REITs snippets

The Securities & Exchange Board of India (Sebi) paved the way for real estate and infrastructure developers to tap the stock markets to raise funds and repay some of the loans taken by them. But it decided to limit the scope of the fund-raising exercise through Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (IITs), mainly to complete projects that are earning revenue. Market experts said REITs can help real estate players raise up to $10 billion over the next four-five years although the market regulator has ensured that the focus remains on commercial real estate, with 80% of the assets in completed and revenue-generating properties. But given that the instrument is new and complex, the regulator has indicated that it is not keen on getting small investors to invest immediately by fixing the minimum investment limit for REITs at Rs.2 lakh.
Under the new instruments, developers can set up trusts, register them with Sebi, and invest directly or through a special purpose vehicle in real estate and infrastructure assets. After registration with the regulator, the trusts can raise money through a public offer, just like a company , and can have follow-on issues, rights issues and institutional placement to raise more funds later. Units of REITs need to be listed on stock exchanges, in trading lots of Rs.1 lakh, Sebi said. It also said that for an initial offer, the minimum value of assets has to be Rs.500 crore, with minimum issue size for initial offer pegged at Rs.250 crore.
In his maiden Budget, finance minister Arun Jaitley announced tax benefits for REITs, which set the stage for the Sebi board to clear the plan on Sunday.
It is expected to allow infrastructure and real estate developers to use the instrument to raise resources from the domestic market in the same way that was used overseas in countries such as the US, UK, Hong Kong and Singapore. In the past, some Indian real estate developers such as Unitech and Hiranandani group's Hirco had raised funds via REITs on London Stock Exchange's Alternative Investment Market for smaller companies.
Experts, however, suggested that residential projects too need to be included in REITs to really make the tool attractive for realtors. Some suggested further tax sops may be needed.
But real estate consultants appeared upbeat. 

No comments: