SEBI Proposes Allowing Depository Receipts Against REIT and Publicly Listed InvIT Units

The Securities and Exchange Board of India (SEBI) has issued a consultation paper proposing the issuance of depository receipts (DRs) backed by units of Real Estate Investment Trusts (REITs) and publicly listed Infrastructure Investment Trusts (InvITs). Under the proposed framework, privately placed InvITs would be excluded from eligibility.

Background and Rationale

SEBI, India's capital markets regulator, has been progressively expanding the investment avenues available to both domestic and overseas investors in REITs and InvITs. India's REIT and InvIT frameworks, introduced in 2014, took time to gain traction—the first InvIT listed in 2017 and the first REIT in 2019—but the segment has since grown to include multiple listed trusts backed by office parks, retail malls, and infrastructure assets. SEBI has also steadily lowered minimum investment thresholds and relaxed related party transaction norms to broaden retail and institutional participation. The latest proposal aims to further widen access by permitting depository receipts to be issued against underlying REIT and InvIT units, potentially attracting greater participation from global investors who are familiar with the depository receipt structure.

What Are Depository Receipts?

Depository receipts are negotiable financial instruments issued by a depository bank that represent securities listed on a foreign exchange. They allow investors to hold shares in overseas companies without directly trading on the local exchange. Well-known examples include American Depositary Receipts (ADRs) and Global Depositary Receipts (GDRs), which have been used for decades to enable cross-border investment in Indian companies such as Infosys and ICICI Bank. In the context of SEBI's proposal, DRs would represent beneficial ownership in REIT or InvIT units held by a domestic custodian.

Scope of the Proposal

The proposed framework covers:

• Units of publicly listed REITs
• Units of publicly listed InvITs

Privately placed InvITs, which are not traded on stock exchanges, are explicitly excluded from the scope.

Expected Benefits

The proposal is designed to enhance liquidity, expand the investor base, and improve the global visibility of Indian REITs and InvITs. By enabling depository receipts, SEBI seeks to make these instruments more accessible to international investors who may face operational or regulatory constraints when investing directly in Indian-listed securities. For global institutional investors, DRs could offer a more familiar route to gain exposure to India's commercial real estate and infrastructure pipeline without navigating onshore account-opening and settlement requirements.

Consultation Process

SEBI has invited public comments on the proposal. The deadline for submitting feedback is August 25. Stakeholders, market participants, and members of the public can submit their responses to the regulator before the consultation period closes. Following the consultation, SEBI would need to finalize and notify the framework before issuers can proceed with DR issuances, meaning any actual market launch would depend on the final rules and subsequent issuer interest.

Source: CNBC-TV18