India Expected to Create Real Estate Investment Trust

February 13, 2008	(1 votes, average: 5 out of 5)  Loading ...
Print This Story   Email This Story Subscribe Newsletter

Following fellow Asian countries, India is expected to create a market for real estate investment trusts (REITs) this year. The step will make it easier for investors to buy into the country’s sparkling new office blocks and shopping malls.

The move would also be encouraging for foreign property funds keen to join India’s construction boom but are not allowed to own finished buildings. Through REITs, they could buy the assets they develop, offering them an easier way to exit the projects and take profits on their investments.

In December, market regulator Securities and Exchange Board of India (SEBI) issued draft guidelines for REITs, which pay most of the rent from their buildings to investors as dividends. But people in the industry say unless tax breaks are also offering by the government in its upcoming budget, a local REIT market would be a non starter.

The SEBI proposal contained no mention of the kind of tax breaks that kick-started other property trust markets, but it could be fleshed out in the federal budget due on Feb. 29. Property trusts, long-established in the United States and Australia, have caught on in Asia in the last five years, with investors enjoying stable yields that are higher than government bonds, and share price rises when rents and property values rise.

REITs would be riskier in India’s immature market, where a three-year building boom sparked by easing of foreign investment rules barely masks crumbling colonial-era infrastructure.

News Published Under:   Property Prices |

Comments