Why in news?
The Securities and Exchange Board of India (SEBI) has proposed targeted regulatory relaxations for Infrastructure Investment Trusts (InvITs) and Real Estate Investment Trusts (REITs) to improve cash management, borrowing flexibility, and post-concession asset handling, while retaining investor protection norms.
Key Proposals in SEBI’s Consultation Paper
1) Holding SPVs Beyond Concession Period (InvITs)
- Issue under current rules:
- A Special Purpose Vehicle (SPV) must hold ≥90% assets in infrastructure projects.
- After a project’s concession expires, assets revert to the government, leaving the SPV temporarily non-compliant.
- SEBI’s proposal:
- Allow InvITs to continue holding such SPVs beyond concession expiry, even if they temporarily fail to meet SPV criteria.
- Rationale:
- InvITs often face tax assessments, litigation, defect-liability obligations, and contractual responsibilities post-concession.
- Avoids forced divestments and provides clarity to a long-standing regulatory ambiguity.
2) Greater Flexibility in Parking Surplus Cash (InvITs & REITs)
- Current position:
- Investments allowed only in a narrow set of liquid instruments.
- Proposed change:
- Expand the eligible universe of liquid mutual fund schemes.
- Expected benefit:
- Better treasury management and returns on idle funds without materially increasing risk.
3) Greenfield Projects: Level Playing Field
- Current issue:
- Private InvITs face tighter investment restrictions than publicly listed InvITs for greenfield projects.
- Proposal:
- Align conditions for private InvITs with those for listed InvITs.
- Impact:
- Encourages capital formation and project development via InvITs.
