Draft REITs regulations in India welcomed by regional industry players
16 October 2013
By Asia Asset Management
The troubled Indian real estate industry has been given a boost with the establishment of draft real estate investment trust (REIT) regulations from the Securities and Exchange Board of India (SEBI), say local associations and industry leaders there.
S Srinivasan, CEO of Kotak Realty Fund and APREA India chapter board member, notes: “This is a commendable effort by SEBI and the draft REIT regulations are workable and as per global standards. These will definitely open up the much anticipated real estate market. Now that SEBI has delivered on its part, it’s up to the government to focus on the tax regime and get it done to really kick-start the market.”
The Asia Pacific Real Estate Association (APREA) has for many years regularly promoted the establishment of a REIT market in India. It recently presented detailed submissions to the country’s regulators and has been working closely with SEBI to push them through.
Globally REITs have been beneficial in improving transparency and standards and improving the professionalism of markets and these benefits may now be felt in India too, notes APREA.
Rahul Rai, head of the real estate investment business of ICICI Prudential Asset Management Company and member of APREA, said: “This is a very positive step to improve the structure of the Indian real estate market. Setting up of REITs will allow investors to participate in quality real estate with transparent pricing and built in liquidity mechanism. This will help in further institutionalisation of the market.”
A recent international symposium that APREA convened in Mumbai (which included international and local industry leaders such as APG Asset Management, Admiral Investment, GIC Real Estate, Morgan Stanley, Standard Chartered Bank, ICICI Prudential Asset Management, Kotak Investment Banking, Herbert Smith Freehills, PricewaterhouseCoopers, Nishith Desai Associates, IDFC, Ernst & Young, CBRE and Religare Investment Advisors) concluded that now is the right time for REITs in India, noting significant institutional investor support and interest. REITs are seen as critical for the development of the real estate industry and capital markets.
Anuj Puri, chairman and country head, Jones Lang LaSalle India and APREA India chapter board member, said: “SEBI has clearly expressed its willingness to kick-start REITs in India. The entire REIT framework was more or less withdrawn after the 2008 draft to make way for real estate mutual funds – which eventually did not materialise either. The cautious approach adopted by SEBI during this initial period is acceptable and appreciable. One concern is with regards to the strengthening of our legal framework surrounding real estate in India, which is a prerequisite for REITs to thrive here.”
Lim Swe Guan, chairman of APREA, commented: “APREA is pleased to have played a leading role in the development of a REIT law for India. REITs have attracted significant amounts of cash in recent years responding to investor demand for high yields and stable capital returns. Even though there has been substantial support for emerging Asia REITs, the potential for even larger allocations by both local and global investors exists.
“Recent APREA research shows that India’s share of the global investable real estate market currently is just 1.3%. However, this is expected to increase to 6% in the next 20 years with the size of the domestic investable real estate market rising 16-fold over that period. India REITs are poised to capture a substantial share of such capital inflows.”
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