India paves way for reit market
Real estate investment trusts seen as new source of funds for debt-hit developers and could lead to US$20b of listings
India is laying the groundwork to make real estate investment trusts tax-exempt and allow them to trade on public exchanges, a move that may help unlock as much as US$20 billion of listings.
Regulations on taxation would be amended, Finance Minister Arun Jaitley said last month, and the stock market regulator is preparing to allow reits to be traded on exchanges, according to Edelweiss Securities.
The introduction of reits will provide a new source of cash to developers that have struggled to reduce debt with interest rates among the highest in Asia, while giving investors the ability to buy into the property market.
Assets that may qualify to be included in reits may reach US$20 billion by 2020, according to an estimate by property broker Cushman & Wakefield. In the first three to five years, as much as US$12 billion could be raised.
"Reits could be the game changer for India's property sector," said Priyaranjan Kumar, a regional director of capital markets at Cushman & Wakefield in Singapore. "It will force much needed transparency at least in the commercial sector, and lower the reliance on financing from banks and incentivise developers to own and manage assets with a long-term view."
Prime Minister Narendra Modi has promised changes in the property market, which was valued at US$66.8 billion in March 2011, according to India Brand Equity Foundation, a government agency.