Good news for the
cash-strapped real estate and infrastructure industry. The capital market
regulator Securities and Exchange Board of India (Sebi) has just approved the
final guideline for real estate investment trusts (REIT) and infrastructure
investment trusts (InvIT).
The twin move will give the real estate and the infrastructure sector easier access to funds and create new options for investors to invest. SEBI’s approval for setting up of REITs is a timely move for the real estate sector as REITs have globally proved to be an efficient way of raising capital for the sector and providing an easy exit route to investors, also they can be well accepted by investors and provide better returns than other asset class.
The twin move will give the real estate and the infrastructure sector easier access to funds and create new options for investors to invest. SEBI’s approval for setting up of REITs is a timely move for the real estate sector as REITs have globally proved to be an efficient way of raising capital for the sector and providing an easy exit route to investors, also they can be well accepted by investors and provide better returns than other asset class.
In simple terms,
REITs will channelize investments from wealthy individuals and institutions to
the real estate sector through units sold by REITs. Like mutual funds
collecting money from investors and investing in company shares and other
financial instruments, REITs will invest money in the real estate industry.
Experts believe that $10-$15 billion worth of investment will be infused into
the real estate industry through REITs in a couple of years.
Political
stability and the recent policy related initiatives have encouraged global
investors who refrained before from entering the Indian market due to
political, policy, governance and infrastructure-related issues to look towards
India again for business activities. Therefore, it is indeed the right time to
introduce REIT in Indian market as it will shore up liquidity in the sector and
emerge as an alternate to bank finance.
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