The Securities and Exchange Board of India (SEBI) has broadened the eligibility criteria for entities classified as “strategic investors” in Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs). The expanded definition is intended to draw more institutional participation into public issuances by these trusts, thereby facilitating smoother capital mobilisation and improving overall market accessibility.
The revised framework aims to simplify investment routes for large institutions that typically seek long-term, stable-yield opportunities. By widening the pool of eligible strategic investors, SEBI expects to streamline fundraising activities for REITs and InvITs and strengthen the ease of conducting business within these asset classes.
Earlier Norms Limited to Select Investor Categories
Under the previous regulations governing strategic investors for these trusts, eligibility was confined to a narrow set of institutions. This excluded several major financial entities that already play a critical role in the broader investment landscape. Pension funds, provident funds and insurance companies—despite being traditional backers of long-term assets—were not recognized as strategic investors under the older rulebook. This restriction prevented them from participating in certain structured offerings of REITs and InvITs, even though these instruments align closely with their investment profiles.
The narrower definition had long been viewed as a limitation, restricting both investor variety and the scale of capital that could be mobilized by issuers.
Expanded Eligibility Through QIB Classification
SEBI has now addressed these constraints by amending the rules and allowing any Qualified Institutional Buyer (QIB) to participate as a strategic investor in REITs and InvITs. The change, notified on December 9, updates the regulatory framework to ensure wider institutional access, bringing it in line with current market practices and the evolving investment ecosystem.
With this revision, a broader group of entities can now participate in public issuances as strategic investors. The expanded list includes:
- Public financial institutions
- Pension funds and provident funds
- Alternative Investment Funds (AIFs)
- State industrial development corporations
- Large family trusts
- Market intermediaries with a minimum net worth of ₹500 crore
- Non-banking financial companies (NBFCs) categorized under the middle, upper, and top layers
By incorporating all QIBs into the strategic investor category, SEBI has effectively created a more inclusive framework for capital participation in the REIT and InvIT segments.
Summary:
SEBI has expanded the definition of strategic investors for REITs and InvITs to include all Qualified Institutional Buyers. The updated norms bring in major investor categories such as pension funds, provident funds, AIFs, insurance-related entities, development corporations, large trusts, high-net-worth intermediaries and key NBFCs. The broader eligibility is intended to boost participation in public issuances and enhance capital-raising capabilities for these investment trusts.
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