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Real estate developers have hailed the Reserve Bank of India’s proposal to allow banks to invest in REITS and InvITs. The RBI move comes after a SEBI proposal requested the banking regulator to allow banks to participate in these schemes.
Rajeev Talwar, Chairman, Naredco and CEO DLF Ltd said, “The RBI's decision to allow banks to invest in REITs within the overall umbrella of 20 per cent of their net owned funds is a huge positive. This step now has the potential to usher-in large number of REITs’ listing in India by offering a safe asset class to invest in and also provide competition to foreign institutions. For banks it offers an additional important asset class for investing. For commercial real estate companies, once REITs pick up, it will bring liquidity, and free up capital that will help lower overall costs.”
REITs are instruments which allow owners of rent yielding assets (commercial and retail) to raise money from investors by pooling and listing them as a trust.
Surendra Hiranandani, Chairman & MD, House of Hiranandani , said, "As widely expected, RBI today kept the repo rate unchanged at 6.25 per cent for the third time in a row. One of the highlights of today's policy was the decision to allow banks to invest in REITs and Invits. It will allow banks to invest in an important asset class thereby providing much needed boost to this segment. Owing to better liquidity, the cost of capital for developers in the commercial segment will come down in the future. “
Currently, banks are allowed to invest in equity -linked mutual funds, venture capital funds (VCFs) and equities to the extent of 20 percent of their net-owned funds.
“It is proposed to allow banks to invest in REITS and InvITs within this umbrella limit (20 percent of their net-owned funds,” RBI said in a statement.
Sachin Sandhir, MD, Emerging Business, RICS, “ India’s REIT potential is quite large but it has not yet taken off. Bank’s involvement will help the commercial real estate segment by bringing in much needed liquidity. It will set the momentum going for REITS.”
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