4 listed REITs join hands to form industry body to advocate interests

Four listed real estate investment trusts have joined hands to form an industry body that will advocate the interests of businesses as well as investors.

The Indian REITs Association, a non-profit group formed under the guidance of the Securities and Exchange Board of India (Sebi) and the Ministry of Finance, will also work on ways to enable further growth of Real Estate Investment Trusts (REITs).

Brookfield India Real Estate Trust, Embassy Office Parks REIT, Mindspace Business Parks REIT, and Nexus Select Trust are the founding members of the Indian REITs Association (IRA).

The journey of REITs in India commenced with the introduction of regulatory guidelines in 2014 and culminated in the public launch of REITs in 2019, with Embassy REIT's listing.

Following this, two more REITs were listed on the Indian exchanges -- Mindspace Business Parks REIT in 2020 and Brookfield India Real Estate Trust, in 2021. In May 2023, India's first retail REIT, Nexus Select Trust, was listed.

The association, which will function as a non-profit trade organisation, has been formed under the guidance of the Securities and Exchange Board of India (Sebi) and the Ministry of Finance, according to a statement.

The newly formed association will closely collaborate with Sebi, the primary REIT regulator.

"In a role similar to that played by the Association of Mutual Funds in India (AMFI) for mutual funds, the IRA aims to be a body of integrity and excellence, and foster industry-best practices that are benchmarked to leading global REIT standards," it said.

The IRA would also work with the authorities and regulators to aid policy initiatives like SEZ reforms that will enable further growth of REITs.

With Rs 1,19,313 crore in gross Assets Under Management (AUM), a market capitalisation of over Rs 75,000 crore, and a portfolio covering 113.5 million sq ft of Grade A office and retail spaces nationwide, REITs in India have demonstrated noteworthy growth since the first REIT was listed in 2019, the statement said.

In just four years, REITs have raised over Rs 25,500 crore of equity capital through primary issuances, including initial listings and follow-on offerings, and Rs 18,890 crore of debt capital demonstrating significant investor appetite for the asset class.

As of June 30, 2023, the number of unitholders in the four REITs has grown to over 2,00,000.

On the newly formed association, Solomon Arokiaraj, Joint Secretary (IPP), Department of Economic Affairs, Ministry of Finance, said, "REITs are innovative financial instruments that provide an opportunity to invest in a portfolio of income-generating real estate assets with relatively smaller ticket sizes, while retaining liquidity, which is generally missing in the case of real estate investments."

The global experience in the US and Singapore markets shows that REITs have been instrumental in the capitalisation of real estate markets, Arokiaraj said.

He is the joint secretary for infrastructure, policy and planning.

At the inaugural launch, the CEOs of the founding members of the IRA in a joint statement said the association will work on key agenda items such as educating investors, improving liquidity, and collaborating with Sebi and other regulators on enhancing governance and investor protection norms, among others.

Indian REITs are required to invest 80 per cent of their portfolio in income-producing properties, pay out at least 90 per cent of net distributable cash flow to investors semi-annually.