DLF Assets to raise $2 bn in Singapore

Having completed the country's largest initial public offering of $2 billion (about Rs 8,200 crore), DLF Chairman K P Singh is getting ready to raise a similar amount in Singapore.

DLF Assets, a privately held company promoted by the Singh family, will be listed as a Real Estate Investment Trust (REIT) in Singapore next month. The company has a portfolio of special economic zones and infotech parks.

DLF had sold some of its leased commercial properties to DLF Assets (DAL). "The transaction was done at an arm's length and DAL has already paid around Rs 2,400 crore to DLF against a total consideration of Rs 4,000 crore. Going forward, DAL is planning to offer a significant part of its equity to the public, thereby raising the resources to pay off DLF," a company executive said.

REIT is a tax-efficient vehicle for a corporation investing in real estate. REIT is required to distribute 90 per cent of the income, which may become taxable in the hands of investors.

The REIT structure was designed to provide a mutual fund-like structure for investment in real estate.

DLF is selling its leased commercial properties to DAL to de-link the development and asset ownership businesses. DLF plans to sell leased commercial space to DAL or other third parties in the future too. Currently, REITs are not permitted in India. "Since there are no regulations in place in India, there are many grey areas. But what is clear is that only a development REIT, a project which is not completely finished and has some development work to be complete, can be listed.

"To bring back the capital raised by an Indian firm's REIT at Singapore, the project will have to comply with Foreign Direct Investment norms or with rules laid down by the Special Economic Zones Act," a company source said.

Existing Indian regulations permit 100 per cent FDI in construction as long as the minimum area to be developed is 10 hectares with a built up area of 50,000 square metres.

DAL's portfolio as of now includes IT parks in New Delhi, Hyderabad and Chennai and two large office complexes in Gurgaon. Earlier this year, DAL raised about $400 million (Rs 1,640 crore) by divesting an undisclosed stake to DE Shaw, a US hedge fund with $30 billion in assets.