Fundraising through emerging investment instruments like real estate investment trust (REITs) and infrastructure investment trust (InvITs) - plunged 59 per cent to Rs 22,145 crore in 2021-22 primarily on account of uncertainty around the world and volatility in the stock market.
In comparison, Rs 54,731 crore was raised in 2020-21. Prior to that, Rs 11,496 crore was mobilised through these avenues in 2019-20, data with the Securities and Exchange Board of India (SEBI) showed.
The funds were raised through initial offer, preferential issue, institutional placement and rights issue. The total fundraising also included money collected by unlisted InvITs, SEBI noted.
REITs and InvITs are relatively new investment instruments in the Indian context but extremely popular in global markets. While an REIT comprises a portfolio of commercial real assets, a major portion of which are already leased out, InvITs comprise a portfolio of infrastructure assets such as highways, power transmission assets.
"Uncertainty around the world and volatility in the stock market are some of the reasons why fundraising through these avenues went slow in recent times," Harshad Chetanwala, Co-Founder at MyWealthGrowth.com, said.
He, further, said that many investors including institutional investors would like to assess the current situation and may be open to investing once overall things start settling down. Some institutions have delayed their InvIT at present, they have plans to come up with the launch when the risk appetite and sentiments of investors improve.
"Inflation and a bad track record of infrastructure projects in India could be why some of the funding has dried up. Margins in the real estate and infra projects are bound to be lower on account of rising inflation and cost of capital going up," Nikhil Kamath, Co-founder, True Beacon and Zerodha, said.
Of the total Rs 22,145 crore, a major chunk or Rs 21,195 crore was collected through InvITs and the remaining Rs 950 crore was mobilised by way of REITs.
While the share of REIT in funding raised during FY22 was marginal, it depends on the size, dilution and pipeline of each category in any given year, which keeps changing.
In terms of issuance, the mode of fundraising by REITs and InvITs rose to 11 during the period under review from 5 in 2020-21. At present, 15 InvITs and four REITs are registered. Of these, seven InvITs and three REITs are listed on the stock exchanges.
REITs and InvITs are innovative and smart ways for developers to monetise a part of their commercial and infrastructure assets. These are otherwise long gestation assets and these vehicles provide an opportunity to release capital to reinvest in new projects.
For investors too, this provides an avenue to participate in income-generating assets which are otherwise beyond one's reach given size and complexity of managing operations.