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

Under SEBI REIT Regulations, a REIT's units are listed and the investment is mainly held through special purpose vehicles (SPVs). Which statement about the REIT's holding in SPVs is correct?

A REIT must hold a controlling interest and at least 50% of the equity share capital or interest in each SPV through which it owns property. A 10% stake is insufficient, SPVs are expressly permitted, and 100% ownership is not required, as co-investors can hold the rest.

  1. AThe REIT must hold at least 50% of the equity share capital or interest in the SPV, and a controlling interest in itCorrect
  2. BThe REIT may hold any minority stake of 10% so long as the manager controls the SPV
  3. CThe REIT may not hold any SPV and must hold properties only directly
  4. DThe REIT must hold 100% of every SPV, with no co-investors allowed

Explanation

The regulations require the REIT to hold controlling interest and at least 50% of the equity share capital or interest in the SPV (other than for certain cases of hold-co structures). A 10% minority stake falls short, SPVs are permitted, and 100% is not mandated.

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