Monday, August 11, 2014

Real Estate Investment Trust (#REIT) gets #SEBI approval

In a move that may offer a new source of financing to India's cash-strapped property developers the Securities and Exchange Board of India (SEBI) has approved the setting up of real estate investment trusts (REITs). SEBI had announced plans to introduce REITs last October, but the plan was delayed amid uncertainty about the taxation structure for the new instrument. REITs are listed entities that mainly invest in income-producing real estate assets, the earnings of which are mostly distributed to their shareholders. They generally get special tax treatment.
Reacting on this development by SEBI Anuj Puri, Chairman & Country Head, JLL India said, “With the stamp of approval by SEBI, REITs are finally a formalized concept. This is a big change from the ambiguity and uncertainty that prevailed about this very important instrument in previous years. It is gratifying to note that SEBI fully intends to deliver on its assurances of bringing better and faster funding into Indian real estate.
 As the drafts for REITs stands now, further clarity about taxation eligibility norms is definitely required, and will doubtlessly come before the first listing goes up. When this happens, there will be vastly increased interest from foreign investors.”
 “Currently, Grade A office space in the top seven cities of India amounts to around 376 million square feet, and we anticipate that approximately 50% of this space will get listed in next 2–3 years. The valuation of these assets is around $10-12 billion, and this accounts for a fairly massive influx of funding waiting in the wings to hit the Indian real estate market via REITs over the next few years,” he further added.”