REITs and InvITs permitted to issue Debt Securities

SEBI (Real Estate Investment Trusts) Regulations, 2014 (“REIT Regulations”) and SEBI (Infrastructure Investment Trusts) Regulations, 2014 (“InvIT Regulations”) were amended vide notifications dated December 15, 2017. The said amendments, inter-alia, clarified that REITs and InvITs can issue debt securities.

Subsequently, SEBI issued a circular permitting Real Estate Investment Trusts (“REITs”) and Infrastructure Investment Trusts (“InvITs”) to issue debt securities subject to the following conditions and compliance of SEBI (Issue and Listing of Debt Securities Regulations), 2008 (“ILDS Regulations”):

  • Unlike other debt securities, such debt securities can be issued for providing loan or acquisition of shares of any person who is part of the same group or who is under the same management as that of the REITs/ InvITs
  • Unlike other issuers, it is not necessary for REITs/ InvITs to create ‘debenture redemption reserve’ to secure the redemption of the debt securities.
  • The compliances required to be made under the Companies Act, 2013 or any filing to be made to Registrar of Companies in terms of the ILDS Regulations, shall not apply to REITs/InvITs for issuance of debt securities unless specifically provided in the circular.
  • All other provisions of ILDS Regulations shall apply to REITs/ InvITs. In case of any conflict between ILDS Regulations and REIT Regulations and/or InvIT Regulations or circulars issued thereunder, the latter shall prevail.
  • Further, REITs/ InvITs shall be required to appoint 1 (One) or more debenture trustee(s) registered with SEBI under SEBI (Debenture Trustees) Regulations, 1993 prior to issue of any debt security.

    Any secured debt securities issued by REITs/ InvITs have to be secured by the creation of a charge on the assets of the REIT/ InvIT or holding company or SPV, having a value which is sufficient to repay the principal amount together with interest thereon.