REIT Registration

An Overview of REIT Registration

The REIT registration (i.e., Real Estate Investment Trust registration) is granted to enable individuals and institutions to make investments in large-scale, income-generating real estate and construction projects. Online REIT registration in India is regulated under the framework of the SEBI (Real Estate Investment Trusts) Regulations, 2014.

The grant of a REIT license has significantly opened up broader investment options in the real estate sector without direct purchase. Furthermore, REIT registration promotes transparency and liquidity options for investors who are making investments.

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What is Real Estate Investment Trust?

Real Estate Investment Trust (REIT), incorporated as a trust, includes corporations and persons investing in revenue generating real estate assets. It offers issuing units to at least 200 investors through pooling for the further management and acquisition of real estate assets or properties. It allows investors to receive the income generated without giving them day-to-day control over the management and operations of such real estate assets or properties.

REIT further includes Small and Medium Real Estate Investment Trusts (SM REITs) as prescribed under Chapter VIB of the Securities and Exchange Board of India (Real Estate Investment Trusts) Regulations, 2014. Furthermore, REITs are listed like shares on the Stock Exchange, allowing you to conduct buying and selling activities over the Exchange.

Brief History of Real Estate Investment Trust

The Real Estate Investment Trust was first introduced in the year 1960, intending to boost development in real estate through the way of existing investments from investors holding a stake in the real estate sector. Furthermore, after almost 50 years, India introduced REIT for the very first time in 2007.

Subsequently, SBEI introduced regulations to facilitate the operational functions of investment funds in 2014, along with further amendments that provide for the listing of REIT companies on the Indian stock exchange.

Advantages of Real Estate Investment Trust Registration

The following are the key advantages of Real Estate Investment Trust registration as discussed below:

1. Affordable Investment

The SEBI-registered REITs offer affordable and simplified investment opportunities with better stability in comparison to stocks and bonds.

2. Regular Income Source

Investments in SEBI-registered REITs offer risk-adjusted returns and further assist in generating regular income/ cash flow. Hence, it enables investors to rely on a steady income source in case of high inflation.

3. Potential for Capital Appreciation

The Real Estate Investment Trusts are trust entities listed on the Stock Exchange. Hence, they are regulated and effectively managed by the Securities and Exchange Board of India, which allows steady potential for capital appreciation over the long term.

4. Portfolio Diversification

Real estate investment trust registration provides portfolio diversification through frequent investment in real estate without buying a property.

5. Professional Management

The properties owned by REIT are professionally managed, which ensures smooth operations with no effort on your part to manage commercial real estate.

6. Dividend Yield

Real estate investment trust registration provides a substantial dividend and interest accruing from the net rental income of the commercial real estate property.

7. Transparency in Dealing

The SEBI-regulated REIT provides an opportunity to avail information on aspects like taxation, ownership, and zoning, making the entire process transparent.

8. Attractive Investment Instrument

REIT registration provides an attractive alternative investment instrument in the Indian financial markets.

9. Tax Exemption

The interest income and dividends accrued from a Special Purpose Vehicle (SPV), renting or leasing real estate assets directly owned by REIT are exempt from payment of taxation.

Types of Real Estate Investment Trust (REIT)

The types of real estate investment trusts (REITs) registered under the Securities and Exchange Board of India (Real Estate Investment Trusts) Regulations, 2014 are as provided below:

1. Equity REIT

Equity REIT is one of the most popular REITs, and it is concerned with operating and managing income-generating commercial real estate properties. The revenue generated through these properties includes rental income and proceeds from sale transactions, distributed as dividends among the shareholders.

2. Mortgage REIT

Mortgage REIT, also known as mREIT, which tends to acquire mortgage-backed securities, is involved with lending money to proprietors, extending mortgage facilities, and real estate companies. mREITs generate income through interest payments, which are distributed among the shareholders.

3. Hybrid REIT

Hybrid REIT offers options to allow investors to diversify their portfolio by sponsoring funds in both mortgage REIT and equity REIT. It ensures investments in both physical properties and real estate debt instruments, diversifying investments across debt and equity.

4. Private REIT

Private REITs function as private placements and cater only to a selective list of investors. These non-SEBI registered entities are prohibited from trading on the National Securities Exchange. Private REITs have less liquidity than publicly traded REITs.

5. Publicly Traded REIT

Publicly traded REITs are real estate investment trusts extending shares enlisted on the National Securities Exchange along with registration with the Securities and Exchange Board of India. Investments in publicly traded REITs are more liquid and exposed to market volatility.

6. Public Non-Traded REIT

Public non-traded, also known as Listed REIT are entities registered with SEBI but prohibited to trade on the National Stock Exchange. These REITs have low liquidity, which prohibits online sales and purchases of these REITs.

Market Size of Real Estate Investment Trust

India observed a speedy growth, demonstrating the increasing demand for the Real Estate Investment Trust model. It represents around 13.7% (i.e., Rs. 29,272 crores) of the total listed estate in India.

Further, an overall growth of 31% has been observed in India’s REIT market (in 2023) after the listing of 4 REITs, namely Embassy Office Parks REIT (2019), Mindspace Business Parks REIT, Brookfield India Real Estate Trust, and Nexus Select Trust.

How Do REITs Generate Revenue for Investors?

The main revenue stream of Real Estate Investment Trust is secured through acquiring, managing, and investing the corpus into various income-generating real estate properties.

The REITs make money through the collection of rent from tenants occupying the commercial properties, the sale of properties having appreciated value, and the distribution of profits in the form of dividends and capital gain earned over time. Furthermore, a small percentage of REITs, called mortgage REITs, earn money from financing real estate and not owing it.

Eligibility Criteria for Online REIT Registration

The eligibility criteria required for the grant of a certificate for online REIT registration, as prescribed in regulation 4 of the Securities and Exchange Board of India (Real Estate Investment Trusts) Regulations, 2014, are as discussed below:

1. Trust Deed

The applicant must incorporate a Trust Deed duly registered under the provisions of the Registration Act, 1908. The Deed ensure undertaking REIT activities in accordance with the regulation.

2. Entities Involved

The entities involved in the REIT registration are sponsors (having experience of at least 5 years in the development of real estate/ fund management), managers (having experience of at least 5 years in fund management/ advisory services/ property management) and trustee registered with SEBI under SEBI (Debenture Trustees) Regulations, 1993.

3. Net Worth Requirement

The applicant sponsor(s) on a collective basis, must possess a net worth of not less than Rs. 100 crores (20 crores for each sponsor). Furthermore, a manager who is a body corporate must have a net worth of not less than Rs. 10 crores or net tangible assets of value not less than Rs. 10 crores.

4. Asset Base Requirement

The value of holding a specific portion of REIT in an underlying asset base or special purpose vehicle shall not be less than Rs. 500 crores or such other value as may be decided by the Board from time to time.

5. Investment Requirement

At least 80% of the value of REIT must be invested (through Holdco/ SPV) into assets completed or rent/income-generating properties. Furthermore, at least 20% of the value of REIT assets must be invested in assets or properties either under construction or completed but not generating rent.

6. Hold Units of REIT

The person designed as sponsor, manager, and trustee are separate entities eligible to hold not less than 5% of the number of units of REIT on a pre-initial offer basis.

7. Issue or Subordinate Units

The applicant sponsors and associates may issue subordinate units to carry only inferior voting or any other rights compared to other units.

8. Fit and Proper Criteria

The parties to RIET must comply with the fit and proper criteria as specified under Schedule II of the Securities and Exchange Board of India (Intermediaries) Regulations, 2008.

9. Code of Conduct

The REIT and parties to the REIT seeking registration under the Securities and Exchange Board of India (Intermediaries) Regulations, 2008, must comply with the Code of Conduct as specified in Schedule IV.

Structure of Real Estate Investment Trust Registration

The structure of Real Estate Investment Trust registration comprises the following individuals or entities with experience and eligibility to perform key functions of the trust.

1. Sponsor of Trust

The applicant seeking REIT registration must act as a sponsor on behalf of the trust. The sponsor or its associates must have experience of at least 5 years in the development of real estate or fund management in the real estate industry. In cases where the sponsor is a developer, at least 2 projects of the sponsor must be accomplished.

2. Manager

The manager or its associate must have at least 5 years of experience in fund management, advisory services, property management in the real estate industry, or real estate development.

3. Trustee

The trustees are companies registered with the Board under the SEBI (Debenture Trustee) Regulations, 1993, that are specialized in providing trusteeship services. They possess finance with respect to infrastructure, personnel, etc., to the satisfaction of the Board as mentioned under the circulars or guidelines.

Documents Required for Online REIT Registration

The applicant must submit the following documents/ information for online REIT registration as prescribed under Schedule I of the Securities and Exchange Board of India (Real Estate Investment Trusts) Regulations, 2014.

• General information of REIT
• Details of trust
• Details of Trustee
• Business Plan
• Investment Strategy
• Declaration by Sponsor
• Declaration by REIT and parties to REIT
• Declaration Statement
• Offer Document
• Trust Deed
• Details of Manager
• Details of Sponsor
• Details of Regulatory Action (if any)

How to Apply for REIT Registration?

Have a look over the crucial steps required to apply for REIT registration in India, as discussed below:

Step 1: Filing of Application

The applicants are initially required to file an application in Form A/ apply for online REIT registration through SEBI Intermediary Portal, as specified in Schedule I of the Securities and Exchange Board of India (Real Estate Investment Trusts) Regulations, 2014.

Step 2: Fulfil Eligibility Criteria

The applicants seeking REIT registration must fulfil the eligibility criteria and conditions as specified under regulation 7 of the Securities and Exchange Board of India (Real Estate Investment Trusts) Regulations, 2014.

Step 3: Payment of Application Fees

The applicants seeking REIT registration are further required to make payment of non-refundable application fees as specified in Schedule II of the Securities and Exchange Board of India (Real Estate Investment Trusts) Regulations, 2014.

Step 4: Furnish Clarification

The Board further require the applicants to furnish any such information or clarification required for the purpose of processing the application.

Step 5: Make Personal Representation

The Board may require the applicant or any authorized representative to appear before the Board for personal representation for the grant of certificate of registration.

Step 6: Grant of Certificate of Registration

Upon being satisfied with the requirements and payment of fees as specified in Scheule II, the Board sends an intimation regarding the grant of certificate of registration in Form B to the trust.

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Compliance Requirements for Real Estate Investment Trust

The Real Estate Investment Trust are required to comply with the following requirements as prescribed under the provisions of the Securities and the Exchange Board of India (Real Estate Investment Trusts) Regulations, 2014:

1. Make Necessary Appointment

The Board is authorized to make necessary appointment of any person taking charge of records, and documents of the REIT for the purpose of protecting the interest of investors.

2. Hold REIT Assets

The trustee of the REIT shall hold the REIT assets for the benefit of the unit holders, as specified in the Trust Deed and Securities and the Exchange Board of India (Real Estate Investment Trusts) Regulation, 2014.

3. Reporting and Disclosure

The trustee is further required to ensure the manager’s compliance with the reporting and disclosure requirements as specified in the Securities and the Exchange Board of India (Real Estate Investment Trusts) Regulations, 2014.

4. Review by Trustee

The trustee is further required to periodically review the transactions carried out between the manager & its associates and the status complaints of unit holders & their redressal undertaken by the manager.

5. Declaration of Distribution

The trustee must ensure the timely declaration of distribution of the unit holders by the manager as specified under the Securities and the Exchange Board of India (Real Estate Investment Trusts) Regulations, 2014.

6. Manager Convenes Meetings

The trustee must ensure the conduct of the Manager Convenes Meeting of the unit holders. Furthermore, the trustee is required to oversee the voting by unitholders and declare the outcome of the voting.

7. Issue and Allotment of Units

The REIT must make an initial public offer for the issue and allotment of units with an offer size of not less than Rs. 250 crores.

Difference Between REITs and Real Estate Mutual Funds

The difference between REIT (Real Estate Investment Trust) and Real Estate Mutual Funds based on terms of investment structure, liquidity, diversification, management, and tax structure are as discussed below:

Taxation Rules for Real Estate Investment Trust Registration

Have a look over the taxation rules applicable to investors obtaining different types of income from real estate investment trust registration, as discussed below:

1. Taxation of Dividends

The annual income of the investors earned in the way of dividend payout from REIT is completely taxed according to the investors’ slab rate applicable for the financial year.

2. Taxation of Capital Gains

Capital gains from the sale of REIT units, which includes Short Term Capital Gains (STCG) are taxed at a rate of 15%, if the holding period of units is 1 year or less from the date of unit application. Furthermore, it includes Long Term Capital Gains (LTCG), which is taxed at a rate of 10% of gains over Rs. 1 lakh if the holding period exceeds 1 year from the date of unit allocation.

3. Taxation of Capital Gains for International REIT Fund of Funds

In case if the capital gains are acquired through the sale of units of international REIT fund of funds, the non-equity capital gains taxation rules are applicable. The rules further provide for the taxation of STCG as per the applicable slab rate of the investors in the financial year and LTCG at a rate of 20% of the indexed capital gains.

Recent Updates on REIT Registration

The recent amendment in the Securities and the Exchange Board of India (Real Estate Investment Trusts) Regulations, 2014, with effect from March, 2024, lays provision on the following matters concerned with the REIT registration.

• The registration of Small and Medium REITs (SM REIT)
• Modes of raising funds under SM REIT
• Allotment and listing of units of the Scheme of SM REIT
• Introduced Form A under Schedule IA for the registration of SM REIT

Fees Required to Obtain REIT License

Every applicant shall pay the required fees with respect to the REIT license as specified under Schedule II of the Securities and Exchange Board of India (Real Estate Investment Trusts) Regulations, 2014.

• Non-refundable application fees of Rs. 1 lakh
• Non-refundable registration fees of Rs. 10 lakhs within 15 days from the receipt of intimation from the Board
• Non-refundable filing fees of 0.1% in case of initial and follow-on offer, and 0.05% in case of rights issue

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Timeline for Real Estate Investment Trust Registration

The timeline for Real Estate Investment Trust Registration in India is not certain. Generally, it takes around 10- 12 weeks for the grant of certificate of registration for the Real Estate Investment Trust. However, regulatory delays or improper documentation may extend the timeline. Thus, it’s better to consult our expert professionals and leave no scope for errors or delays.

Reasons to Consider Enterslice for Online REIT Registration

We at Enterslice are proud of having leading industry experts with a deep understanding of the REIT framework. Given below are the reasons why real estate business enthusiasts consider our services for online REIT registration with SEBI-

Pioneer in REIT Advisory

Our experts hold immense knowledge and expertise in India's growing real estate investment sector.

98% Success Rate

As our application process is swift and smooth, we boast a 98% success rate in REIT registration approvals.

Verifying REITs

We at Enterslice assist in verifying the registration of both publicly traded and non-traded REITs.

Analyze Company’s Role

We ensure analysis of the company’s role in facilitating capital appreciation of REITs in the long run.

Professional Assistance

We provide professional assistance while opting between ETFs and mutual fund investment options for REITs.

Post-Registration Compliance

We provide post-registration compliance support in consonance with the ongoing SEBI guidelines for regulations dealing with REIT registration.

Avoid Delays and Complications

Ensure that delays and complications are avoided while filing application forms and documents required for REIT registration.

Comprehensive REIT Registration Services

We provide end-to-end real estate investment trust registration services, assuring 100% compliance throughout the REIT lifecycle.

Expert Legal Advisory

Our network of 50+ REIT-specific legal experts ensure your operational framework complies with the SEBI (Real Estate Investment Trusts) Regulations, 2014.

Post-registration Support

At Enterslice, we ensure that your REIT adheres to SEBI's stringent disclosure pertaining to REIT registration requirements.