Finance Minister Nirmala Sitharaman said on Friday that foreign portfolio investors (FPIs) will be permitted to subscribe to listed debt securities issued by the Real Estate Investment Trusts (REITs) and the Infrastructure Investment Trust (InvITs).Presenting her maiden Union Budget, Sitharaman said that an important determinant of attracting cross-border investments is availability of investible stock to the foreign portfolio investors (FPIs). "Encouragement to foreign institutional investors to subscribe in REITs and InvITs will help in transforming the commercial realty market which is at present coming out of the liquidity crunch," said Sakshi Katiyal, Chief Executive Officer at Home & Soul."This issue assumes greater significance in view of the gradual shift from stock targeted investments towards passive investment whereby funds track global indices, composition of which depends upon available floating stock," Sitharaman said."Accordingly, I propose to increase the statutory limit for FPI investment in a company from 24 per cent to sectoral foreign investment limit with option given to the concerned corporates to limit it to a lower threshold. FPIs will be permitted to subscribe to listed debt securities issued by ReITs and InvITs," she said.
New and innovative financial instruments have been launched in the last five years like InvITs, REITs as well as models like toll-operate-transfer (ToT) as part of the brownfield asset monetisation strategy for augmenting infrastructure investment, she said."India has had reasonable success in brownfield asset monetisation and several InvITs and one REIT transaction have already been completed. Additionally, the National Highway Authority of India (NHAI) carried out one ToT transaction as well. The cumulative resources garnered through these instruments and model exceed Rs 24,000 crore," Sitharaman said in her Budget speech.Commenting on the announcement, Chintan Patel, Partner, Deal Advisory, and Head, Building, Construction & Real Estate, KPMG India, said that allowance of FPIs to subscribe to listed debt securities under REITs and InvITs mechanisms will further boost foreign investor participation.Surendra Hiranandani, Director, House of Hiranandani, said that the decision to allow foreign institutional investors to subscribe to REITS and INVITs is a welcome move.