REITs, InvITs to be part of Nifty indices: NSE

5 August 2022
4 mins read
REITs, InvITs to be part of Nifty indices: NSE

The National Stock Exchange (NSE) has announced the inclusion of Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs) in its indices such as Nifty 500 and Nifty Smallcap 25 and Nifty Midcap 150. The changes, which will be implemented from September 30, are aimed at drawing more investment interest into these trusts.

According to a recently issued statement, the NSE said all REITs, InvITs and equity shares that are traded on the NSE (listed and traded apart from those not listed but allowed to trade) are eligible to be included. Thus far, only shares that are traded on NSE were eligible to be included under the Nifty indices.

Further, the NSE has also said that the eligibility requirements for Nifty pharma index has been changed. It has permitted the top 20 stocks to be included in the pharma index rather than the earlier top ten stocks. There have also been many changes in other indices like Nifty 500, Nifty Midcap 150 and Nifty 100, among others.

Nifty indices

Nifty is NSE’s market index and contains a range of other indices, including Nifty broad based ones, which act as a benchmark to measure stock performance or portfolios. Some of them include Nifty 50, Nifty Next 50, Nifty 100, Nifty 500, etc. There are also several sectoral indices such as Nifty Auto, Nifty Bank, Nifty FMCG, Nifty Metal among others. Thematic indices include Nifty100 ESG and Nifty MNC indices for instance. The Nifty index may undergo changes every six months, depending on performance of stocks over that period.

What are REITs and InvITs?

The two are relatively new asset classes that are made available for investors. These allow investors to invest in real estate and infrastructure assets that are completed and have a relatively smaller ticket size. These are also asset classes that offer liquidity. Market regulator SEBI, on July 30, modified the scope of investment in the two trusts. Earlier, the minimum value of the application for a retail investor in a REIT and InvIT was Rs 50,000 and Rs 1 lakh, respectively. Now, as per the July 30 notification, it has been revised to the range of Rs 10,000 to Rs 15,000, in a bid to boost liquidity.

REITs permit money from several investors to be put together into one trust which is managed in a professional manner. This trust further invests in properties that yield rent or even special purpose vehicles (SPVs) that constitute such properties. According to SEBI, 80 per cent of the REIT investment needs to be in commercial properties that yield rent. The 20 per cent of the REIT can be held in assets like commercial properties under construction, bonds, stock or cash.

Much like REITs, InvITs also provide investors an opportunity to invest in the infrastructure projects of companies. The money that companies raise through InvITs may be used to buy only infrastructure assets or invest in SPVs’ debt/equity instruments. Like REITs, InvITs also hold assets via SPVs. However, in the case of InvITs, unlisted and private trusts are also permitted as per SEBI. This is a departure from REITs where the same is not applicable.

How many REITs/InvITs are available in India?

There are three REITs and InvITs each listed on the NSE at present. Overall, as of March 2021, four real estate investment trusts and 15 infrastructure investment trusts have been registered, with nine of them listed on the exchanges in India. According to SEBI data released in July 2021, InvITs and REITs together raised nearly Rs 55,000 crore for the 2020-21 period. The net InvIT and REIT assets touched Rs 1.65 lakh crore. Comparatively, InvITs managed to raise Rs 8,573 crore for the 2019-20 period while REITs did not raise any funds in the same period.

Conclusion

The NSE has stated that REITs and InvITs will be included in the Nifty indices come September, as per the new eligibility requirements. This move is aimed at enhancing investor interest and participation in these asset classes. Greater participation would in turn lead to enhanced liquidity and more volumes, experts note.

 

FAQs

What are REITs and InvITs?

REITs are real estate investment trusts while InvITs are infrastructure investment trusts. They are a new asset class made available for retail investors. These trusts pool investments from many investors into one trust that is managed in a professional manner.

What is the NSE’s latest move about REITs and InvITs all about?

According to the NSE, REITs and InvITs will be included in the Nifty indices from September 30 to ensure greater investor interest and participation.