On Wednesday, capital market regulator Sebi issued guidelines on preferential issues and institutional placement of units in emerging investment vehicles – REITs and InvITs.

According to two separate notices, the regulator has clarified how listed real estate investment trusts (REITs) and infrastructure investment trusts (InvITs) will issue preferential issues and institutional placements.

Regarding the issuance of institutional placement units, Sebi stated that there would be no placement, directly or indirectly, to any institutional investor who is the promoter or manager or to individuals, affiliates or related parties associated with the institution.

However, units may be allocated to sponsors for the unsubscribed portion of institutional placements where at least 90% of the issue size has been subscribed, the issue is to acquire assets from such sponsors, and the unitholders have approved the unsubscribed portion allocated to the sponsor.

Listed InvITs and REITs can pre-emptively issue units or institutionally place units by notifying their unitholders of a meeting to pass a resolution if the like-minded units to be allocated are listed on a stock exchange at least six months before that date.

REITs and InvITs are relatively new investment vehicles in India but are very popular in the global market. REITs include a portfolio of commercial real estate assets, most of which are leased, while InvITs include a portfolio of infrastructure assets such as highways and transmission assets.