Real Estate Industry waiting with bated breath to see the outcome of REITs
When the finance minister Arun Jaitley had launched the real estate investment trusts (REITs) in the budget, it had brought a lot of cheer to the real estate world. Now the government is busy clearing roadblocks forthe REITs and several real estate biggies like DLF, Tata Realty and Infrastructure, Prestige Group and Panchshil Realty are considering raising funds through this route.
It is estimated that these Indian companies could raise around $6-8 billion by launching REITs. Since a tax pass-through status will be given to REITs, they are expected to be very popular with the investors. Saurabh Chawla the executive director of DLF explained that the company is interested in raising money via REITs; however they are yet to come to a conclusion about the launch date of such endeavours. Chawla also mentioned that it would be beneficial for both investors and developers.
Rajeev Bairathi the executive director of capital transaction group & north India at Knight Frank India mentioned that there is opportunity of raising up to $8 billion approximately through REITs. 100 million square feet of commercial real estate is available in the country, However, experts said that more clarity is required on taxation and it would be at least a couple of quarters before any REIT is set up in the country.
A REIT would own and in most cases operate income-producing property. Some REITs will also engage in financing real estate. There is a provision of holding these trusts publicly or privately.
Bairathi also mentioned that while DLF, the largest real estate company in the country, has around 30 million square feet of commercial space, Blackstone has around 20 million square feet. Most of the real estate companies holding large commercial space like Panchshil Realty, Raheja Group, Indiabulls, among others, would focus on REITs to raise funds.
Many developers who were hesitant to invest in commercial real estate due to lack of funds can do it now with the help of REITs. The developers would be able to de-leverage their balance sheets and use the funds raised via REITs for repaying debt or use it as working capital.
Abhijeet Maheshwari the head of business development at Tata Realty and Infrastructure stated that their company is looking actively at creating a REIT platform. He also mentioned that REIT is a game changer for the Indian real estate sector as it will be the first time that small investors will be able to buy into small amounts in Grade A properties for rental income.
Source- Financial Chronicle
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