 "PEs mull floating Reits")
The capital markets regulator had recently issued draft guidelines on Reits, in which it proposed a minimum initial offer size of Rs 250 crore and a minimum public float of 25 per cent for such securities. According to sources in the sector, the final norms are likely to be issued within a year. A Reit is a tax-efficient investment vehicle that invests in real estate assets to generate income, which is passed on to investors. Just like stocks, Reits are listed and traded on stock exchanges.
Kotak, TRIL, Xander and Blackstone have investments in rent-generating IT parks and other commercial assets, which can form part of underlying assets of a Reit. The funds can exit their investments by floating a Reit and listing it on a stock exchange.
“As per Press Note 2, foreign direct investment can happen only in under-construction projects. Projects funded by FDI money in 2006-07 are built and ready, but guidelines have remained the same. So, the next PE fund cannot replace the old fund. The existing fund can either sell it to a domestic investor or list them abroad,” said Shobhit Agarwal, managing director (capital markets), Jones Lang LaSalle, a global property consultant.
“Now the existing investors will be able to access public markets and exit their investment,” said JLL’s Agarwal, adding, “Once markets opens, it will help them in price discovery.”
According to Morgan Stanley, India has 400 million sq ft of office and mall properties valued at $60 billion (Rs 3.72 lakh crore).
“It is definitely of interest to us and we would like to float a Reit like many others,” said V Hari Krishna, director at Kotak Realty Fund, which has a little over $100 million of investment in commercial assets. “You get to play the property market without development risks; Reits offer high liquidity which is not there in the real estate markets and offer an income-play like bonds.”
“The legislation (on Reits) offers good options for developers like us who have large income-generating assets. It is a good platform for exits. We believe Reits will be realty in India in the next one year, when we will list our own Reit here,” TRIL managing director Sanjay Ubale had told Business Standard recently.
“Three-four years down the line, we will look at floating a Reit in Singapore,” he had said.
TRIF-1 has a corpus of $750 million and owns around 90 per cent stakes in the company’s mall projects in Amritsar and Nagpur, among others.
According to sources, US-based Blackstone has also started doing the spadework to launch Reits here. Blackstone is the most-aggressive investor in commercial properties in India. It has invested about $1 billion in Indian commercial properties, mostly in IT parks and special economic zones, since 2011.
Some of its major investments include a $149-million investment in DLF Akruti Info Parks in Pune and $200 million in the properties of Embassy Property Developments.
An email questionnaire sent to Blackstone did not elicit any response.
Xander, which manages capital over $2 billion and over 50 million sq ft of residential buildings, office complexes and retail malls, is also looking at Reit structures.
A Xander spokesperson said: “It will hopefully provide another set of well-capitalised buyers in the market, which is always helpful. However, more importantly, we see this as a move to further institutionalise the real estate market and enable the small investor to access quality real estate.”
According to sources in the industry, investors such as IDFC and Everstone that have investments in rent-producing assets could also look at Reits once these are allowed in the country.
IDFC and Everstone did not respond to mails on this subject.
Sanjay Bansal, managing partner of Aurum Equity Partners, said investors would get fixed returns more or less equivalent to the rent generated by properties and help in capital appreciation. “When property prices rise, it will get reflected in the value of Reit,” he said.