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Sebi's draft norms on realty investment trusts welcomed by industry

Welcoming market regulator Securities and Exchange Board of India's draft norms on real estate investment trusts (REITs), the real estate industry said on Thursday the instrument would help in increasing capital flows into the sector and also provide exit route to investors once implemented.

The Securities and Exchange Board of India (Sebi) has proposed listing of REITs, which is a popular instrument for raising funds in the realty sector.

Issuing draft norms for REITs, Sebi said the evolution of such investment vehicles is "crucial" for the rapidly growing real estate industry.

"This is a welcome move. Once in place it will provide an additional exit route for investors and enable retail money to be channelised into India's realty sector through a regulated network," Anshuman Magazine, chairman and managing director of CBRE South Asia, said in a statement.

The introduction of REITs in the long term would propel the realty sector, spurring capital inflows and bringing institutional credibility, he added.

Echoing similar views, Unitech managing director Sanjay Chandra said, "It's an excellent progressive step. This will let investors directly participate in the institutional Grade A office space, giving them steady income and a much needed boost to commercial real estate business. Developers will benefit by freeing up freeing up of capital in the sector."

Consultancy firm PWC India said that Sebi seems to have taken a very pragmatic approach at the REIT regulations and lot of emphasis has been given to transparency and disclosures.

"Indian investors will get an additional investment opportunity to invest in real estate. It will also benefit real estate developers who will be able to transfer their developed assets into a REIT," said Bhairav Dalal, associate director of PWC India.

Sebi has released its consultative guidelines for operation of REITs in India after five years of releasing its first draft, said Anuj Puri, chairman and country head of leading property consultant Jones Lang LaSalle (JLL) India.

"The positive thing is that the statement clearly spells the need for REITs in India at the earliest considering its huge popularity across the world," he further said.

As per the Sebi draft guidelines, REITs would be allowed to list on stock exchanges through initial public offer (IPO) and can raise funds further through follow-on offers.

According to Sebi, REITs can issue units of their investment schemes through a public offer and list them thereafter on a stock exchange in a way similar to the issuance and listing of shares during an IPO.

Thereafter, the units can be traded on the stock exchange platform just like shares. It further said that listing of units will be mandatory for all REITs.

The regulator said that REIT may raise funds from any investors, resident or foreign. However, initially, till the market develops, it is proposed that the units of REITs may be offered only to HNIs/institutions.