SEBI's Major Move: Depository Receipts Proposed for REITs and InvITs to Supercharge Foreign Capital Inflow

SEBI's Major Move: Depository Receipts Proposed for REITs and InvITs to Supercharge Foreign Capital Inflow​

SEBI has introduced a significant regulatory proposal aimed at unlocking substantial foreign investment into India’s real estate and infrastructure sectors. The regulator is proposing that depository receipts be issued against units of Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs). This move is set to provide an additional, high-level mechanism for international investors to access these lucrative assets.

Streamlining Global Access to Indian REITs and InvITs​

The proposal mandates aligning the rules governing depository receipts against REITs and InvITs with those already established for equity depository receipts. Depository receipts are specialized foreign-currency instruments issued by an overseas financial institution. They are backed by securities held within a domestic custodian, enabling global investors to trade these assets in international markets.

REITs and InvITs are critical components of India’s infrastructure push, attracting both domestic and international capital under existing government and central bank guidelines. The introduction of depository receipts aims to widen the investment funnel significantly.

How Depository Receipts Boost Foreign Investment​

The proposed regulations would introduce a new and powerful route for overseas investors. By utilizing these foreign-currency-denominated instruments, investors can trade REITs and InvIT units directly in international markets. This structure moves beyond existing foreign investment avenues, making Indian real estate and infrastructure assets more seamlessly accessible on the global stage.

SEBI stated that this proposal is a direct attempt to attract heightened levels of foreign capital into these vital sectors. By providing regulatory parity with equity depository receipts, SEBI is signaling its commitment to market deepening and international connectivity.

Regulatory Timeline and Next Steps​

The Securities and Exchange Board of India has sought extensive public commentary on the proposed changes. This period allows industry stakeholders and market participants to review the implications of the proposal. Interested parties are mandated to submit their comments regarding the proposals by August 25, 2024.