The reit stuff for urban development

The reit stuff for urban development

Next, the turn of infrastructure investment trusts.

The filing of prospectus for India’s maiden real estate investment trust (REIT) is significant, given the huge potential and need to allocate savings to urban infrastructure, with broad-based investor participation. Modern investment vehicles like REITs can purposefully step up funding for India’s woefully underfunded urban real estate, including to utilise the scope for city redevelopment, and also provide attractive, stable and long-term returns for retail investors. It is notable indeed that the Blackstone Group is joining hands with Embassy Office Parks and proposes to raise over ₹5,000 crore in an REIT scheme with a portfolio that would include over 70 real estate assets in Mumbai, Bengaluru, Pune and the National Capital Region.

Significantly, it would be Asia’s largest office REIT by square foot portfolio size, and double that of the next largest in the Indo-Pacific. So, India joins the league of global REIT markets, such as those in the US, the UK, Singapore, Japan, Australia and Canada. REITs are entities that own, operate or finance income-generating properties. In the mature markets, returns on equities can be lacklustre but usually not those of REITs. Structured akin to mutual funds, REITs are stock exchange-listed and allow investors to earn dividend-based returns. Investment norms for REITs have been in place since September 2014, but it was only in December last year that the capital markets regulator Sebi tweaked the rules to allow such trusts to issue bonds. It is only lately that strategic investors like non-banking finance companies (NBFCs), commercial banks and international financial institutions have been allowed to invest in the public issues of REITs.

The economy is gaining growth speed and India is urbanising fast, and we need to viably and sustainably expedite funds flow into urban real estate. The way ahead is to have proactive policies for such infrastructure sectors as power, telecom and public transport so as to make REITs and infrastructure investment trusts attractive investment vehicles.