SEBI Issues Detailed Rules for Depositary Receipts on REIT, InvIT Units

SEBI Opens an Overseas Route to Indian REIT and InvIT Units

The new framework sets the approvals, pricing and unitholder safeguards for depositary receipts linked to listed Indian trusts.

India’s markets regulator has laid out how real estate investment trusts and infrastructure investment trusts can connect their units with overseas markets through depositary receipts. The rules give trusts a defined route to reach foreign investors, while setting conditions intended to protect existing unitholders and maintain parity between domestic and overseas offerings.

The framework was proposed in August to attract more foreign capital to the sectors and approved by the Securities and Exchange Board of India in September. Its significance lies not in creating the first access for foreign investors—REITs and InvITs already accept foreign investment subject to government and central bank rules—but in establishing a specific overseas-market channel for these units.

How depositary receipts can connect overseas investors

A depositary receipt is a foreign-currency instrument issued by an overseas institution against securities held with a domestic custodian. It can be traded on an overseas exchange, giving investors there a way to gain exposure to the underlying Indian securities through that market’s trading framework.

For REIT and InvIT units, this could broaden the channels through which overseas capital encounters Indian real estate and infrastructure trusts. The framework does not, by itself, establish how much demand will follow. Investor interest would still depend on the individual trust and the terms of any issue, while foreign investment remains subject to applicable government and central bank rules.

Approvals and pricing guardrails set the terms

A REIT or InvIT proposing to list in India and issue depositary receipts at the same time must obtain approval from both the Indian exchange and the international exchange involved. That requirement makes coordination across the two markets part of the issuance process, rather than leaving the overseas listing as a standalone step.

Any fresh depositary receipt issue also requires approval from at least 75% of unitholders. In addition, units underlying the receipts cannot be priced below the price offered to Indian investors for a similar offering. These conditions matter because they give unitholders a formal say and set a floor intended to prevent overseas investors from receiving a cheaper price in a comparable issue.

Private InvIT issues have a narrower investor pool

The rules also distinguish privately placed InvITs. Fresh depositary receipts linked to units of these trusts may be subscribed to only by foreign institutional investors and corporate bodies. The provision limits eligibility for this category; it should not be read as applying the same restriction to every REIT or InvIT issue.

This distinction makes the structure and investor eligibility of an issue important considerations. For trusts, the route may offer another way to seek overseas participation, but the approvals, unitholder threshold, pricing condition and investor restrictions will shape how any proposed transaction is designed.

What investors should look for as the framework is used

The framework creates a route, not a promise of fundraising or stronger performance for the underlying trust. For investors, the practical test will be the terms of any actual issue, including its pricing relative to a similar domestic offering and whether the required approvals have been secured. The rules provide a clearer structure for cross-border issuance, while leaving the investment merits of each REIT or InvIT to be assessed on their own.

Key Highlights

• SEBI has issued rules for depositary receipts linked to REIT and InvIT units on selected overseas exchanges.
• Simultaneous Indian listing and overseas receipt issuance require approval from both exchanges involved.
• Fresh depositary receipt issues need approval from at least 75% of unitholders.
• The underlying units cannot be priced below a similar offering to Indian investors.
• Fresh issues linked to privately placed InvITs are restricted to foreign institutional investors and corporate bodies.

Investor Note: The rules widen the potential route for overseas participation but do not guarantee investor demand or alter the need to assess each trust and issue on its own merits. Watch for actual issuance terms, approvals and compliance with the applicable foreign-investment rules.