Huge amount of funds might flow into REITs
While the fine print yet to be figured out, estimates of around $10 billion or more of foreign funds could flow into Real Estate Investment Trusts (REITs) over the next few years appear somewhat far-fetched at this juncture. In order to be sure, there could be a thriving market in REITs one day but given that the real estate sector in India suffers from the lack of reliable data and given that there is no tax holiday right now, that could be some time away.
Even more, the fact that the final guidelines put out by the Securities and Exchange Board of India (Sebi) allow for REITs only in commercial real estate, many believe, make the opportunity less attractive; the real play, they say, is in the residential property space. Analysts point out that excluding a few deals in the trough of 2010-11, most pre-let commercial property acquisitions took place at high single-digit or low double-digit yields, whereas the cost of borrowing is around 11.5 percent.
Although, throwing open the space to a large number of participants—the asset size for a REIT that wants to float an initial offer has been halved to Rs 500 crore from the originally envisaged Rs 1,000 crore—is a good idea, as it is to leave the minimum size for subscriptions at just Rs 2 lakh.
Source: The Financial Express
Arun Jaitley, guidelines for Real Estate Investment Trust, Infrastructure Investment Trusts, real estate investment trust, Real Estate Investment Trusts, SEBI Board, SEBI Chairman
