MUMBAI, 17 November 2014: Real Estate Investment Trusts (REITs), as a concept, are not new to the Indian market. In fact, the market regulator, Securities & Exchange Board of India (SEBI) released the first draft of guidelines for REITs in 2008.
From 2008 till 2014, if we analyze the reason why the draft guidelines for REITs never got final approval, it points towards various aspects, including the lack of clarity on tax-related issues, said Niranjan Hiranandani, MD, Hiranandani Constructions. One also needs to factor in the global financial crisis which hurt the investment climate in India as indeed, all over the world.
“In August this year, the market regulator, SEBI, introduced draft guidelines for trading in REITs in India,” said Niranjan Hiranandani. “This was followed up by positive response from the new Government in New Delhi; also, we need to positively reflect upon the Bombay Stock Exchange having set up an 11-member advisory group of experts, bankers, legal professionals and consultants in the real estate industry to help develop the REITs,” added the Hiranandani Constructions MD.
This has been a major turning point: for the very first time, India now has the opportunity of having REITs become a reality, said Niranjan Hiranandani. “The basic advantage, as I see Is that REITs is a medium through which we can enable small savings to be channeled into the Indian real estate sector. Yes, we will see global money coming in – and as I foresee it, in a big way – but consider the other advantage that REITs will bring in: this will allow the small investor with as small an investment option as a couple of lakh rupees, the opportunity of investing in India’s real estate,” added Niranjan Hiranandani, MD, Hiranandani Constructions.
At the recent seminar jointly organized by the Indian Merchants' Chamber’s Capital Market, Direct Taxation and Real Estate & Infrastructure Committees on "Real Estate Investment Trusts (REITs) & Infrastructure Investment Trusts" in Mumbai, Niranjan Hiranandani said, “Real Estate Investment Trusts (REITs) & Infrastructure Investment Trusts (INVITs) are a positive for real estate, and the industry needs to understand the potential of these new capital market instruments.”
“If large-scale real estate investment is to be pulled to India immediately, REITs is the answer,” said Niranjan Hiranandani. “However, some key issues such as transfer of asset to REIT, levy of stamp duty at the state government level etc need attention, upon which it shows potential benefits to the tune of USD 1o-15 billion over the long term. Whoever I have met in the international investment market is very excited to see how these can be converted into a reality,” he added.
From the perspective of Indian real estate, especially owners of income-generating properties, setting up REITs is logical, he says. “Globally, commercial real estate projects have been popular assets for the purpose of securitizing, market dynamics in India suggest that even the retail sector could be a beneficiary; effectively this will broaden the scope of properties that can be securitized,” Niranjan Hiranandani, MD, Hiranandani Constructions concluded.
KEY WORDS: Indian real estate, Niranjan Hiranandani, Hiranandani Constructions, SEBI, BSE, New Delhi, Mumbai, Indian Merchants' Chamber, Real Estate Investment Trusts, REITs, Infrastructure Investment Trusts, INVITs
Author -Mr Niranjan Hiranandani.