The Union Cabinet on 6 May 2015 gave its nod for allowing foreign investments into Real Estate Investment Trusts (REITs) by recognizing it as an eligible financial instrument or structure under the Foreign Exchange Management Act (FEMA) 1999.
The decision allows entities registered and regulated under the SEBI (REITs) Regulations 2014 to access foreign investment inflows into the completed rent yielding real estate projects, which is, as of now, prohibited under the FEMA Regulations.
About Real Estate Investment Trusts (REITs)
• It was proposed by the then Union Finance Minister Arun Jaitley during his budget speech of 2014-15.
• They are intended to attract long term finance from foreign and domestic sources including Non Resident Indians (NRIs).
• They are listed entities that primarily invest in leased office and retail assets, allowing developers to raise funds by selling completed buildings to investors and list them as a trust.
• To operationalise the instrument, the capital market regulator The Securities and Exchange Board of India (SEBI) issued the SEBI (REITs) Regulations 2014 in September 2014.
• However, due to the limitation of its access only to domestic investments, it has not attracted desired investments from the market, which is remedied by the recent decision of the Cabinet.
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