The Securities and Exchange Board of India (Sebi) on Sunday approved the launch of Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs), paving the way for an alternative to bank finance for the cash-starved realty and construction sectors.
The new move will facilitate infusion of an estimated $15-20 billion (Rs 91,500 crore-1,22,000 crore) into the sector, analysts said.
Besides, REITs and InvITs will offer a new investment option to retail and high net worth individuals who have been mainly investing in gold, and help curb capital outflows from the country.
The Sebi board, which was also addressed by finance minister Arun Jaitely, cleared a proposal for simplified one-time procedure for registration of brokers.
The moves aim at boosting construction activity and spurring investment and jobs across industries such as cement and steel.
“The idea is that even if somebody can invest as low as Rs. 2 lakh, such a person can get the benefit of the income from the completed projects,” Sebi chairman U K Sinha said.
REIT norms would allow creation and listing of such trusts and their units can be traded on stock exchanges like shares.
“Primarily REIT is with regard to completed projects, revenue generating projects,” Sinha said.
In this year’s budget, Jaitley had offered tax breaks for REITs — an investment vehicle that puts money into real estate assets to generate income. All REIT schemes will be structured in a way that that will invest in projects and will give returns to unit holders. The income of unit holders will come from capital appreciation or rental income of these projects.
Through InvITs, the government is aiming to create a new avenue for raising funds to meet infrastructure investment requirements to the tune of Rs. 61 lakh crore for the 12th Five Year Plan (2012-17).
“The new norms will facilitate infusion of an estimated $15-20 billion (Rs. 91,500 crore-Rs. 1,22,000 crore) in the sector, and an alternate to bank finances. With amendments, both foreign and domestic institutions and other investors will be eligible to invest in these trusts,” said Neeraj Bansal, partner and head, real estate and construction, KPMG.