SEBI Issues Framework for Issuance of Depository Receipts on Units of REITs

• Regulatory Context: The Securities and Exchange Board of India (SEBI) has notified a comprehensive regulatory framework enabling Real Estate Investment Trusts (REITs) to issue Depository Receipts (DRs) in permissible foreign jurisdictions, opening global fundraising avenues beyond domestic capital markets. • Mechanism of Depository Receipts (DRs): - An Indian custodian holds the underlying domestic units of the listed REIT. - An overseas depository issues negotiable Depository Receipts (such as Global Depository Receipts - GDRs or American Depository Receipts - ADRs) backed by those underlying units to foreign investors on international bourses (e.g., LSE, NYSE, NASDAQ). - International investors can invest in Indian commercial real estate assets in their domestic currency without currency exchange friction or requiring a domestic demat account. • Regulatory Safeguards: - Compliance with the Depository Receipts Scheme, 2014, Foreign Exchange Management Act (FEMA), and SEBI REIT Regulations. - Issuance restricted to FATF (Financial Action Task Force) and IOSCO-compliant foreign jurisdictions. - Voting rights on underlying units can only be exercised by the foreign depository strictly according to the deposit agreement.

• Infrastructure & Real Estate Monetisation: Fulfills long-term patient capital requirements for commercial real estate development and asset monetization by tapping foreign pension and sovereign wealth funds. • Market Liquidity & Price Discovery: Enhances unit liquidity, broadens foreign institutional ownership, lowers the cost of capital, and establishes global valuation benchmarks for Indian commercial property assets.

• REITs pool investor capital to acquire and manage income-generating commercial real estate (office parks, logistics centers, malls). • By law, REITs must distribute a minimum of 90% of their net distributable cash flows (NDCF) to unit holders as periodic distributions. • The new framework provides an exit mechanism and global secondary market for unit holders, boosting Foreign Portfolio Investment (FPI) inflows.