India’s markets regulator is considering opening up real estate investment trusts (REITs) to small investors by gradually lowering the minimum trading lot size of REIT units from Rs 50,000 to the value of just a single unit, much like how stocks are traded.
The move is aimed at improving liquidity for investors in REITs, two people with direct knowledge of Securities and Exchange Board of India’s (Sebi’s) plans said on condition of anonymity.
“Sebi is considering a plan to gradually make REITs trading akin to share trading. This will help grow the market as it will channelise household investments into commercial realty,” said one of the two people.
Embassy Office Parks REIT is currently the only such listed trust in India. On Tuesday, the company’s REIT was trading at Rs 341 per unit on BSE.
The company’s total market value is around Rs 26,245 crore but there is no free-float market cap because REIT units are not freely tradable, which will change once Sebi relaxes the rules and allows small investors to buy and sell REIT units on exchanges without any minimum lot size restrictions or perhaps in small affordable lot sizes.
The market regulator’s proposal is in line with global practices where even a single REIT unit can be traded.
Though Sebi allowed listing of REITs in 2016, so far, Embassy REIT is the only listed entity.
Despite subdued equity markets, Embassy REIT fetched a return of 25% over the last one year, which explains the growing popularity of REITs and the reason why the market regulator is now planning to allow retail investors to enter REITs market.
“Sebi is in receipt of the representation from some industry participants and is considering it. The regulator wants the REIT market to grow but can’t compromise on safety of investors,” said one of the people cited above.