REITs and InvITs to see considerable growth moving forward: Report
The market for REITs (Real Estate Investment Trusts) and InvITs (Infrastructure Investment Trusts) is expected to kick start in the near future. Currently, the market for REITs and InvITs is relatively nascent in India. However, with various enabling factors such as the growth of the economy and the middle class, and a concomitant need for housing and infrastructure, the demand for these investment vehicles will see an upswing over the next few years.
According to the PwC-APREA report, ‘India’s New Real Estate and Infrastructure Investment Trusts – The way forward’, REITs market has evolved substantially in several countries and these investment vehicles have gained immensely in terms of their market capitalisation. A primary condition for the growth of these markets, as demonstrated by the experience of different countries, is their ability to customise regulations governing these investment vehicles in conformity with domestic market conditions.
In the near future, REITs are expected to increase the depth of the Indian property market through a sound regulatory framework which ensures transparency and high governance standards, and promotes regular monitoring of their performance, the report pointed out.
Commenting on the future of REITs and InvITs in India, Abhishek Goenka, Partner – Tax, PwC India, said, “Real Estate and Infrastructure are the two most critical sectors in any developing economy. Given the importance of these two sectors in the country, and the paucity of public funds available to stimulate their growth, it is imperative that additional channels of financing are put in place. REITs and InvITs can play a pivotal role here as these investment vehicles can be used to attract private investment in these sectors while relieving the burden on formal banking institutions.”
Peter Verwer, CEO of the Asia Pacific Real Estate Association, said, “There is growing international interest in India’s REITs and InvITs. Global investors, including patient capital providers, are keen to gain access to India’s growth momentum and view securitised real estate and infrastructure as an efficient vehicle for doing so.”
The report also discusses how the adoption of Ind AS (effective from April 1, 2016) is likely to have a significant impact on the financial statements of Indian companies across sectors including real estate and construction. As per the report, SEBI (Securities and Exchange Board of India) regulations have not clearly indicated the accounting standards to be followed by REITs or InvITs. However, the introduction of Ind AS to REITs or InvITs or their underlying SPVs (Special Purpose Vehicles), sponsors or asset management companies could have quite a significant impact on their financial statements, depending on the complexities involved in each case.