Capital markets regulator Sebi came out with a framework for a unit-based employment benefit scheme for investment trusts — REITs and InvITs.
REIT and InvIT
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.
Under the framework, the Securities and Exchange Board of India (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).
Also Read: Get Returns From Real Estate Without Buying Property: Know What Is REIT Investment In India
In two separate notifications, Sebi said the ‘unit-based employee benefits 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 instead of management fees, to provide 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 “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, Sebi has amended REIT and InvIT rules, which became effective from July 12.
What Is REIT?
Real Estate Investment Trusts (REITs) are companies that own, operate, or finance income-generating real estate across a range of property sectors. They provide a way for individual investors to earn a share of the income produced through commercial real estate ownership without actually having to buy, manage, or finance any properties themselves.
What Is InvIT?
Infrastructure Investment Trusts (InvITs) are investment vehicles that enable individuals and institutional investors to invest in infrastructure projects. They allow developers of infrastructure assets to monetize their investments by pooling multiple projects under a single entity.
REITs and InvITs are new concepts in the Indian market but have been a popular choice globally for their lucrative returns and capital appreciation.
(With PTI inputs)
