The insurance regulator IRDAI has issued a regulation permitting insurance companies to invest in Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs).
The move follows those of the Securities and Exchange Board of India and the Reserve Bank of India which have eased regulations to create more interest in these instruments, reported The Times of India.
Currently India does not have a listed REIT. There are several InvITs such as IRB InvIT Fund, Sterlite Power's India Grid Trust InvIT. With players such as the Blackstone Group, Singapore's GIC and Brookfield Asset Management showing keen interest in India, the first REIT listing is expected by September.
SEBI only last December revised and eased regulations for REITs and InvITs. This was followed by the RBI permitting banks in April to invest in such instruments.
In the new regulation, the IRDAI stipulates that the minimum rating of REITs and InvITs should not be less than "AA" for them to be treated as approved investment; otherwise, they would form part of "other investments".
The IRDAI also says that insurers cannot have more than 3% of their funds in REITs and three InvITs and exposure to a single REIT or InvIT should not be more than 5% of the total units issued by that listed entity. The IRDAI has barred investments in REITs, InvITs, where the sponsors are affiliated or part of the promoter group of the insurance company. The regulator says investment in InvITs would qualify as mandatory "infrastructure investments".
"Units of REITs and InvITs should be valued at market value (last quoted price should not be later than 30 days). If the market quotation is not available for 30 days, the units should be valued at the latest NAV of the units published by the trust," said the IRDAI.