Technology

Infrastructure Investment Trusts (InvITS) in Indian Real Estate

 

 InvITS

InvITS or Infrastructure Investment Trusts is the modified version of REIT (Real Estate Investment Trusts) which works as same as the mutual fund which directs the individual investor’s investment of small amount of money in infrastructure for earning a small portion of the income as return.

 

 

 

Types of InvITS: There are two types of InvITS which have been allowed:-

  • Investment mainly in the completed and revenue generating infrastructure  projects.
  • Investment in completed or under-construction projects

 

InvITS Guidelines: InvITs which propose to invest at least 80% of the value of the assets in the completed and revenue generating Infrastructure assets shall:

  • raise funds only through public issue of units
  • have a minimum 25% public float and at least 20 investors
  •  have minimum subscription size and trading lot of Rs ten lakhs and Rs five lakhs respectively
  • distribute not less than 90% of the net distributable cash flows, subject to applicable laws, to the investors
  • undertake full valuation of invested assets atleast once a year and half yearly updation of the same
  • may invest the remaining 20% in under-construction infrastructure projects and certain other permissible investments. However, the investments in under-construction infrastructure projects shall not be more than 10% of the value of the assets

InvITs which propose to invest more than 10% of the value of their assets in under construction infrastructure projects:

  • can raise funds only through private placement from Qualified Institutional Buyers and body corporates
  • have minimum investment and trading lot of Rs. 1 crore
  • have minimum of 5 investors with each holding not more than 25% of the units
  • distribute not less than 90% of the net distributable cash flows, subject to applicable laws, to the investors
  • undertake full valuation on yearly basis

 

Features or Structures of InvITS:

InvITS are registered with SEBI and includes four parties:-

  • Sponsor: Not more than 3 sponsors setup all the InvIT and appoint it to trustee.
  • Trustee: Hold invITs assets for the benefit of unit holders and ensure the investment manager for the timely payment of dividend to the unit holders.
  • Investment Manager: They ensure that the assets have the proper legal titles and contracts and it should be legal, valid and binding.
  • Project Manager: Undertake all the operations and management of invIt assets for the under construction projects.

 

Advantages of InvITS:

  • Providing wider and long-term re-finance for existing infrastructure projects
  • Freeing up of current developer’s capital for reinvestment into new infrastructure projects
  • Refinancing/takeout of existing high cost debt with long-term low-cost capital and help banks free up/reduce loan exposure, and thereby help them create headroom for new funding requirements

 

                 

                                                                           

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