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The board of the Securities and Exchange Board of India on Saturday approved a proposal to introduce a framework for fractional ownership of real estate assets. The regulator, however, deferred its plan to make changes to delisting rules.

Sebi had proposed to allow companies to delist by coming out with a fixed price for the repurchase of shares, instead of the existing reverse book-building mechanism where they decide on the price based on the sell orders submitted by shareholders.

“It (delisting proposal) was discussed in the board meeting. Our commitment to using data for policy making is such a strong commitment that the board directed us that since the number of delisting applications received over the last five years is small … the data set is very limited to draw a very significant conclusion,” Sebi chairperson Madhabi Puri Buch said after the board meeting. “The board guided us to go back and do further examination of certain data and do further consultation with stakeholders so that we have a better sense. That is the reason that it was not done this time.”

The Sebi board approved setting up of small and medium real estate investment trusts (REITs), with an asset value of at least Rs 50 crore as compared to Rs 500 crore for existing REITs.

Sebi said small and medium REITs would have the ability to create separate schemes for owning real estate assets through special purpose vehicles constituted as companies. It said the existing structures could migrate, provided they meet certain criteria such as net worth, minimum unit holding requirement, minimum subscription, distribution and valuation rules.

The avenue would facilitate investment in primarily pre-leased real estate which earn the investors a rental yield, as well as participate in potential rise in the value of such properties. The returns are distributed to the investors after management fees and other charges. “This growth-oriented initiative is poised to facilitate fractional ownership of real estate in a more organised and structured manner,” said Sumit Agrawal, partner, Regstreet Law Advisors.

T+0 Trade Settlement
Sebi is also planning to allow T+0 settlement of trades – settlement on the same day of trade – before the end of this financial year. “We have said that we will move optionally to one-hour settlement and then we will move to instantaneous. The market infrastructure and the brokers together have come back and told us that the technology part they need to take to get to instantaneous settlement will be much better if the first step we take is not a one-hour settlement but T+0,” Buch said.

“There is an in-between step which has undergone a change based on a consultation. So, the feedback was it will be quicker and less expensive to move to T+0 and then move to instantaneous settlement rather than to move to one hour and then to instantaneous. Since that roadmap is working out very well, we feel that the incremental benefit of inserting a one-hour in the middle may not be there. So, we will move to T+0 and then to instantaneous.” The regulator has also tweaked rules for index providers. It said the new framework would provide for registration of index providers which license significant indices.”With the global and Indian financial sectors experiencing a surge in passive investment, the need for clear regulations regarding indexes and index service providers has become evident,” Agrawal of Regstreet Law Advisors said. “Sebi seems to have shifted its policy from regulating all indexes to focusing on significant ones. Indexes vary in scope, ranging from broad-based and widely used to narrowly focused, including specialised ones tailored for specific users.”

  • Published On Nov 27, 2023 at 01:17 PM IST

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