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      Question

      Which of the following statement is incorrect with

      respect to REITs and InVITs in India?
      A REITs earn primarily from rental income, while InvITs earn from usage charges or toll revenues, along with possible capital appreciation Correct Answer Incorrect Answer
      B Public REITs and InvITs must be mandatorily listed on recognized Indian stock exchanges to ensure liquidity and transparency. Correct Answer Incorrect Answer
      C SEBI permits controlled leverage for REITs and InvITs, subject to specified limits, credit rating requirements, and disclosures Correct Answer Incorrect Answer
      D REITs to invest minimum 65% of their assets in completed, rent-yielding properties to ensure predictable income Correct Answer Incorrect Answer
      E All are correct Correct Answer Incorrect Answer

      Solution

      REITs (Real Estate Investment Trusts) and InvITs (Infrastructure Investment Trusts) are SEBI-regulated, stock-exchange-traded investment vehicles that pool money to invest in income-generating assets. REITs focus on commercial real estate (offices, malls), while InvITs invest in infrastructure projects (roads, power lines). Both offer dividends, high liquidity, and lower entry costs for investors

      • Statement a: REITs primarily generate income from rental yields of commercial properties, while InvITs earn from usage charges, toll revenues, and service fees from infrastructure projects like roads and power grids.
      • Statement b: SEBI regulations mandate that all publicly offered REITs and InvITs must be listed on a recognized stock exchange in India to provide liquidity to retail investors.
      • Statement c: SEBI allows these trusts to employ leverage (borrowing), but it is strictly "controlled." For instance, as per SEBI regulations, REITs in India are permitted to have a total leverage up to 49% of their total asset value, designed to balance growth with risk. If the REIT has a AAA rating and meets specific compliance requirements (such as consecutive distributions and unit holder approval), this leverage limit can be extended up to 70% .
      • Statement d: Under SEBI guidelines, a REIT must invest at least 80% of its value in completed and rent-generating assets. (and not 65%)

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