How REIT will Change the Indian Real Estate Market
Feb 06, 2018 Real Estate News
After a long wait, REIT is going to launch in India. They are expected to provide opportunities to the retail investors to invest in the real estate. This will also help the real estate industry to get more liquidity for the projects. According to the reports, the listing potential of the Indian REIT market can easily come across trillion rupee mark.
Let us first explain what REITs do. REITs are the listed entities that primarily invest in leased office and retail assets by allowing the developers to raise the funds by selling the building that has been completed by the investors. REITs are expected to improve the market conditions and make the availability of funds easier.
Why Are REITs significant to the market?
Some developers face a cash crunch and it becomes difficult for them to carry on with the project. REIT will usher greater liquidity in the real estate market, which will help developers have an option for an exit, in case of the cash crunch. REITs and RERA will bring more transparency to the real estate market. Over the past two years, the government has provided various concessions and provisions to make REITs attractive.
The enforcement of RERA will help in building more organised real estate market which REIT will need.
Impact of RBI’s proposal:
According to experts, the government has already abolished dividend distribution tax for SPVs and have allowed the foreign investors for REITs. Recently, RBI has allowed banks to invest 10% of their capital in REITs and InVITs. This will increase the window of funding unstable way which will help increase the liquidity for the real estate builders. The move will motivate many companies to bring their REITs and invest in the real estate while giving banks safer asset to invest in.
Things that need attention for the success of the REIT:
There are few issues that need to be addressed:
1.The correct method to be employed in the valuation of the assets. The managers who will be assigned the job should be skilled for the same.
2.The supply of Grade A office and commercial space should be maintained.
While the government has given way for REITs, the stamp duty levied o the state level continues to be a hindrance for REITs. According to experts, the stamp duty may reduce the profits and returns from the REITs than bonds and other investment areas.
Let us first explain what REITs do. REITs are the listed entities that primarily invest in leased office and retail assets by allowing the developers to raise the funds by selling the building that has been completed by the investors. REITs are expected to improve the market conditions and make the availability of funds easier.
Why Are REITs significant to the market?
Some developers face a cash crunch and it becomes difficult for them to carry on with the project. REIT will usher greater liquidity in the real estate market, which will help developers have an option for an exit, in case of the cash crunch. REITs and RERA will bring more transparency to the real estate market. Over the past two years, the government has provided various concessions and provisions to make REITs attractive.
The enforcement of RERA will help in building more organised real estate market which REIT will need.
Impact of RBI’s proposal:
According to experts, the government has already abolished dividend distribution tax for SPVs and have allowed the foreign investors for REITs. Recently, RBI has allowed banks to invest 10% of their capital in REITs and InVITs. This will increase the window of funding unstable way which will help increase the liquidity for the real estate builders. The move will motivate many companies to bring their REITs and invest in the real estate while giving banks safer asset to invest in.
Things that need attention for the success of the REIT:
There are few issues that need to be addressed:
1.The correct method to be employed in the valuation of the assets. The managers who will be assigned the job should be skilled for the same.
2.The supply of Grade A office and commercial space should be maintained.
While the government has given way for REITs, the stamp duty levied o the state level continues to be a hindrance for REITs. According to experts, the stamp duty may reduce the profits and returns from the REITs than bonds and other investment areas.
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