InvITs, REITs get much-needed liquidity

Debt financing of infrastructure investment trusts (InvITs) and real estate investment trusts (REITs) by foreign portfolio investors (FPIs) will help boost much needed liquidity, said industry experts. The proposal to make dividend payments to REIT and InvITs exempt from TDS shall also encourage retail individual investors to explore investment opportunities in REITs.

Nitish Poddar, Partner and National Leader - Private Equity, KPMG in India, said: “Foreign capital is a vital factor in the overall development of the Indian economy. Private equity with huge dry powder is one of the biggest contributors of foreign capital to India. The policy announcement of permitting offshore debt borrowings for InvITs and REITs and no tax withholding on dividend payments will provide access to foreign debt raising and boost investment in REIT and InvITs.”

Experts at real estate consultancy firm JLL said the leveraging window will increase further and provide an opportunity for REITs/InVITs to acquire more assets in their portfolio. This will lead to the listing of more REITs/InVITs in 2021.

The unlocking of value of real estate assets, especially in the office segment, will provide growth capital for the sector, they said. Investments in infrastructure projects will have access to low cost offshore funds. InvITs and REITs are gaining currency in India, following the footsteps of the developed world, they added.

A recent Crisil Ratings analysis shows these instruments can potentially raise up to ₹8-lakh crore for India’s infrastructure buildout over the next five fiscals. A deeper debt market where investors can discern risks and returns across infrastructure asset classes, and stable regulations will be critical to achieving this goal. “A government task force has estimated that ₹111- lakh crore of investments are required in infrastructure through fiscal 2025 — or twice what was spent in the past five fiscals.

“That’s a humongous investment need, and cannot be met by the government and traditional infrastructure-financing channels alone. Thus, alternative channels need to be pressed into service,” said the report