Context: According to Sebi data, Rs 18,658 crore was collected through these emerging investment vehicles in the April-September period of 2023-24. This comprises Rs 12,753 crore through InvITs and the remaining Rs 5,905 crore via REITs.
What are InvITs?
Infrastructure Investment Trusts (‘InvITs’) are pooled investment vehicles similar to mutual funds which were introduced to make investment in infrastructure assets accessible to private and retail investors. InvITs invest in long-term infrastructure projects such as roads, gas pipelines, transmission lines, renewable assets, etc. They are regulated by SEBI.
Design and Features of InvITs:
The InvITs designed as a tiered structure with a sponsor setting up the InvIT which in turn invests into the eligible infrastructure projects either directly or via special purpose vehicles (SPVs).
Who can Invest?
- The minimum subscription limit for InvITs is 1 lakh. Hence apart from institutional investors like Banks, Insurance companies, pension funds and sovereign wealth funds, Retail investors also can invest in InviTs. The investors receive units for their investment, hence they are also referred as Unit holders.
- Some part of the investment is used by the InvIT as loan while other portion is used as capital. Hence, the unit holders receive returns in the form of Dividend and Interest. Both the dividend and interest are taxed.
- If the investor receives profit upon selling his units, Capital gains tax is imposed on any such gain.
- As per the SEBI regulations, InvITs must invest at least 80% of their assets in projects that are completed and revenue-generating. This lowers the risk for investors as this reduces the typical risk associated with the infrastructure sector i.e. delay in completion, due to lack of regulatory approvals, poor project management etc.
- InvITs and REITs are recognised as borrowers under the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest (SARFAESI) Act. This enables the investors, especially banks, to initiate action against the trustees of InvITs in case of any default.