REIT: This real estate investment tool is boon for investors and developers alike

March 30, 2019 3:28 PM

For the Indian property market, it is certainly good news that will not only trigger a flow of institutional funds but will considerably enhance transparency and governance in the realty market especially the commercial one, thereby boosting stakeholder’s confidence.

The Indian realty market has a plethora of REITable properties that works more or less like mutual funds or shares.

By Honey Katiyal

The Indian real estate industry has been waiting with bated breath for the launch of the country’s first REITs, that is, Real Estate Investment Trusts. After four years of rigorous efforts and a continuous push by the government and the real estate sector, the listing of India’s first REITs has become a reality.

For the Indian property market, it is certainly good news that will not only trigger a flow of institutional funds but will considerably enhance transparency and governance in the realty market especially the commercial one, thereby boosting stakeholder’s confidence.

The Indian realty market has a plethora of REITable properties that works more or less like mutual funds or shares. These assets include commercial properties like office spaces and coworking spaces. However, the major deciding factor is to get them listed on stock exchanges or security trades. So, if you are a small investor, you don’t have to think before investing in REITs. All you have to do is to buy some units and start trading.

The launch of REITs comes as welcome news along with a healthier and greener tomorrow for the complete real estate sector. After demonetisation, there were many bottlenecks that stopped investment coming into this sector. And this was the time when the need to list the REIT arose. Although work and regulations got notified five years back, developers and investors were not confident about it due to many tax issues. However, the government approach bodes well with the developers as well as investors and the recent launch is the proof to it.

The new investment tool is a boon to many developers and investors whose capital expenditure remain blocked as current policies do not allow them to exit any commercial investment till the time it is complete or returns to breakeven. But with REIT, a commercial investor can partially or completely move out of the project as the units are listed in the exchange and there are many others in line who are waiting to do their bit of investment. It also helps them in raising more finances for their underlying project.

For many small investors, who till now were deterred to invest in the commercial real estate market due to many barriers, REITs can be seen as an opportunity. Even the corporate and institutional investors who are looking to enhance their investment portfolio can give REITs a try.

REITs will also stabilize institutional findings in the commercial real estate market. With a fresh flow of capital, the developers will be able to complete their struck projects. Also, the liquidity crunch which the sector is facing from the past few years will be improved thereby welcoming several new innovations.

The concept is still in its nascent stages but it has all the potential to change the overall face of the Indian commercial real estate market thereby helping the sector to grow speedily. Down the line, over the next 5 years, the REIT market will become much more alluring that can compete well with other developed economies like Japan and Singapore.

(Honey Katiyal is the Founder and CEO at Investors Clinic. Views are the author’s own.)

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