SEBI amends REIT, InvIT rules; issues framework for unit-based employment benefit scheme

Capital markets regulator SEBI developed a framework for a unit-based employment benefit scheme for investment trusts -- REITs and InvITs.

Under the framework, SEBI has prescribed the manner of the implementation of the scheme through a trust, the manner of receiving units by the employee benefit trust, and the manner of allotment of units to the employee benefit trust by REIT (Real Estate Investment Trust) and InvIT (Infrastructure Investment Trust).

In two separate notifications, SEBI said the 'unit-based employee benefit scheme' would be like the employee unit option scheme.

Employee unit option scheme refers to a scheme under which the investment manager grants unit options to its employees through an employee benefit trust.

The implementation of the scheme would be done through a separate Employee Benefit Trust (EB Trust) which can be created by the manager of a REIT or the investment manager of InvIT. The units held by EB Trust would be used only for the limited purpose of providing unit-based employee benefits.

As per SEBI, the investment manager or manager can receive the units of InvIT/REIT in lieu of management fees, for the purpose of providing unit-based employee benefits.

The EB trust would not undertake any transfer or sale of units of REIT/InvIT held by it except for providing unit-based benefits to the employees of the manager or investment manager.

The trustee of the EB Trust would not be eligible to vote on account of the units of the REIT/InvIT held by it.

Any offer of a unit-based employee benefits scheme by the manager would not result in any additional cost to the REIT, InvIT, their respective HoldCo, and SPV.

For disclosure to the recognized stock exchange, the unitholding of the EB Trust would be shown as a "non-sponsor and non-public" unitholding.

The provisions of Sebi's insider trading PFUTP (Prohibition of Fraudulent and Unfair Trade Practices) rules should apply to the manager/investment manager, its directors, its key managerial personnel, and recipients of UBEB and EB Trust.

To give this effect, the Securities and Exchange Board of India (SEBI) has amended REIT and InvIT rules, which became effective from July 12.

REITs and InvITs are new concepts in the Indian market but have been a popular choice globally for their lucrative returns and capital appreciation.

A REIT is made up of a portfolio of commercial real estate assets, the majority of which are already leased out, and InvITs consist of a portfolio of infrastructure assets like highways.