NEW DELHI: Demand for real estate investment trusts and infrastructure investment trusts will witness an upswing over the next few years if the government customises regulations governing these investment vehicles in conformity with domestic market conditions, says a report.
In the near future, REITs are expected to increase the depth of the Indian property market through a sound regulatory framework which ensures transparency and high governance standards, and promotes regular monitoring of their performance, the report by PwC and Asia Pacific Real Estate Association (APREA) pointed out.
Abhishek Goenka, Partner – Tax, PwC India, said, “Real estate and infrastructure are the two most critical sectors in any developing economy. Given the importance of these two sectors in the country, and the paucity of public funds available to stimulate their growth, it is imperative that additional channels of financing are put in place. REITs and InvITs can play a pivotal role here as these investment vehicles can be used to attract private investment in these sectors while relieving the burden on formal banking institutions.”
In general terms, a REIT is an investment vehicle that owns and operates real estate-related assets, and allows individual investors to earn income produced through ownership of commercial real estate without actually having to buy any assets. Typically, the income-producing real estate assets owned by a REIT include office buildings, shopping malls, apartments, warehouses and mortgaged property.
The market for REITs and InvITs is relatively nascent in India at present. Regulations governing REITs and InvITs were introduced in India as recently as 2014.
Peter Verwer, CEO of the Asia Pacific Real Estate Association, said, “There is growing international interest in India’s REITs and InvITs. Global investors, including patient capital providers, are keen to gain access to India’s growth momentum and view securitised real estate and infrastructure as an efficient vehicle for doing so.”
The liberalisation of foreign direct investment (FDI) rules for the real estate sector, opening up of the domestic fund industry to foreign investment and the passage of the Real Estate Regulation Act have brought back focus on to this sector. Also, the government’s flagship project to provide “housing for all by 2022″ and the development of smart cities have led to increasing activity in this sector, according to the report.
Credits ET Realty