SEBI relaxes rules for investment in real estate

MUMBAI: Aiming to develop the corporate bond market to attract more foreign investments into the India, markets regulator Sebi on Friday allowed a select categories of foreign portfolio investors (FPIs) to directly trade in the debt segment of the market, bypassing brokers. The markets regulator also relaxed norms for real estate investment trusts (REITs), globally one of the popular vehicles to invest in the real estate sector. It also relaxed rules for investing in the infrastructure sector through Infrastructure Investment Trusts (InvITs), also a popular invest vehicle for investors in developed markets.

The Sebi board also approved foreign investors to hold up to 15% in stock exchanges in India. In July the government had hiked this stake from the earlier ceiling of 5%. Foreign banks, insurance companies and depositories are now allowed to have higher stakes in Indian bourses. For the first time, the Sebi board met at the National Institute of Securities Markets campus in Patalganga, about 80 kilometres from the city. Sebi is setting up the NISM campus for imparting training and certification services for the capital markets.

Sebi on Friday removed the number of sponsors for REITs and InvITs, reduced mandatory sponsor holdings to 15% in InvITs and also allowed REITs to invest up to 20% in under construction assets, from 10% earlier. The easier rules for these investment products are expected to attract more companies to take these routes to raise money which in turn would give investors more options to invest in these sectors.

On the issue of allowing FPIs in corporate bond markets, after the initial phase once the regulator and stock exchanges get feedback from FPIs, these entities may be allowed to trade directly in stocks also, market players said. Currently, while all FPIs have to compulsorily route their trades through brokers, but most of the large ones take the direct market access (DMA) route that allow them to put trades using brokers’ terminals in their own office.

The move, however, is sure to have negative impact on brokerage houses, domestic and foreign, since these entities stand to lose out on broking commissions from their FPI clients. The Sebi is also in favour of companies taking minority shareholders’ nod before assigning special rights to private equity players. The regulator feels there is a corporate governance issue in such deals and has floated a concept paper on the same for market’s views.

Sebi also allowed permanent registration to credit rating agencies, merchant bankers, registrar to issues and some other market intermediaries. At present these entities have to renew their registration every three years. Sebi also floated another consultation paper on amending its investment advisory rules. Among the issues which this consultation paper will address are: if mutual fund distributors can continue to act as investment advisors, restrictions on trading tips via electronic forms like SMS, email etc. and also advertisement codes for investment advisors.

Credits Times of India

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