REIT – The Right Law at Right Time

Real Estate Investment trusts[REIT] - It is really a breather to the real estate sector and it came from Securities Exchange Board of India [SEBI] at the right time. It was much awaited and with a stable Government at the Central, this wil attract more investment to India and also help the funds to pool the resources from local market.

REIT Concept – Investors view point

AS per SECURITIES AND EXCHANGE BOARD OF INDIA (REAL ESTATE INVESTMENT TRUSTS) REGULATIONS, 2014 , the concept of REIT is similar to Mutual funds and a trustee is holding the REIT assets in trust for the benefit of the unit holders in accordance with the trust deed and the SEBI regulations. REIT is a recognised alternate investment vehicle globally and of late the same is coming to India under the safe wings of the market regulator. REITs are typically involves in setting up of a trust which owns a revenue generating assets and distribute that revenue to the tune of 80% among the investors(unit holders)

There are sponsors for every REIT who will transfer their assets to the trust in lieu of units or shares. When quoting a live example I would like to quote a news item in Economic Times( 15th December, 2014) mentioning about the Blackstone’s RIET which has begun the transfer of its holds in India into a REIT and their plans to list those units in the local bourses to raise around $ 1.5 Billion or Rs 6000 Crores by selling roughly 50% to the public. Due to the tax efficiency and the high income generating capacity of the REIT has made the same attractive globally. High quality income generating assets are the base of REIT and the secret behind their successful acceptance by the investor community.

When implemented in Indian context under the strict supervision of our corporate watch dog, the investors are more protected and their interest became the prime most important factor. The duties and responsibilities of all the key role players such as Manager, Sponsors etc as clearly defined in the regulation and all the related party transactions are covered under surveillance. Indian investors will be benefited by the implementation of high level of corporate governance system and they will be able to enjoy the fruits of income generating assets which are underlying .

REIT Concept – Industry view point

The regulations are very specific on the eligibility criteria and there are not many players who can meet those highly set marks. As per the regulations the Sponsors should have atleast 100 Crore of net worth , collectively, provided each sponsor has a net worth of not less than Rs.20 Crore. But this will ensure the security aspects and also will protect the interest of the unit holder.

Conclusion

As per the foreign direct investment policy of India there are certain factors which requires immediate amendment and also the tax factors to be clarified to gain investor confidence. This will definitely a boon to the real estate and infrastructure sector in India and when reading along with the “Make in India’ campaign the REIT can definitely add value to the same.