Sebi’s approval to REITs will benefit the Real Estate Investment
Mr. Anuj Puri, Chairman & Country Head, JLL India
With the stamp of approval by SEBI, REITs is finally a formalized concept. This is a big change from the ambiguity and uncertainty that prevailed about this very important instrument in previous years. It is gratifying to note that SEBI fully intends to deliver on its assurances of bringing better and faster funding into Indian real estate. As the drafts for REITs stands now, further clarity about taxation eligibility norms is definitely required, and will doubtlessly come before the first listing goes up. When this happens, there will be vastly increased interest from foreign investors. Currently, Grade A office space in the top seven cities of India amounts to around 376 million square feet, and we anticipate that approximately 50% of this space will get listed in next 2–3 years. The valuation of these assets is around $10-12 billion, and this accounts for a fairly massive influx of funding waiting in the wings to hit the Indian real estate market via REITs over the next few years.
Mr. Anshuman Magazine, Chairman & MD, CBRE South Asia Pvt. Ltd
This move is a positive signal for India’s capital markets as a whole, and the realty sector in particular. Reducing the minimum requirement for commercial real estate asset sizes permitted to be listed in India REITs from Rs.1,000 crore to Rs.500 crore is likely to generate more income through this new funding channel and encourage many mid-sized development firms to consider this avenue. Having said that, although the government has already clarified that India REITs will be given ‘pass through taxation status’, clarifying the tax structure is of high importance at the moment. A successful India REIT market will require strong support from existing landlords and investors, as well as favorable market conditions. All in all, the establishment of the REIT market in India is still at a very nascent stage; and successful implementation and development will rest on a number of factors related to the regulatory environment, market conditions and issuers/investors.
Mr. Bhairav Dalal, Associate Director, PwC.
If REITS (Real Estate and Infrastructure Investment Trusts) are allowed to invest in LLPs holding real estate, sponsors might contemplate setting up LLPs for Reits. This would provide slightly higher returns to investors, since dividend distribution tax is not applicable to profit distributions made by LLPs.
Mr. Shishir Baijal, Chairman & MD, Knight Frank India
The move by SEBI to issue guidelines for REITs is laudable as this would bring in positive sentiments and clear confusion in cash strapped Real Estate. REITs specifically will prove to be effective tool for enhancing investments into the commercial real estate. REITs only look at completed income generating projects so risks are minimum for investors.
Mr. Sachin Sandhir, MD, RICS South Asia
The move by SEBI to issue guidelines for REITs is laudable as this would bring in positive sentiments and clear confusion in cash strapped real estate sector. REITs specifically will prove to be effective tool for enhancing investments into the commercial real estate. REITs only look at completed income generating projects so risks are minimum for investors.