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SEBI reveals fast-track FPO framework to boost fundraising for REITs and InvITs

#Taxation & Finance News#India

Last Updated : 2nd Apr, 2025

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Synopsis

SEBI has introduced a fast-track framework for follow-on public offers (FPOs) to streamline capital raising by Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs). Key provisions include mandatory in-principle listing approvals, lock-in periods for sponsors, and a minimum 25% public unit holding post-FPO. Merchant bankers must submit due diligence certificates alongside draft FPO documents. The move aligns with global practices in the U.S. and U.K., aiming to boost investor confidence, market transparency, and fund access. By simplifying fundraising norms, SEBI supports faster capital mobilisation for real estate and infrastructure development across India.

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The Securities and Exchange Board of India (SEBI) has introduced a framework to streamline fundraising for Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs) through fast-track follow-on public offers (FPOs).

Key Features of the Framework:

Eligibility for Fast-Track FPOs - REITs and InvITs can now raise additional capital beyond their initial public offerings (IPOs) through FPOs.

Listing Approvals - Entities must apply to all stock exchanges where their units are listed to seek in-principle approval for the FPO. They must designate one exchange as the primary platform for the process.

Lock-In Provisions for Sponsors - Sponsors and sponsor groups are required to lock in 15% of their allotted units for three years from the date of trading approval. The remaining units are subject to a one-year lock-in period.

Minimum Public Unit Holding - Post-FPO, at least 25% of the total outstanding units must be held by public investors, ensuring adequate market participation and liquidity.

Filing and Approval Process - The FPO document, after incorporating SEBI's observations, must be filed with the regulator and recognized stock exchanges. Merchant bankers are responsible for submitting a due-diligence certificate alongside the draft FPO document, affirming compliance with the required norms.

This framework is expected to enhance the efficiency of capital raising for REITs and InvITs, providing them with quicker access to funds for expansion and development projects. By establishing clear guidelines, SEBI aims to bolster investor confidence and market transparency, contributing to the growth and stability of the real estate and infrastructure sectors.

Similar regulatory frameworks have been implemented in other countries to facilitate capital raising for investment trusts. For instance, the United States Securities and Exchange Commission (SEC) allows Real Estate Investment Trusts (REITs) to utilize shelf registrations, enabling them to offer new shares to the public more efficiently. This mechanism has streamlined fundraising processes for REITs in the U.S., allowing them to access capital markets swiftly to fund new acquisitions and developments.

In the United Kingdom, the Financial Conduct Authority (FCA) has established guidelines that permit Property Authorized Investment Funds (PAIFs) to conduct secondary offerings with reduced administrative procedures, provided they meet certain eligibility criteria. This approach has facilitated quicker capital infusion into the real estate sector, promoting growth and development.

SEBI's initiative aligns with global best practices, aiming to create a more conducive environment for REITs and InvITs in India. By simplifying the process for follow-on public offers, the framework is poised to attract more investors and encourage the development of high-quality infrastructure and real estate projects across the country.

Next (RBI reports 3.1% rise in India�s housing prices with Kolkata in the lead)