requirements for listing and trading of REITs in IFSC shall be prescribed by the recognised stock exchanges in IFSC pursuant to approval by IFSCA.

4. This circular is issued in exercise of powers conferred by section 12 of the International Financial Services Centres Authority Act, 2019 to develop and regulate the financial products, financial services and financial institutions in the International Financial Services Centres.

5. A copy of this circular is available on the website of International Financial Services Centres Authority at www.ifsca.gov.in.

Yours faithfully,

Arjun Prasad Deputy General Manager arjun.pd@ifsca.gov.in

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Annexure - I

Listing of Real Estate Investment Trusts

Chapter I: Preliminary

Definitions

1. The terms defined herein shall bear the meanings assigned to them below, and their cognate expressions shall be construed accordingly,–

• a. "change in control" means,-

  • (i) in case of a company or body corporate, change in control where 'control' shall have the meaning as provided in sub-section (27) of section 2 of the Companies Act, 2013;
  • (ii) in any other case, change in the controlling interest; Explanation.─ For the purpose of sub-clause (ii), the expression “controlling interest” means an interest, whether direct or indirect, to the extent of not less than fifty percent of voting rights or interest;

• b. "foreign jurisdiction" means a country, other than India, whose securities market regulator is a signatory to International Organization of Securities Commission’s Multilateral Memorandum of Understanding (IOSCO's MMOU) (Appendix A signatories) or a signatory to bilateral Memorandum of Understanding with the IFSCA, and which is not identified in the public statement of Financial Action Task Force as:

  • i. a jurisdiction having a strategic Anti-Money Laundering or Combating the Financing of Terrorism deficiencies to which counter measures apply; or
  • i. a jurisdiction that has not made sufficient progress in addressing the deficiencies or has not committed to an action plan developed with the Financial Action Task Force to address the deficiencies;

• c. “holdco” or “holding company” means a company or LLP.,-

  • (i) in which REIT holds or proposes to hold not less than fifty percent of the equity share capital or interest and which it in turn has made investments in other SPV(s), which ultimately hold the property(ies);
  • (ii) which is not engaged in any other activity other than holding of the underlying SPV(s), holding of real estate/properties or infrastructure projects, as the case may be, and any other activities pertaining to and incidental to such holdings;

• d. “IFSC” or “International Financial Services Centre” shall have the same meaning as assigned to it in clause (q) of section 2 of the Special Economic Zones Act, 2005;

• e. “IFSCA” means the International Financial Service Centres Authority established under the International Financial Services Centres Authority Act, 2019 (50 of 2019);

• f. “investment management agreement” means an agreement between the trustee and the manager which lays down the roles and responsibilities of the manager towards the REIT;

• g. “manager” means a company or LLP or body corporate incorporated in India which manages assets and investments of the REIT and undertakes operational activities of the REIT;

• h. “parties to the REIT” shall include the sponsor group(s), re-designated sponsor(s), manager, and trustee;

• i. “real estate related asses” shall mean 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;

• j. “REIT” or "Real Estate Investment Trust" means a trust registered as such under these provisions;

• k. “REIT assets” means real estate assets and any other assets held by the REIT, on a freehold or leasehold basis, whether directly or through a holdco and/or a special purpose vehicle;

• l. "SEBI" means the Securities and Exchange Board of India;

• m. "special purpose vehicle " or "SPV " means any company or LLP, -

  • (i) in which either the REIT or the holdco holds or proposes to hold not less than fifty percent of the equity share capital or interest;
  • (ii) which holds not less than eighty percent of its assets directly in properties and does not invest in other special purpose vehicles; and
  • (iii) which is not engaged in any activity other than holding and developing property and any other activity incidental to such holding or development;

• n. “sponsor” means any person(s) who set(s) up the REIT and designated as such at the time of application made to the IFSCA;

• o. “sponsor group” includes:

  • (i) the sponsor(s);
  • (ii) in case the sponsor is a body corporate:
    • (a) entities or person(s) which are controlled by such body corporate;
    • (b) entities or person(s) who control such body corporate;
    • (c) entities or person(s) which are controlled by person(s) as referred at clause b.
  • (iii) in case sponsor is an individual:
    • (a) an immediate relative of such individual (i.e., any spouse of that person, or any parent, brother, sister or child of the person or of the spouse); and
    • (b) entities or person(s) which are controlled by such individual;

• p. “stock exchange” means the recognised stock exchange in IFSC;

• q. “trustee” means a person who holds the REIT assets in trust for the benefit of the unit holders; and

• r. “valuer” means any person who is authorised to practise as a valuer under the law of the state or country where the valuation takes place.