All eyes on REITs this year
Jun 02, 2017 Real Estate News
Last year was not a very good year for the real estate sector in India. Even though the demand was high, the transactions for the residential part of the real estate remained low.
A number of policy reforms were introduced last year to boost the sales in the real estate sector. Significant among them are RERA (real estate regulation and development Act), Benami property act, REIT (real estate investment trust), which will ensure safe and transparent transactions for the buyers. The interest of the buyers has been exploited by the builders for quite sometime now.
While the impact of them above mentioned reforms remained subdued in the residential sectors, the commercial sector saw a bloom.
For the consecutive three years, from 2012 to 2014, the commercial sector has been on all time low with net absorption below 30 million sq ft. the year 2015 brought some change in the wind for the commercial real estate sector which contributed to the growth and the selling of the properties. This has continued for the year 2016. The commercial real estate remains blooming, and the sales only going up. In cities like Mumbai and Kolkata, the office supplies increased remarkably.
In 2017, the demand for the office space keeps increasing. The demands for spaces for the IT offices are on a high rise. Another interesting trend in the commercial sector that has risen is the demand for the medium sized office space.
This year the real estate is gearing up for even higher demands, which is due to the introduction of REITs. It is supposed to open more opportunities for the developers. The investment yield in the commercial estate is much higher than the residential real estate. The yield in the commercial sector is 8 percent to 10 percent as compared to 2 percent of the residential estate.
The introduction of REITs will expand the universe of real estate and will open the windows of opportunities for the developers for the exit projects. The projects like shopping malls and complexes are considered a REIT because they already have tenants and it is easier to get investments out from them.
The value of a project in real estate sector increases with time. Investors will be benefited with them as the REITs hold their assets for a very long time. The centre has removed the dividend distribution tax on special purpose vehicles in last years’ budget.
The investment cap of the under construction projects has increased from 10 to 20 percent. The new opportunity will let the REIT grow even more in the commercial sector. REITs will help regulate the real estate sector more.
A number of policy reforms were introduced last year to boost the sales in the real estate sector. Significant among them are RERA (real estate regulation and development Act), Benami property act, REIT (real estate investment trust), which will ensure safe and transparent transactions for the buyers. The interest of the buyers has been exploited by the builders for quite sometime now.
While the impact of them above mentioned reforms remained subdued in the residential sectors, the commercial sector saw a bloom.
For the consecutive three years, from 2012 to 2014, the commercial sector has been on all time low with net absorption below 30 million sq ft. the year 2015 brought some change in the wind for the commercial real estate sector which contributed to the growth and the selling of the properties. This has continued for the year 2016. The commercial real estate remains blooming, and the sales only going up. In cities like Mumbai and Kolkata, the office supplies increased remarkably.
In 2017, the demand for the office space keeps increasing. The demands for spaces for the IT offices are on a high rise. Another interesting trend in the commercial sector that has risen is the demand for the medium sized office space.
This year the real estate is gearing up for even higher demands, which is due to the introduction of REITs. It is supposed to open more opportunities for the developers. The investment yield in the commercial estate is much higher than the residential real estate. The yield in the commercial sector is 8 percent to 10 percent as compared to 2 percent of the residential estate.
The introduction of REITs will expand the universe of real estate and will open the windows of opportunities for the developers for the exit projects. The projects like shopping malls and complexes are considered a REIT because they already have tenants and it is easier to get investments out from them.
The value of a project in real estate sector increases with time. Investors will be benefited with them as the REITs hold their assets for a very long time. The centre has removed the dividend distribution tax on special purpose vehicles in last years’ budget.
The investment cap of the under construction projects has increased from 10 to 20 percent. The new opportunity will let the REIT grow even more in the commercial sector. REITs will help regulate the real estate sector more.
