Sebi clears decks for smaller REITs, postpones new delisting rules for further study

The Securities and Exchange Board of India (Sebi) on Saturday cleared the decks for small and medium real estate investment trusts (REITs). Sebi’s board also eased the norms for social stock exchanges (SSEs) and provided exemptions to certain alternative investment funds (AIFs) that are currently required to dematerialise their units. The markets regulator, however, deferred a proposal on easing delisting norms, saying it intends to examine more data before coming up with new rules. 

Currently, only REITs with an asset value of at least ₹500 crore can be listed in India. Under the proposal for small and medium REITs, the minimum asset value will be only ₹50 crore. Sebi also will provide a framework for existing private REITs to become public REITs. 

“The regulatory framework approved by the board for SM REITs provides for the structure of SM REITs, migration of existing structures meeting certain specified criteria, obligations of the investment manager including net worth, experience and minimum unitholding requirement,” Sebi wrote in a release. 

The minimum issue size for SSEs is being proposed to be reduced from ₹1 crore to ₹50 lakh, and the minimum ticket size for an investor has been reduced from ₹2 lakh to ₹10,000. 

Sebi also eased the compliance burden on AIFs. Earlier, it had proposed that certain kinds of AIFs would have to mandatorily dematerialise their units. Now, it has proposed exemptions in cases where an investee company is already required to issue shares in demat form. The exemption also extends to funds that are at the end of their lifecycle or funds that are in the liquidation phase. 

Sebi chairperson Madhabi Puri Buch said the Sebi board suggested on Saturday that the regulator analyse more data pertaining to delisting norms before coming up with proposals. Sebi had floated a discussion paper in August, proposing easier delisting norms to ensure orderly exits for companies that choose to leave the public markets. 

“The board guided us that since the number of delisting applications, even the ones taking over five years, is pretty small. [It said] the dataset is too limited to draw very significant conclusions… the board has guided us to further examine certain data,” Buch said. 

Providing an update on the proposal for instantaneous settlements in equity markets, Buch said an option of trading with T+0 settlement would be introduced by the end of the financial year and that the instantaneous settlement would be introduced in the next financial year. She reiterated that the proposed instantaneous settlement would be through a separate route and would be optional for investors.