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REITs to bring consolidation and liquidity in Real Estate

Monday, February 05, 2018
By Ashok Mohanani

Ashok Mohanani, Chairman, Ekta World & Vice President NAREDCO West

After an interminable wait, real estate investment trusts (REITs) are likely to become a game-changing factor for the real estate sector soon. REITs are anticipated to bring opportunities for retail investors, to join in the real estate sector. At the same time when developers facing liquidity challenges, it will also help the Real estate sector to get liquidity for projects. While obtaining recognition globally, REITs are expected to establish their maiden entry in India shortly, which will bring a constant source of revenue to the investors, rent out office spaces, luxury malls and warehouses. REITs are going to result in a win-win for the developer with much-needed fluidity in the sectors. REIT shall get the much-required break by withdrawing the commercial projects through the listing of the REITs. It is much predicated that the listing potential of the Indian REIT, could easily achieve the trillion-rupee mark.

With the RERA taking charge across the country it will make the sector more consolidate by changing the unorganised sector into more transparent and boosting confidence. This transparency will craft a more suitable milieu for investments, as REIT funds will choose a regulated souk. REITs are listed bodies under Security exchange board of India(SEBI) that principally invest in the rented workplace and retail assets, permitting developers to raise funds by selling edifices which have been completed, to the prospective investors. This is likely to boost a new wave of market activity with greater accessibility of funds, hoping to increase the investment in real estate sector.

Recently, Security Exchange Board of India has relaxed investment norms for Real Estate Investment Trusts (REITs) by allowing to invest minimum 50 percent stake in holding companies.

The country has over 900 properties worthy of REITs in India, but not a single REIT is listed yet.

REITs will enable Lakhs of modest investors to have the access and suitability to invest in the real estate business of shopping malls through REIT. This can portray an influential role in the expansion of better and advanced malls with their investments in enhanced infrastructure, designer architecture and sophisticated engineering technologies with a superior and broader stockholder base which is likely to improve the significance of funding. It also possess capabilities to address the demand-supply discrepancy of shopping malls in India both in terms of quality and quantity.

Also, the Reserve Bank of India’s proposal, to permit banks to capitalize in REITs and participation up to 10%, will force many syndicates to influence in their REITs and get it listed on the exchange allowing banks to have a secured asset class to invest in. Overall, this will pervade liquidity in the system and help boost the real estate sector.

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