While we are still awaiting detailed guidelines from the government on the implementation of REITs in India, the draft guidelines circulated by SEBI in October 2013 proposed a minimum capitalization of INR 1,000 crore, and an initial offer size of INR 250 crore. At least 90% of the investment was required to be in ‘revenue generating completed’ properties. The minimum subscription size was to be INR 2 lakh, with resident as well foreign investors to be allowed to invest in the REIT. Numerous funds such as Blackstone have already started building a corpus of well-leased or sold completed commercial and residential properties, so that they are ready to issue as and when the Government of India releases its final policy framework on REITs.
At a time when the realty sector is struggling for alternate avenues of funding—other than traditional banks and financial institutions—and private players are sourcing institutional capital, permitting REITs can act as a key enabler for capital markets in the country, and provide investors with exit options.
Although a detailed clarification on the tax structure for REITs is still awaited, nonetheless, this is a positive move that would go a long way in reviving global investor sentiments in the India market. Apart from a low entry level, this will now provide an avenue for channelizing retail funds into the realty sector. Once formally introduced by SEBI, the instrument will provide for a safe and diversified investment option at reduced risks—all under professional management, to ensure the highest returns on investment.
—The author is CMD, CBRE South Asia Pvt. Ltd.