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CS Professional · Strategic Management and Corporate Finance · Real Estate Investment Trusts

A REIT in India holds its properties through special purpose vehicles (SPVs). Which statement best explains the rationale for this holding structure?

The REIT holds properties through SPVs so that each property or project sits in a separate entity, isolating assets and liabilities and handling project-level approvals and compliance, while the trust itself still has a trustee and unit holders retain their usual rights.

  1. ASPVs allow the REIT to hold individual properties in separate entities, isolating assets and enabling direct holding of land and project-level complianceCorrect
  2. BSPVs are used so that unit holders can vote directly on each property's tenancy
  3. CSPVs remove the need for a trustee in the REIT structure
  4. DSPVs allow the sponsor to retain full ownership of all REIT units permanently

Explanation

REITs commonly hold assets via SPVs, which house individual properties, isolate liabilities and manage project-level compliance and approvals. The trustee remains necessary, unit holders do not vote on each tenancy, and sponsors are required to reduce holding over time rather than retain all units.

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