FPIs still waiting for RBI regulations on investments in InvITs, REITs

Ahead of Finance Minister Nirmala Sitharaman’s Budget announcements on Saturday, Indian companies flag some of the promises made in the last Budget that remain unfulfilled. Foreign Portfolio Investors (FPI)s, for instance, still await guidelines by the Reserve Bank of India (RBI) for investments in debt securities issued by infrastructure investment trusts (InvITs) and Real Estate Investment Trusts (REITS).
 
“Last Budget, the finance ministry announced that FPIs would be allowed to invest in debt securities issued by InvITs and REITs, but the guidelines of the same has not yet been issued,” said Harsh Shah, chief executive for India Grid Trust (INDIGRID), an InvIT holding power transmission assets.

The norms for FPI investments in InvITs were relaxed in the July 2019 Budget session. Earlier, while markets regulator Securities and Exchange Board of India (Sebi) had operationalised issue of debt securities under InvIT and REIT regulations, raising financing from FPIs had hit a roadblock due to restrictions under the FPI regulations as only corporate debentures were permitted.
“We are at the next Budget now, and the regulations are not yet out from the RBI… the efficacy then gets questioned,” Shah from INDIGRID said.
 
India has an ambitious plan to invest Rs 102 trillion worth of investment in infrastructure projects over the next five years. The multi-trillion investment is to be met through a combination of public and private investments. InvITs as a model was introduced in 2016 to help infrastructure companies monetise assets and churn capital for new projects. Attracting foreign investments into India’s infrastructure segment will be crucial to meet the target.
 
“There are a lot of offshore bond investments already happening. Direct investments will definitely help,” said Shubham Jain, senior vice- president and group head - corporate ratings for ICRA. He said there was interest from FPIs for investing in debt securities issued by InvITs and REITs.