‘Property sector needs exclusive stock exchange for growth’

New Delhi, Nov 4: The government should set up an exclusive stock exchange, dealing only in real estate-based mutual funds to arrest the current downtrend and boost growth of the sector, a leading real estate consulting firm has said.

“Setting up a stock exchange, allowing exclusive trading in real-estate based mutual funds is absolutely necessary for the growth of the sector,” Cushman & Wakefield director Sanjay Verma said.
He said, real estate investment trusts (REITs), like the ones existing in the US, to allow buying and trading of real estate-based shares should also be established.

“US experience in REITs offers us an innovative option of permitting investors to buy and trade shares in the real estate sector, Mr Verma said and added that “permission should be also be given to collect dividends from capital appreciation and rental incomes.”
An REIT is a company that buys, develops, manages and sells real estate assets and allows participants to invest in a professionally managed portfolio of properties.

Mr Verma said introduction of real estate mutual funds and mortgage-backed securitisation would help to provide a much-needed fillip to the domestic real estate sector.

The current economic slowdown, coupled with the uncertain global security environment, has affected the domestic real estate sector, with property prices plunging by over 10 per cent this year.

Hudco chairman V Suresh thinks REIT is a “viable option for requisite tax and regulatory structures.” “This would result in increased rental housing generation,” he says.

Outlining the primary difference between REITs and other real estate companies, Mr Suresh says, “It is primarily a clearing entity which distributes the majority of its income cash flow to investors, thereby saving taxation at corporate level.” REITs are generally classified into three categories — Equity REITs, Mortgage REITs and Hybrid REITs. Majority of REITs in the US are equity-based.

— PTI