(1) The Investment by a REIT shall only be in 143[holdco and/or] SPVs or properties or securities or TDR in India in accordance with these regulations and in accordance with the investment strategy as detailed in the offer document as may be amended subsequently.
(2) The REIT shall not invest in vacant land or agricultural land or mortgages other than mortgage backed securities:
143 Inserted by the SEBI (Real Estate Investment Trusts) (Amendment) Regulations, 2016, w.e.f. 30.11.2016 36
Provided that this shall not apply to any land which is contiguous and extension of an existing project being implemented in stages.
(3) The REIT may invest in properties through SPVs subject to the following,-
(a) no other shareholder or partner of the SPV shall 144[exercise] any rights that prevents the REIT from complying with the provisions of these regulations 145[and an agreement 146[has been] entered into with such shareholders or partners to that effect prior to investment in the SPV]:
147[Provided that the shareholders’ agreement or partnership agreement shall provide for an appropriate mechanism for resolution of disputes between the REIT and the other shareholders or partners in the SPV:
Provided further that the provisions of these regulations shall prevail in case of inconsistencies between such agreement(s) and the obligations cast upon a REIT under these regulations.]
148[(b) the manager, in consultation with the trustee, shall appoint atleast such number of nominees on the board of directors or the governing board of such SPVs, as applicable, which are in proportion to the shareholding or holding interest of the REIT in the SPV;]
(c) the manager shall ensure that in every meeting including annual general meeting of the SPV, the voting of the REIT is exercised 149[***].
150[(3A) The REIT may invest in properties through holdco subject 151[to] the following,- 144 Substituted for the word “have” by the Securities and Exchange Board of India (Real Estate Investment Trusts) (Amendment) Regulations, 2018, w.e.f. 10.04.2018.
145 Inserted by the SEBI (Real Estate Investment Trusts) (Amendment) Regulations, 2016, w.e.f. 30.11.2016 146 Substituted for the words “shall be” by the Securities and Exchange Board of India (Real Estate Investment Trusts) (Amendment) Regulations, 2018, w.e.f. 10.04.2018.
147 Inserted by the Securities and Exchange Board of India (Real Estate Investment Trusts) (Amendment) Regulations, 2018, w.e.f. 10.04.2018.
148 Substituted by the Securities and Exchange Board of India (Real Estate Investment Trusts) (Amendment) Regulations, 2018, w.e.f. 10.04.2018. Prior to the substitution, the clause read as:
“(b) the manager, in consultation with the trustee, shall appoint the majority of the Board of directors or governing board of such SPVs[, as applicable;” 149 Omitted “subject to provisions of Companies Act, 2013” by the SEBI (Real Estate Investment Trusts) (Amendment) Regulations, 2016, w.e.f. 30.11.2016 150 Inserted by the SEBI (Real Estate Investment Trusts) (Amendment) Regulations, 2016, w.e.f. 30.11.2016 151 Inserted by the Securities and Exchange Board of India (Real Estate Investment Trusts) (Amendment) Regulations, 2018, w.e.f. 10.04.2018.
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(a) the ultimate holding interest of the REIT in the underlying SPV(s) is not less than twenty six per cent;
(b) no other shareholder or partner of the holdco or the SPV(s) shall 152[exercise] any rights that prevent the REIT, the holdco or the SPV(s) from complying with the provisions of these regulations and an agreement 153[has been] entered into with such shareholders or partners to that effect prior to investment in the holdco and/or SPVs:
154[Provided that the shareholders’ agreement or partnership agreement shall provide for an appropriate mechanism for resolution of disputes between the REIT and the other shareholders or partners in the holdco and/or SPV;
Provided further that the provisions of these regulations shall prevail in case of inconsistencies between such agreement(s) and the obligations cast upon a REIT under these regulations.]
155[(c) the manager, in consultation with the Trustee, shall appoint atleast such number of nominees on the board of directors or the governing board of the holdco and/or the SPV, which are in proportion to the shareholding or holding interest of the REIT/holdco in the SPV;]
(d) the manager shall ensure that in every meeting including annual general meeting of the holdco and/or SPV(s), the voting of the REIT is exercised;]
(4) Not less than eighty per cent. of value of the REIT assets shall be invested 156[***] in completed and rent 157[and/or income] generating properties subject to the following,-
(a) if the investment has been made through a 158[holdco and/or] SPV, whether by way of equity or debt or equity linked instruments or partnership interest, only the portion of direct investments in properties by such 159[ holdco and/or] SPVs shall 152 Substituted for the word “have” by the Securities and Exchange Board of India (Real Estate Investment Trusts) (Amendment) Regulations, 2018, w.e.f. 10.04.2018.
153 Substituted ibid for the words “shall be”.
154 Inserted by the Securities and Exchange Board of India (Real Estate Investment Trusts) (Amendment) Regulations, 2018, w.e.f. 10.04.2018.
155 Substituted ibid. Prior to the substitution, the clause read as:
“(c) the manager, in consultation with the Trustee, shall appoints the majority of the Board of directors or governing board of the holdco and/or SPV(s);” 156 Omitted “proportionate to the holding of the REITs” by the SEBI (Real Estate Investment Trusts) (Amendment) Regulations, 2016, w.e.f. 30.11.2016 157 Inserted by the SEBI (Real Estate Investment Trusts) (Amendment) Regulations, 2017, w.e.f. 15.12.2017 158 Inserted by the SEBI (Real Estate Investment Trusts) (Amendment) Regulations, 2016, w.e.f. 30.11.2016 159 Inserted by the SEBI (Real Estate Investment Trusts) (Amendment) Regulations, 2016, w.e.f. 30.11.2016 38 be considered under this sub-regulation and the remaining portion shall be included under sub-regulation (5);
(b) if any project is implemented in stages, the part of the project which is completed and 160[rent and/or income generating] shall be considered under this subregulation and the remaining portion including any contiguous land as specified under proviso to sub-regulation (2) shall be included under clause (a) of subregulation (5).
(5) Not more than twenty per cent. of value of the REIT assets shall be invested 161[***] in assets other than as provided in sub-regulation (4) and such other investment shall only be in,-
(a) properties, 162[whether directly or through a company or LLP,] 163[***] which are:
(i) under-construction properties which shall be held by the REIT for not less than three years after completion;
(ii) under-construction properties which are a part of the existing income generating properties owned by the REIT which shall be held by the REIT for not less than three years after completion;
(iii) completed and not rent generating properties which shall be held by the REIT for not less than three years from date of purchase;
(b) listed or unlisted debt of companies or body corporate in real estate sector:
Provided that this shall not include any investment made in debt of the 164[holdco and/or SPVs];
(c) mortgage backed securities;
160 Substituted for the words “rent-generating” by the SEBI (Real Estate Investment Trusts) (Amendment) Regulations, 2017, w.e.f. 15.12.2017 161 Omitted “proportionate to the holding of the REITs” by the SEBI (Real Estate Investment Trusts) (Amendment) Regulations, 2016, w.e.f. 30.11.2016 162 Inserted by the Securities and Exchange Board of India (Real Estate Investment Trusts) (Amendment) Regulations, 2018, w.e.f. 10.04.2018.
163 Omitted “in which not more than ten per cent. of value of the REIT assets shall be invested,” by the SEBI (Real Estate Investment Trusts) (Amendment) Regulations, 2016, w.e.f. 30.11.2016 164 Substituted for “SPV” by the SEBI (Real Estate Investment Trusts) (Amendment) Regulations, 2016, w.e.f.
30.11.2016 39
(d) equity shares of companies 165[which are] listed on a recognized stock exchange in India which derive not less than seventy five per cent. of their operating income from real estate activity as per the audited accounts of the previous financial year;
166[(da) unlisted equity shares of companies which derive not less than seventy five per cent. of their operating income from real estate activity as per the audited accounts of the previous financial year:
Provided that the investments, made through unlisted equity shares of a company, in under construction properties and/or completed and not rent generating properties, shall be in compliance with clause (a) of this subregulation.]
(e) government securities;
(f) unutilized FSI of a project where it has already made investment;
(g) TDR acquired for the purpose of utilization with respect to a project where it has already made investment;
(h) money market instruments or cash equivalents.
167[(5A) The investment conditions as specified at sub-regulation (4) and (5) of regulation 18 shall be complied at the time of Offer document and thereafter.]
(6) Not less than 168[fifty one] per cent. of the 169[consolidated] revenues of the REIT 170[, holdco] and the SPV, other than gains arising from disposal of properties, shall be, at all times, from rental, leasing and letting real estate assets or any other income incidental to the leasing of such assets.
165 Inserted by the Securities and Exchange Board of India (Real Estate Investment Trusts) (Amendment) Regulations, 2018, w.e.f. 10.04.2018.
166 Inserted by the Securities and Exchange Board of India (Real Estate Investment Trusts) (Amendment) Regulations, 2018, w.e.f. 10.04.2018.
167 Inserted by the SEBI (Real Estate Investment Trusts) (Amendment) Regulations, 2016, w.e.f. 30.11.2016 168 Substituted for “seventy five” by the SEBI (Real Estate Investment Trusts) (Amendment) Regulations, 2016, w.e.f. 30.11.2016 169 Inserted by the Securities and Exchange Board of India (Real Estate Investment Trusts) (Amendment) Regulations, 2018, w.e.f. 10.04.2018.
170 Inserted by the SEBI (Real Estate Investment Trusts) (Amendment) Regulations, 2016, w.e.f. 30.11.2016 40 171[***] 172[***]
(9) Conditions specified in sub-regulations (4), (5), (6), (7) and (8) shall be monitored on a half-yearly basis and at the time of acquisition of an asset:
Provided that if such conditions are breached on account of market movements of the price of the underlying assets or securities or change in tenants or expiry of lease or sale of properties, the manager shall inform the same to the trustee and ensure that the conditions as specified in this regulation are satisfied within six months of such breach:
Provided further that the period may be extended by another six months subject to approval from investors in accordance with regulation 22.
(10) A REIT shall hold any completed and rent generating property, whether directly or through 173[holdco or] SPV, for a period of not less than three years from the date of purchase of such property by the REIT or 174[holdco or] SPV.
(11) For any sale of property, whether by the REIT or 175[holdco or] the SPV or for sale of shares or interest in the SPV by the 176[holdco or] REIT exceeding ten per cent. of the value of REIT assets in a financial year, the manager shall obtain approval from the unit holders in accordance with regulation 22.
(12) A REIT shall not invest in units of other REITs.
(13) A REIT shall not undertake lending to any person 177[other than the holding company/special purpose vehicle(s) in which the REIT has invested in, subject to disclosures specified in Schedule IV]:
Provided that investment in debt securities shall not be considered as lending.
171 Omitted by the Securities and Exchange Board of India (Real Estate Investment Trusts) (Amendment) Regulations, 2018, w.e.f. 10.04.2018. Prior to omission, the clause read as:
“(7) Not less than seventy five per cent. of value of the REIT assets proportionately on a consolidated basis shall be rent generating.” 172 Omitted by the SEBI (Real Estate Investment Trusts) (Amendment) Regulations, 2017, w.e.f. 15.12.2017. Prior to the omission, the sub-regulation read as follows:
“(8) A REIT shall hold at least two projects, directly or through 172[holdco and/or] SPV, with not more than sixty per cent. of the value of the assets, proportionately on a consolidated basis, in one project.” 173 Inserted by the SEBI (Real Estate Investment Trusts) (Amendment) Regulations, 2016, w.e.f. 30.11.2016 174 Inserted by the SEBI (Real Estate Investment Trusts) (Amendment) Regulations, 2016, w.e.f. 30.11.2016 175 Inserted by the SEBI (Real Estate Investment Trusts) (Amendment) Regulations, 2016, w.e.f. 30.11.2016 176 Inserted by the SEBI (Real Estate Investment Trusts) (Amendment) Regulations, 2016, w.e.f. 30.11.2016 177 Inserted by theSEBI (Real Estate Investment Trusts) (Amendment) Regulations, 2017, w.e.f. 15.12.2017 41
(14) With respect to investment in leasehold properties, the manager shall consider the remaining term of the lease, the objectives of the REIT, the lease profile of the REIT’s existing real estate assets and any other factors as may be relevant, prior to making such investment.
(15) In case of any co-investment with any person(s) in any transaction,-
(a) the investment by the other person(s) shall not be at terms more favourable than those to the REIT;
(b) the investment shall not provide any rights to the person(s) which shall prevent the REIT from complying with the provisions of these regulations;
(c) the agreement with such person(s) shall include the minimum percentage of distributable cash flows that will be distributed and entitlement of the REIT to receive not less than pro rata distributions and mode for resolution of any disputes between the REIT and the other person(s).
(16) With respect to distributions made by the REIT and the 178[holdco and/or] SPV,-
(a) not less than ninety per cent. of net distributable cash flows of the SPV shall be distributed to the REIT 179[/holdco] in proportion of its holding in the SPV subject to applicable provisions in the Companies Act, 2013 or the Limited Liability Partnership Act, 2008;
180[(aa) with regard to distribution of net distributable cash flows by the holdco to the REIT, subject to applicable provisions in the Companies Act, 2013 or the Limited Liability Partnership Act, 2008, the following shall be complied:
(i) with respect to the cash flows received by the holdco from underlying SPVs, 100% of such cash flows received by the holdco shall be distributed to the REIT;
and
(ii) with respect to the cash flows generated by the holdco on its own, not less than 90% of such net distributable cash flows shall be distributed by the holdco to the REIT;]
(b) not less than ninety per cent. of net distributable cash flows of the REIT shall be distributed to the unit holders;
178 Inserted by the SEBI (Real Estate Investment Trusts) (Amendment) Regulations, 2016, w.e.f. 30.11.2016 179 Inserted by the SEBI (Real Estate Investment Trusts) (Amendment) Regulations, 2016, w.e.f. 30.11.2016 180 Inserted by the SEBI (Real Estate Investment Trusts) (Amendment) Regulations, 2016, w.e.f. 30.11.2016 42
(c) such distributions shall be declared and made not less than once every six months in every financial year and shall be made not later than fifteen days from the date of such declaration;
(d) if any property is sold by the REIT or 181[holdco or SPV or if the equity shares or interest in the holdco/SPV are sold by the REIT, then],-
(i) if the REIT proposes to reinvest sale proceeds, if any, into another property, it shall not be required to distribute any sale proceeds from such sale to the unit holders; 182[***]
(ii) if the REIT 183[***] proposes not to invest the sales proceeds made into any other property, 184[within a period of 1 year,] it shall be required to distribute not less than ninety per cent. of the sales proceeds in accordance with clauses (a) 185[, (b), (c) and (d) of sub-regulation 16];
(e) if the distributions are not made within fifteen days of declaration, then the manager shall be liable to pay interest to the unit holders at the rate of fifteen per cent. per annum till the distribution is made and such interest shall not be recovered in the form of fees or any other form payable to the manager by the REIT.
(17) No schemes shall be launched under the REIT.
(18) The Board may specify any additional conditions for investments by the REIT as it deems fit.
Related party transactions.