The market regulator Securities and Exchange Board of India (SEBI) has come up with new regulations for setting up the Real Estate and Infrastructure Investments Trusts that will attract foreign investors to the debt-ridden real estate sector. The move is likely to be a boon for cash strapped industry with the inflow of 1 lakh crore rupees expected from domestic and overseas investors.
REITs are beneficial for both real estate sector as well as investors, as it offers an exit route for property developers and at the same time provides a safe, sound and good investment opportunity for High Net Individual investors in commercial properties. It allows its sponsors the much needed liquidity by passing the ownership to shareholders.
The realty sector has welcomed this move by SEBI and this is what some of the leading voices of the industry had to say on REITs and InvITs –
The Confederation of Real Estate Developers Association of India commonly known as CREDAI welcomed the regulator’s decision stating that it’s good news for the sector as it will not only bring liquidity but also help reduce the debt of the organizations that are in the business of lending commercial properties in India.
2. Ernst & Young India
The tax partner of Ernst & Young India, Gaurav Karnik while welcoming the SEBI move said that REIT will avail fresh equity, attract finance from domestic investors, get long term funds from foreign sources and will reduce the pressure on banking system. He said, “Dependence of developers on bank funding is likely to come down as REITs will enable them to get access to cheaper funds compared to debt which is costly”.
3. Jones Lang LaSaelle India
The Chairman and Country Head of realty sector services major,Jones Lang LaSaelle India’s AnujPuridescribed the approval as great news for the real estate sector. He said that close to 10 billion dollars is expected to be raised in the coming 5 years.
4. Apex Multicons
Anant Pandit, the CEO of Apex Multicons said that the REITs will definitely help to mobilize fund in real estate and may probably infuse the much needed confidence in this struggling sector. He however said that it would have been better had REITs also covered residential properties along with commercial projects. Pandit added, “The pass-through entity status for REITs would pronounce a plethora of opportunities to developers and funds alongside addressing some sector specific issues of lack of transparency, organizing the real estate industry”.
5. KPMG India
Neeraj Bansal,partner and Head of Real Estate and Construction at KPMG India welcomed SEBI regulations and said that it’s really great to see that the norms have been cleared within a month of Budget announcements. Speaking on this he said, “Post SEBI approval, expediting of notification of REIT and InvIT norms will facilitate infusion of an estimated $15- $20 billion in the sector…”. Bansal was of the opinion that this would serve as an alternate to bank loans.
The National Real Estate Development Council also termed this as good news for the realty industry and stated that the government is doing a great job in moving fast with REITs. The industry body was of the view thatthis will definitely bring the much needed relief to the cash starved sector.
7. Walker Chandiok& Co LLP
Neeraj Sharma, Partner at Walker Chandiok& Co LLP was of the opinion that reduction in the asset pool to 500 crore rupees from 1000 crore rupees for REITs would allow more players to participate and enable more rent yielding properties under this vehicle. Neeraj added, “…final REITs guidelines are definitely encouraging, particularly the two developments are noteworthy – requirements of minimum asset size has been halved and allowing foreign investments in REITs”.