INFRASTRUCTURE INVESTMENT TRUST IN INDIA

What is Infrastructure Investment Trust?

- Navnit Kumar

Infrastructure investment trusts, or InvITs, are instruments that work like mutual funds.

InvITs are designed to pool small sums of money from a number of investors to invest in assets that give cash flow over a period of time.

Part of this cash flow would be distributed as dividend back to investors.

In the layman's term, they are the mutual funds for infrastructure projects.

How are they established?

To understand better, InvIts are established as a trust fund in which individuals, institutions or the companies can invest.

The trust fund is traded on stock exchange hence available for subscription.

The trust fund further invests the amount in the infrastructure projects.

On completion of the infrastructure projects, the revenue or the sales proceeds are distributed back to the investors in the form of dividends.

Why choose INVITs?

The primary objective of InvITs is to promote the infrastructure sector of India by encouraging more individuals to invest in it and can be modified according to a given situation.

Typically, such a tool is designed to pool money from several investors to be invested in income-generating assets. The cash flow thus generated is distributed among investors as dividend income.

When compared to Real Estate Investment Trust or REITs, the structure and operation of both are quite similar but difference lies in sector specific usage.