REITs to give a boost to the real estate sector
The real estate industry was going through a bad time in the last few years as the economy was slow and the demand for the properties had gone down. All the investors were reeling under debt pressure and huge inventories of unsold ‘’ready to move in’’ dwellings. The real estate companies are now hoping that the government gives a green signal to real estate investment trusts, or REITs, in the upcoming budget in July.
They feel that due to the high cost of funds, and reluctance of banks to finance the real estate projects have been the main reasons behind the sluggish growth of the sector which had increased the costs of the units and hence had triggered a downward trend in the demand.
Industry experts are speculating that the Centre is likely to offer REITs the status of a “pass-through vehicle” that will offer tax breaks to investors who park money in these trusts.
REITs could become a vehicle for real estate developers to access cheaper funds for developing and monetising assets. This will eventually help the buyers as the costs will come down. According to market watchers, REITs could attract investments upwards of Rs 50,000-60,000 crore in the first year itself.
Shailesh Puranik the managing director of Mumbai-based Puranik Realty mentioned that REITs will go mainly into completed assets, but still, a lot of other money, which is locked into those assets, will get freed to be used by a developer. According to an earlier report by Morgan Stanley, India has 400 million square feet of office and mall properties valued at $60 billion (around Rs 3.60 lakh crore).
Source- Hindustan Times
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