Investor interest in Infrastructure Investment Trusts (InvITs) and Real Estate Investment Trusts (REITs) is growing rapidly, with fundraising through these avenues reaching Rs 17,116 crore in the fiscal year 2023-24, marking a 14-fold increase compared to the previous year.
According to data from Prime Database.com, fundraising by REITs and InvITs surged to Rs 17,116 crore in 2023-24 from a record low of Rs 1,166 crore in the previous fiscal year. Notably, the fiscal year also witnessed the first-ever Offer-for-Sale (OFS) by an InvIT, with Data Infrastructure Trust raising Rs 2,071 crore.
Between 2021-20 and 2019-20, funds raised through these routes stood at Rs 13,841 crore and Rs 33,515 crore, respectively.
What are REITSs and InvITs?
REITs and InvITs, though relatively new in India, are globally recognized for their lucrative returns and capital appreciation. A REIT typically comprises a portfolio of leased commercial real estate assets, while InvITs consist of infrastructure assets like highways.
Since their introduction in 2014, these investment vehicles have experienced significant growth. The first investment trust was registered with Sebi in 2016-17. Presently, there are 24 registered InvITs and 5 REITs, boasting an assets base exceeding Rs 5.5 lakh crore.
India Inc expresses optimism
Industry experts express optimism about the outlook for InvITs and REITs in the current fiscal year FY25, citing regulatory amendments and a strong infrastructure development pipeline.
Aryaman Vir, CEO of WiseX, told news agency PTI, “After Sebi’s amendments to the SM (small and medium) REITs regulations last month, we are poised for a transformative shift. The Indian fractional ownership market, set to evolve into SM REITs, is projected to grow from USD 500 million to over USD 5 billion in AUM by 2030, indicating a significant expansion and bright prospects for SM REITs.”
Harsh Shah, CEO of IndiGrid, highlights the efforts made by REITs and InvITs to educate investors about the benefits of investing in these vehicles, such as assured returns and visibility of cash flows for investors, and freeing up capital for infrastructure developers.
Market regulator Securities and Exchange Board of India (Sebi) has introduced various regulations to enhance governance standards and transparency for REITs and InvITs, including Unitholder Nominated Directors, caps on leverage, minimum rating requirements, and higher disclosure measures. Additionally, Sebi has simplified investment into InvITs by reducing lot sizes and updating pricing requirements for institutional placements by listed trusts.