REITs: Safe haven for realty investors

The introduction of real estate investment trusts (REITs) in India could be termed as the biggest move by the stock market regulator (SEBI) to serve the country's booming property market.

With this a developer can sell the building after construction is completed and reinvest the money in other projects. While retail investors and institutional investors can buy stake in the REIT and own these properties, rentals and other revenues would be given out as dividend.

“If you wanted to buy space in the heart of Delhi, REITs will give you an option of owning anything from a square foot to a whole building by picking up equity in the trust,” said Sanjay Chandra, MD, Unitech. “It is this organised retail participation that has made REITs a hit across the globe," adds Chandra.

But large builders have already firmed their plans for listing in Singapore with Unitech also got its approvals a few days ago.

Unitech has got informal approvals for its REIT valued at $1 billion in Singapore and it will raise at least $500 million from the REIT. DLF had got approvals last week for its REIT and it plans to raise $1.2 billion. Indiabulls also has plans to list a REIT in Singapore.

The big builders still see Singapore as the preferred destination because SEBI norms do not permit them to list a developer promoted REIT. However, few of them will sell a part of their commercial property to Indian REITs but would only like to sell mainly the non FDI compliant projects.

Industry experts tell NDTV that the SEBI legislation is tailor made for financial institutions and makes sense for mutual fund players like ICICI and HDFC to form REITs.

Surely REITs will boost returns for realty players and give retail investors a piece of the action in one of the fastest growing real estate markets in the world and most important give real estate markets depth and transparency.