Introduction
In a Real Estate Investment Trust (‘REIT’ for short) the primary role is played by the Sponsor followed by the Trustee. Next to trustee the Manager plays a vital role in the REIT. The term ‘Manager’ is defined under Regulation 2(1)(w) of Securities and Exchange Board of India (Real Estate Investment Trusts) Regulations, 2014 (‘Regulations’ for short) as a company or LLP or body corporate incorporated in India which manages assets and investments of the REIT and undertakes operational activities of the REIT. No individual can be appointed as Manager of REIT.
Eligibility criteria
Regulation 4(2)(e) provides the criteria for a company or Limited Liability Partnership (‘LLP’ for short) or body corporate to become a Manager in REIT which are as below-
- Minimum Net worth – not less than Rs.10 crore;
- Experience – Not less than 5 years in fund management or advisory services or property management in real estate industry or development of real estate;
- Personnel – Not less than 2 key managerial personnel having not less than 5 years of services in fund management or advisory services or property management in real estate industry or development of real estate;
- Independent director – Not less than half of directors as independent directors; such persons shall not be directors or members of the governing board or the manager of another REIT;
- Agreement – The manager shall enter into an agreement with the trustee which provides the responsibilities of the Manager.
Rights and responsibilities of the Manager
Regulation 10 provides the rights and various responsibilities of the Manager in an REIT. The Manager shall-
- make the investment decisions with respect to the underlying assets of the REIT including any further investment or divestment of the assets;
- ensure that the real estate assets of the REIT or holdco and/or SPV have proper legal and marketable titles and that all the material contracts including rental or lease agreements entered into on behalf of REITs or holdco and/or SPV are legal, valid, binding and enforceable by and on behalf of the REIT or holdco and/or SPV;
- ensure that the investments made by the REIT are in accordance with the investment conditions and in accordance with the investment strategy of the REIT;
- undertake management of the REIT assets including lease management, maintenance of the assets, regular structural audits, regular safety audits, etc. either directly or through the appointment and supervision of appropriate agents;
- in consultation with trustee, shall appoint the valuer(s), auditor, registrar and transfer agent, merchant banker, custodian and any other intermediary or service provider or agent for managing the assets of the REIT or for offer and listing of its units or any other activity pertaining to the REIT in a timely manner;
- arrange for adequate insurance coverage for the real estate assets of the REIT;
- ensure that disclosures made in the offer document or any other document as may be specified by the Board contain material, true, correct and adequate disclosures and are in accordance with these regulations and guidelines or circulars issued thereunder;
- declare distributions to the unit holders;
- ensure adequate and timely redressal of all unit holders' grievances pertaining to activities of the REIT;
- ensure that the disclosures to the unit holders, Board, trustees and designated stock exchange are adequate, timely and in accordance with these regulations and guidelines or circulars issued thereunder;
- ensure that adequate controls are in place to ensure segregation of its activity as manager of the REIT from its other activities;
- not obtain any commission or rebate or any other remuneration, by whatever name called, arising out of transactions pertaining to the REIT other than as specified in the offer document or any other document as may be specified by the Board for the purpose of issue of units;
- coordinate with trustee, as may be necessary, with respect to operations of the REIT;
- ensure that computation of Net Asset Value of the REIT is based on the valuation done by the valuer and is declared no later than fifteen days from the date of valuation to the stock exchange(s) and such computation shall be done and declared not less than once every 6 months;
- ensure that the audit of accounts of the REIT by the auditor is done not less than once in a year and such report is submitted to the designated stock exchange within 60 days of end of such financial year ending March 31st;
- appoint a custodian in order to provide such custodial services as may be authorized by the trustees and oversee activities of such custodian;
- place, before its board of directors in the case of a company or the governing board in case of an LLP, a report on activity and performance of the REIT every 3 months;
- convene meetings of the unit holders and maintain records pertaining to the meetings;
- ensure the compliance with laws, as may be applicable, of the State or the local body with respect to the activity of the REIT including local building laws;
- ensure that all activities of management of assets of the REIT and activities of the intermediaries or agents or service providers appointed by the manager are in accordance with these regulations and circulars issued thereunder.
Report to Trustee
The Manager shall submit to the Trustee-
- quarterly reports on the activities of the REIT including receipts for all funds received by it and for all payments made, position on compliance with these regulations, specifically including compliance with regulations 18, 19 and 20, performance report, status of development of under-construction properties, within thirty days of end of such quarter;
- valuation reports as required under these regulations within fifteen days of the receipt of the valuation report from the valuer;
- decision to acquire or sell or develop any property or expand existing completed properties along with rationale for the same;
- details of any action which requires approval from the unit holders as required under the regulations;
- details of any other material fact including change of its directors, any legal proceedings that may have a significant bearing on the activity of the REIT within seven working days of such action.
Obligations of the Manager
Board of Manager
Regulation 26B provides that the Board of Directors of the Manager shall comprise of not less than 6 directors and have not less than one-woman independent director. The quorum for every meeting of the Board of Directors of the Manager shall be one-third of its total strength or 3 directors, whichever is higher, including at least one independent director. The Board of Directors of the Manager shall review compliance reports every quarter pertaining to all laws applicable to the REIT as well as steps taken to rectify instances of non-compliances. The Compliance Officer, Chief Executive Officer and the Chief Financial Officer shall provide the compliance certificate to the Board of Directors of the Manager along with supporting evidence thereof. The Board of Directors of the Manager shall set forth clearly the recommendation of the Manager in the notice to the unitholders for each item.
Vigil mechanism
The Manager shall formulate a vigil mechanism, including a whistle blower policy for directors and employees to report genuine concerns. The vigil mechanism shall provide for adequate safeguards against victimization of Director(s) or employee(s) or any other person who avail the mechanism and also provide for direct access to the chairperson of the audit committee in appropriate or exceptional cases. An independent service provider may be engaged by the Manager for providing or operating the vigil mechanism who shall report to the audit committee. The audit committee shall review the functioning of the vigil mechanism.
Secretarial Compliance Report
The Manager shall submit a secretarial compliance report given by a practicing company secretary to the stock exchanges, in such form as specified, within 60 days from end of each financial year. The secretarial compliance report shall be annexed with the annual report of the REIT.
Corporate Governance
The Manager shall submit a quarterly compliance report on governance in the format as may be specified by the Board, to the recognized stock exchange(s) within twenty-one days from the end of each quarter. The report shall be signed either by the compliance officer or the chief executive officer of the Manager.
Grievance Redressal Mechanism
The Manager shall redress investor grievances promptly but not later than 21 calendar days from the date of receipt of the grievance and in such manner as may be specified by the Board. The Board may also recognize a body corporate for handling and monitoring the process of grievance redressal within such time and in such manner as may be specified.
Code of conduct
The following are the code of conduct for Managers-
- Manager shall carry out the business of the REIT and invest in accordance with the investment objectives stated in the Offer document and take investment decisions solely in the interest of unit holders.
- REIT, parties to the REIT and any third party appointed by the manager shall not use any unethical means to sell, market or induce any person to buy units of the REIT and where a third party appointed by the manager fails to comply with this condition, the manager shall be held liable for the same.
Conclusion
The Manager of REIT is crucial in ensuring the successful operation and management of REIT’s real estate. The managers are responsible for overseeing the day-to-day operations of the properties within the REIT, managing tenant relationships, and maximizing the overall financial performance of the properties.
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