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Consultative Paper on proposed SEBI (Real Estate Investment Trusts) Regulations for Public Comments

The Consultative Paper and draft SEBI (Real Estate Investment Trusts) Regulations are placed on SEBI website for Public Comments.

The full text of the Consultative Paper and the draft Regulations is available on here. Click here.

Comments are invited on the Consultative Paper latest by October 31, 2013.

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Excerpts from the Paper

1. Background 

1. India™s real estate sector has witnessed rapid growth in recent years underlined by robust economic growth in the country. The growing scale of operations of the corporate sector has increased the demand for commercial buildings and space including modern offices, warehouses, shopping centres, conference centres, etc. For such rapidly growing industry, it is crucial that investment vehicles such as Real Estate Investment Trusts (REITs) evolve in the country.

2. Globally, REITs invest primarily in completed, revenue generating real estate assets and distribute major part of the earning among their investors. Typically, most of such investments are in completed properties which provide regular income to the investors from the rentals received from such properties.

3. By the very nature of REITs, it is beneficial to both the investors and the industry in different ways. On one hand, REITs provide the investors with an investment avenue, which is comparatively less risky than investing in under-construction properties and provides regular income. On the other hand, REITs provide the sponsor (usually a developer or a private equity fund) avenues of exit thus providing liquidity and enable them to invest in other projects.

4. Globally, framework for REIT exists in several countries including United States of America, Australia, Singapore, Japan, France, United Kingdom, etc. In most of these countries, REITs appear to have the following features:

a. REITs are managed by professional managers which usually have diverse skill bases in property development, redevelopment, acquisitions, leasing and management, etc.

b. In countries where REITs are available for retail investors, they provide an avenue to such investors in properties which they otherwise would not have been able to take an exposure.

c. REITs are also a popular investment option for long term pools of capital such as pension funds and insurance companies primarily since the regular stream of income helps them in managing regular outflow to their investors.

d. Listed REITs provide liquidity thus providing easy exit to the investors.

e. REITs bring in transparency and accountability in the real estate sector.

All these reasons have made REIT one of the preferred investment vehicles around the world.

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Tags: IndiaReal EstateReal estate investment trustReal Estate Investment Trusts: Structure Performance and Investment Opportunities (Financial Management Association Survey and Synthesis Series)REITSecurities and Exchange Board of IndiaSingaporeUnited States

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