How to Invest in Infrastructure Investment Trusts invITs in India best steps

Infrastructure Investment Trusts, invITs in India
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InvITs or Infrastructure Investment Trusts have become a popular investment option for retail individual investors as well as institutional investors who are looking to diversify their portfolios. InvITs provide a unique investment opportunity by allowing investors to participate in the benefits of owning infrastructure projects without being associated with the operation of the project.

InvITs in India have been gaining popularity due to their potential for stable returns. Infrastructure projects are mainly driven by the government and are typically long-term in nature. Investing in these InvIT funds generates steady income over time, which can provide a consistent stream of income to investors.

Moreover, the government of India is now focusing on infrastructure, making InvITs a potentially safer investment compared to other asset classes in difficult times.

You may be interested to know investing in InvITs or the best SEBI registered Infrastructure investment trusts to invest in. Lear more on “The SEBI Registered InvITs in India

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What is  InvITs or infrastructure investment trust

InvITs or infrastructure investment trusts are similar to mutual funds and real estate investment trusts (REITs). InvITs are designed to pool funds from investors to invest mainly in infrastructure projects. The returns from these projects are then distributed back to the investors periodically.

InvITs or Infrastructure Investment Trusts are new investment instruments for retail investors to invest directly in the growth of India’s infrastructure story. These instruments help retail investors to invest small amounts of money directly in the infrastructure sector to earn good returns. The return from InvITs is more attractive than Fixed Deposits (FDs) in Banks or Term Deposits (TDs) in Post Offices.

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SEBI Regulation on Invits in India

SEBI (SECURITIES AND EXCHANGE BOARD OF INDIA) with a notification on 20th October 2023 modified the rules of Infrastructure Investment Trusts Regulation 2014. This is the Third Amendment in the InvITs regulation may be called  Infrastructure Investment Trusts Regulations, 2023.

SEBI introduced some key changes to the regulatory framework governing Infrastructure Investment Trusts (InvITs) mainly focusing on sub-regulation (6) of Regulation 18. The detailed notification can be accessed here as Securities and Exchange Board of India (Infrastructure Investment Trusts) (Third Amendment) Regulations, 2023

As per the SEBI regulation, InvITs have to invest at least 80% of their total assets in completed infrastructure projects. This will generate income for investors. The balance of 20% can be invested in under-construction infrastructure projects. As per the SEBI mandate, at least 90% of its income will be distributed as dividends to the unit shareholders.

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Why To Invest In InvITs In India?

Investing in InvITs is simply invest in a diverse range of infrastructure projects including utilities, waste management, road construction, telecommunications, airports, and shipping, among others. They provide an excellent way for investors to gain exposure to these sectors without directly investing in them. The return from InvITs investment is better than FD and Postoffice investments.

How to Evaluate InvITs in India

Like with any other investment options, it’s important to thoroughly evaluate an InvIT before investing. Investors should look at the underlying assets of the trust, the track record of the trust’s management, and the trust’s financials, among other factors before putting their money.

How to invest in invITs

Investing in InvITs can be done through purchasing their units on an open exchange. Another option to participate in InvIT is Exchange-Traded Funds (ETFs) that specialize in REITs. InvITs are exchange-traded investments that are listed on NSE and BSE. You can easily buy and sell units using the trading window during the trading session. There are only 22 InvITs in India as of February 2024.

The way we bought and sold equities in stock exchanges, InvITs can be bought and sold similarly. Public InvITs are listed on the BSE or the NSE. Investors can trade any number of units freely without any lock-in.

Opening a Demat account

Investor must have their demat account with a SEBI registered brokerage firm. The process of opening a demat account is the same as that used for equity.

The minimum documents required to open the demat account are identity proof, address proof, and bank account details. The account can be opened online. Please be careful about discount brokers and regular brokers. The broker will guide you through the process and assist you in opening the demat account.  

With the Demat account, you can invest and trade in publicly listed InvITs and trade in publicly listed InvITs using the instrument symbol.

How Much to Invest in InvITs in India

There is no minimum investment limit for InvITs. Investors can buy one unit of InvIT on the stock exchanges. That is the reason these investment options are quite interesting and attractive. Like mutual funds SIP, one can invest in this segment of the investment option. Assess your risk before investing in the InvITs that match your investment objectives.

The minimum application value in an InvIT IPO is in a range of INR 10,000-15,000, compared to the earlier requirement of INR 1 lakh for InvITs.

Who Can Invest in InvITs?

As discussed earlier, both retail, individual, and institutional investors can invest in infrastructure investment trusts. InvITs give an option to investors to diversify their investments and lower their risk profile. Many infrastructure investment trusts in India are government-driven and come with tax benefits. Since, there is no minimum investment amount, any individual investor can participate in this option.

Since InvITs are mandated to distribute the income regularly among unit holders, this can be a regular income stream for investors.

InvITs in India Examples

For instance, Powergrid Infrastructure InvIT is one of the major investment options. This InvIT traded at Rs 8,808.79 Crore of market cap and gave a dividend of 15,5% on your investment value. India Grid Trust is another example of InvITs.

Risks and Considerations

As every investment has certain risks associated with it (except FD and post office investment),  InvITs also have certain risks associated with it. The risks in InvITs include the risk of operational failures, regulatory changes, and market fluctuations. Investors have to do the proper due diligence before investing in the infrastructure investment trusts InvITs.

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Final words

infrastructure investment trusts offer a new avenue for retail investors to participate in the infrastructure growth story of the country without directly participating in the operational level in the infrastructure sector.

InvITs provide strong and long-term returns in comparison to other such kind of investment options like FDs while also giving the benefits of diversification. However, like any investment, they come with their own set of risks and should be thoroughly researched before investing.

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Frequently Asked Questions (FAQs)

What is Infrastructure investment trusts or InvITs?

InvITs are investment scheme facilitating direct investment in infrastructure development of a country. This mainly helps India to boost its infrastructure sector.

How to invest in InvITs in India?

An Investor can participate in Infrastructure investment trusts easily through demat account. Please refer to the complete article to understand more.

How can an investor get return from InvITs in India

Investors of InvITs can get benefit from Infrastructure investment trusts in two ways. One is through regular distributions of income to the unit holders and second is the potential capital appreciation.

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