Gold Deposit Scheme, REITs Can Monetise 1% of GDP: Report

Mumbai: The proposed gold deposit scheme and Real Estate Investment Trusts (REITs) can release as much as 1 per cent of GDP for productive investments, according to a report.

"Savings in non-productive physical assets, primarily property, gold is 17 per cent of GDP...a well-run gold monetisation and REITs scheme can recycle one per cent of GDP, which can revive the savings rate in the financial and help fund investments," JM Financial said in a report.

REITs have a market size potential of $50 billion with a return profile of 13-14 per cent pre-tax, it added.

The report also said gold monetisation scheme can ease pressure on imports. The country has an estimated 20,000 tonnes of gold stock. The gold monetisation scheme will allow the depositors of gold to earn interest in their metal accounts and the jewellers to obtain loans in their metal account.

Noting that as much as 30 per cent of the physical stock of gold can come into the market and get monetised over the next three years, the report said even if only 5 per cent of the total gold stock comes under the scheme over the next three years it will circulate gold to the tune of $15 billion or Rs 93,000 crore per annum. This is roughly half of the annual gold demand or 0.8 per cent of GDP.

It also said allowing banks and other dealers to monetise the metal will open up an avenue to transform the physical asset in a financial asset and free up resources.

According to the report, the provision in the Budget of exemption of sponsor units from capital gains puts REITs at parity with IPO listing.

While some uncertainties remain about the direct holding structure, the report cited transaction costs and time taken for acquisition makes the direct holding structure at a disadvantage against other structures. But it noted that this can pave the way for REIT formation enabling companies to recycle capital in high RoE residential space or reduce debt.

In a report, the SBI's research wing has said the gold deposit scheme can fetch Rs 1 lakh crore.

Describing the gold deposit scheme as a "game changer", SBI Research said, "The proposed gold deposit scheme on a conservative basis can bring in the monetary value at least Rs one trillion".

In Budget offers multiple measures to monetise gold, including the gold monetisation scheme, a sovereign gold bond and develop an Indian gold coin. Giving a fillip to investments in realty and infra sectors, it rationalises capital gain tax regime by providing partial pass through to them for the sponsors of newly-created business structures REITs and InvITs (infrastructure investment trusts).