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The proposal of market regulator SEBI to allow the listing of Real Estate Investment Trusts (REITs) is a positive step and will help improve the liquidity position of developers, industry body Credai said today.
Credai also said it would soon submit a suggestion on SEBI’s draft guidelines on REITs released yesterday.
Reviving a five-year-old proposal, SEBI issued draft norms for REITs, a popular investment vehicle in many parts of the world. It is similar to mutual funds, except that investments would be on real estate assets that generate rental income.
In a statement, Credai Chairman Lalit Kumar Jain welcomed the “much awaited move” on allowing REITs in India. “REIT will definitely be a positive step for the sector since the liquidity position of developers could increase.”
REIT will also result in increased inflow of foreign funds for the sector, which is “struggling” for funds in view of the RBI restrictions and negative weightage given to real estate, he added.
Jain, however, called for some clarity on taxation issues around the instrument from the Finance Ministry.
“Credai will soon submit the developers’ viewpoint to SEBI,” he added. SEBI has asked stakeholders to give their comments on the draft guidelines by the end of this month.
Looking to attract more real estate investors into the capital market, SEBI has proposed listing of REITs, saying the evolution of such investment vehicles is “crucial” for the rapidly growing real estate industry.
REITs would be allowed to list on stock exchanges through an Initial Public Offer (IPO) and can raise funds further through a follow-on offer.
Property consultant Knight Frank India Chief Economist & Director, Research, Samantak Das said the SEBI’s decision to revive the proposal to allow REITs after five years gives a strong signal that the regulator is going to operationalise the REITs market in India on high priority basis.
He added: “This is a very positive move which will enhance the depth of the country’s real estate market and will give financing and exit options to developers on the one hand and avenues for investors on the other.
“The timing of this move is very important keeping in mind the prevailing paucity of funds coupled with the ongoing slowdown in the economic growth.”
Cushman & Wakefield Executive Managing Director South Asia Sanjay Dutt said the REITs, once implemented, would revive substantial investor interest from domestic and global investors in India’s currently subdued real estate markets.
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