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The Indian real estate is in need of REITs, say industry observers. A Reit expands as Real Estate Investment Trust, and is defined as an establishment that keeps and controls income-generating real estate or associated assets. These might comprise of office construction, shopping malls, flats, restaurants, resorts, warehouses,self-storage facilities, and loans. With REITs, there is no reselling of bought properties, instead such assets are made part of the company’s investment portfolio.
The Securities and Exchange Board of India (sebi) is actively contemplating the REITs, as an attempt to generate additional liquidity and an opportunity to invest safely in Indian real estate without having to worry about the legal issues or checking the documents.
A Reit would provide an opportunity for realty developers to effectively commercialize their developed properties, by giving access to an exit avenue. Besides, over leveraged companies would be getting a chance to deleverage.
Also, REIT would be the best option at a time when the realty sector calls for urgent implementation of money.
However, the materialization of REITs is not that easy, as many concerns could arise, such as foreign investment with such trusts, stamping of agreements during property transfer and taxation regulations for REIT. Further, certain amendments have to be brought in to the existing policies in Indian Real Estate and as much residential or commercial properties should be made to come under the category ‘real estate’. With this, the REITs could be made effective for infrastructural development across the nation.
Certain changes are needed in existing laws concerning real estate investments too. Since an REIT more or less would function as a mutual fund, policies regarding existing mutual funds could be brought in.
At present, the lowest asset cost of Reit is Rs 1,000 crores and this might be a concern for small players. To eliminate the issue and enable small companies to benefit from REITs, the concept of co-sponsorship should be included, like that of mutual fund.
In the last few years, LLP or Limited Liability Partnership has earned immense popularity as a result of the benefits. LLP is also a method to bring small companies into the network of REITS.
In short, REIT appears to be an effective strategy to help recuperate the sluggish Indian realty sector. Yet, it might not be as easy as expected to start REITs. Therefore, a gradual and well-studied approach is the need of the hour.
The Securities and Exchange Board of India (sebi) is actively contemplating the REITs, as an attempt to generate additional liquidity and an opportunity to invest safely in Indian real estate without having to worry about the legal issues or checking the documents.
A Reit would provide an opportunity for realty developers to effectively commercialize their developed properties, by giving access to an exit avenue. Besides, over leveraged companies would be getting a chance to deleverage.
Also, REIT would be the best option at a time when the realty sector calls for urgent implementation of money.
However, the materialization of REITs is not that easy, as many concerns could arise, such as foreign investment with such trusts, stamping of agreements during property transfer and taxation regulations for REIT. Further, certain amendments have to be brought in to the existing policies in Indian Real Estate and as much residential or commercial properties should be made to come under the category ‘real estate’. With this, the REITs could be made effective for infrastructural development across the nation.
Certain changes are needed in existing laws concerning real estate investments too. Since an REIT more or less would function as a mutual fund, policies regarding existing mutual funds could be brought in.
At present, the lowest asset cost of Reit is Rs 1,000 crores and this might be a concern for small players. To eliminate the issue and enable small companies to benefit from REITs, the concept of co-sponsorship should be included, like that of mutual fund.
In the last few years, LLP or Limited Liability Partnership has earned immense popularity as a result of the benefits. LLP is also a method to bring small companies into the network of REITS.
In short, REIT appears to be an effective strategy to help recuperate the sluggish Indian realty sector. Yet, it might not be as easy as expected to start REITs. Therefore, a gradual and well-studied approach is the need of the hour.
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