The SEBI chief, Madhabi Puri Buch, said on Wednesday that the regulator will strive to bring down the minimum investment size for REITs, InvITs, and municipal bonds. This is to facilitate a diverse holding of these products across investors.
“The strength of our equity market comes from our retail investors. What it reflects is the fractional ownership of companies. In a similar manner, the fractional ownership of real estate and infrastructure is where the strength of the country will lie,” Madhabi Puri Buch said during the fifth SEBI-NISM Research Conference held in Mumbai.
She said the governance and regulatory aspects of these asset classes had given the regulator the comfort to go and tell retail investors that they could invest in these products. The way the InvITs were being structured, for instance, had resulted in a high investor appetite, particularly among foreign investors.
“We have brought down the minimum investment size of these products to make them affordable. We will bring down the ticket size even further and facilitate innovation and digitization within this space,” Buch said.
She said the entire market capitalisation of the equity market today was roughly one-time GDP. And that the total value of the REITs, InvITs, and municipal bond ecosystem could be another one-time GDP. “That is the opportunity for growth available to us as a nation,” Buch said.
She said the inclusion of government bonds in global bond indices would bring in a lot of passive investment into the country and increase the level of investor interest in corporate debt as well.
While the secondary bond market today has low liquidity with buy-and-hold kind of investors, the primary market is robust, Buch said. For every 100 rupees that the corporate sector was borrowing from the banking system, ₹68-70 were being borrowed from the bond market at its peak.
Buch expects bond market borrowing for corporates to stabilise at the 60 per cent mark. “This is not small, and we have only got started with retailing and facilitating a wider and easier spread of investment for the bond market,” she said.
Buch expects the bond market, especially municipal bonds, to grow at a fast clip. “We are a capital-deficient nation, and we need foreign capital. Where there is growth, there is capital formation; where there is capital formation, there is growth,” she said.
Municipal bonds are debt securities issued by local governments and municipal corporations and are used to finance various public works projects. Between 2017 and 2022, municipal bonds raised ₹3,840 crore, according to reports.