Industry welcomes SEBI regulations on Real Estate and Infrastructure Investment Trusts

The market regulator Securities and Exchange Board of India (SEBI) has come up with new regulations for setting up the Real Estate and Infrastructure Investments Trusts that will attract foreign investors to the debt-ridden real estate sector. The move is likely to be a boon for cash strapped industry with the inflow of 1 lakh crore rupees expected from domestic and overseas investors.

REITs are beneficial for both real estate sector as well as investors, as it offers an exit route for property developers and at the same time provides a safe, sound and good investment opportunity for High Net Individual investors in commercial properties. It allows its sponsors the much needed liquidity by passing the ownership to shareholders.

The realty sector has welcomed this move by SEBI and this is what some of the leading voices of the industry had to say on REITs and InvITs –

1. CREDAI

The Confederation of Real Estate Developers Association of India commonly known as CREDAI welcomed the regulator’s decision stating that it’s good news for the sector as it will not only bring liquidity but also help reduce the debt of the organizations that are in the business of lending commercial properties in India.

2. Ernst & Young India

The tax partner of Ernst & Young India, Gaurav Karnik while welcoming the SEBI move said that REIT will avail fresh equity, attract finance from domestic investors, get long term funds from foreign sources and will reduce the pressure on banking system. He said, “Dependence of developers on bank funding is likely to come down as REITs will enable them to get access to cheaper funds compared to debt which is costly”.

3. Jones Lang LaSaelle India

The Chairman and Country Head of realty sector services major,Jones Lang LaSaelle India’s AnujPuridescribed the approval as great news for the real estate sector. He said that close to 10 billion dollars is expected to be raised in the coming 5 years.

4. Apex Multicons

Anant Pandit, the CEO of Apex Multicons said that the REITs will definitely help to mobilize fund in real estate and may probably infuse the much needed confidence in this struggling sector. He however said that it would have been better had REITs also covered residential properties along with commercial projects. Pandit added, “The pass-through entity status for REITs would pronounce a plethora of opportunities to developers and funds alongside addressing some sector specific issues of lack of transparency, organizing the real estate industry”.

5. KPMG India

Neeraj Bansal,partner and Head of Real Estate and Construction at KPMG India welcomed SEBI regulations and said that it’s really great to see that the norms have been cleared within a month of Budget announcements. Speaking on this he said, “Post SEBI approval, expediting of notification of REIT and InvIT norms will facilitate infusion of an estimated $15- $20 billion in the sector…”. Bansal was of the opinion that this would serve as an alternate to bank loans.

6. NAREDCO

The National Real Estate Development Council also termed this as good news for the realty industry and stated that the government is doing a great job in moving fast with REITs. The industry body was of the view thatthis will definitely bring the much needed relief to the cash starved sector.

7. Walker Chandiok& Co LLP

Neeraj Sharma, Partner at Walker Chandiok& Co LLP was of the opinion that reduction in the asset pool to 500 crore rupees from 1000 crore rupees  for REITs would allow more players to participate and enable more rent yielding properties under this vehicle. Neeraj added, “…final REITs guidelines are definitely encouraging, particularly the two developments are noteworthy – requirements of minimum asset size has been halved and allowing foreign investments in REITs”.

 Source: http://www.india.com/

Read More

India Regulator Approves REIT Rules

India's capital markets regulator on Sunday approved rules for the creation of real-estate investment trusts and infrastructure-investment trusts in the country.

The step comes a month after Finance Minister Arun Jaitley said these trusts would be given a tax pass-through status, meaning they wouldn't have to pay any federal taxes as long as they pass most of their income to shareholders in the form of a dividend.

Industry experts welcomed the rules issued Sunday by the Securities and Exchange Board of India, saying that real-estate and infrastructure trusts will help provide a new source of funding for developers and investors in infrastructure projects.

"We expect this to be a positive move for the Indian capital markets and could also free up some liquidity for real-estate and infrastructure players," said Bhairav Dalal, associate director at PricewaterhouseCoopers in India.

The rules finalized Sunday state that only commercial properties, such as office buildings can be part of a REIT, and all REITs have to be listed on a stock exchange.

To be eligible for listing, the value of the assets owned or proposed to be owned by a REIT should be worth at least 5 billion rupees.

REITs will be required to distribute not less than 90% of their net distributable cash flows to investors at least every six months.

Under the rules, at least 80% of the value of the REIT's assets must be in properties that are completed and generating revenue. A REIT can invest only 10% of the value of its assets in properties that are under construction, SEBI said. REITs can also invest a small portion in other securities like mortgage-backed securities and money market funds.

Meanwhile, infrastructure investment trusts will own infrastructure projects. These trusts may or may not be listed on stock exchanges, depending on the kind of assets they own.

Source: The Wall Street Journal

Read More

“Sikka” & “Cinepolis” signed LOI to have Multi Screen Cinema (Multiplex) in The Downtown Noida

After having signed a deal with “Intercontinental Hotel Group” (IHG) to have Five Star Hotel and “Savemax” to have a Hyper store in The Downtown, Noida. We proudly announce the signing of another LOI with Legendry world renowned International Brand “Cinepolis” .

Cinépolis is a Mexican chain of movie theaters. Its name means City of Cinema. Cinepolis India is a wholly-owned subsidiary of Cinepolis, the world's 4th largest movie theatre circuit operating in 11 countries having the biggest cineplex chain in Mexico with 205 theaters in 65 cities and they have become the largest chain in Latin America and the fourth largest in the world with over 230 theaters, more than 3,400 screens throughout Mexico, Guatemala, El Salvador, Costa Rica, Panama, Colombia, Brazil, Peru, India and the United States.

Movie exhibitor Cinepolis India has plans to take the number of screens in the country to 400 by 2017 from the present 84 in 13 cities, after the expansion, the seating capacity will go up to 88,000 from the current 17,600.

Sikka is a North India' leading premier Real Estate Developer, currently developing in excess of 7 million sq.ft. of prime real estate, with over 12 projects in Northern Part of the Country in different cities who has recently introduced the concept of branded office spaces, with offerings at every level, from world-class corporate offices to large-scale office campuses to signature boutique offices for growing businesses. Now Sikka has further extended its promise of luxury living by introducing a Luxury project at Dehradun, the capital of Uttrakhand.

Read More

Best Asset Classes in India – Real Estate and Equities

Investments made in the real estate and equities have given the highest returns of up to 20 per cent to investors in the last two decades, says a study.

According to a recent study by Cians Analytics on the returns from various asset classes in India during 1991–2013, real estate and equity market have given maximum returns to investors.

The study covers five types of asset classes -- equities (BSE Sensex), commodities (gold), bank fixed deposits (1–3 year maturities), government securities (10-year maturity), and real estate.

 It was aimed at finding out which asset class would have provided the highest return since the liberalization process commenced in 1991.

Looking at the overall returns, the study noted that "real estate appears to have outperformed all other asset classes during the 23-year period with an annualized rate of 20 per cent."

After real estate, equities have also performed strongly in India as the stock market gave a healthy annualized return of 15.5 per cent on a nominal basis during the past 23 years. However, adjusting for inflation, the real return is only 7.1 per cent per annum.

The study also explored gold, government securities and fixed deposits at banks, which were found to have posted comparatively lower returns of 10.9 per cent, 9.7 per cent and 8.8 per cent respectively for the 23-year period.

"Real estate was repeatedly the best performer during the 5-year sub-periods since 1991, with the highest return being 670 per cent during 2008–12 and the lowest 46 per cent during 1993–97," the study noted.

It said that the realty sector performance has been measured based on the average of the land rates (1991–2006) and circle rates (2007 onwards) set by the land and urban development authorities for residential property in Delhi.

These have been used as a proxy for real estate prices since reliable data is not available for the period since 1991. Furthermore, the rental yields have been sourced from various new reports for the respective periods, the study said.

Source: The Financial Express

Read More

Government provides incentives for real estate investment trusts(REIT) in Budget 2014

Finance Minister Arun Jaitley announced in the Union Budget on Thursday, that the government would provide necessary incentives to REIT's.  Also, to avoid double taxation, the REIT's would be given a tax pass-through status.

A real estate investment trust (REIT) is a company that owns, and in most cases, operates income-producing real estate. The REIT structure was designed to provide a real estate investment structure similar to the structure mutual funds provide for investment in stocks. REITs own many types of commercial real estate, ranging from office and apartment buildings to warehouses, hospitals, shopping centers, hotels and even timberlands. Some REITs also engage in financing real estate. REITs can be publicly or privately held. REITs can be classified as equity, mortgage, or a hybrid.

In reacting to the budget, Vinay Khattar (Edelweiss Financial Services | Head-Research) says, 'Overall the budget is very positive. The structure of the government focus points has been made clear. REIT was very positive for real estate. Infrastructure focus of the government has also become very clear especially for the roads space.'

After the announcement, real estate giants like HDIL and DLF saw a rise of over 9% in their stock prices.

Pre-budget Expectation:
Regulations on REIT:  Once introduced, the Indian Real Estate Invetment Trusts (REIT) will help individual investors enjoy the benefits of owning an interest in the securitised real estate market. The greatest benefit will be that of fast and easy liquidation of investments in the real estate market unlike the traditional way of disposing of real estate. The government and Securities and Exchange Board of India through various notifications is in the process of making it easier to invest in real estate in India directly and indirectly through foreign direct investment, through listed real estate companies and mutual funds.

Source: DNAIndia.com

Read More

Budget 2014: Real estate looks for growth-oriented road map

From the perspective of the homebuyers, the tax benefit on housing loan interest for self occupied property has remained constant at 1.5 lakh since 2001. However, the real estate prices have increased rapidly leading to a quantum rise in the loan requirement for each home purchase.

The 16th of May 2014 was a landmark day in the history of India. With the nation electing the Modi government, there is a strong expectation of a revival of the economy that has been stagnant for some time now. We are seeking action, and the budget is the first litmus test. Now, all eyes and ears are on Arun Jaitley by bringing about a change for a true economical impact.

On the onset, the Indian market has done quite well in the last few months giving an indication that the economy will revive. Narendra Modi made his intentions clear in his first speech in the parliament as a Prime Minister. He laid emphasis on a pragmatic economy and addressed the right economic realities including a stable tax regime, infusing infrastructure growth in the rural and urban areas of the country and most importantly creating job opportunities. With our leader’s approach on the right track, one can surely expect Arun Jaitley to give us a progressive and a reform-oriented budget.

Due to the rapidly growing industry, SEBI has been aggressively pushing for an evolution and clarity in the real estate investment (REIT) trust. It is time that the government takes measures in ensuring that a real estate fund is created to keep the liquidity flowing in the construction business. A regulation or a policy should be created through which the developers can borrow at lower rates of interest. There will be two pronged benefit of these steps. While easy fund availability will reduce the construction cost for developers, the home buyers will also benefit through better real estate prices. This, in turn, will increase the demand of housing finance and lead to the growth of the retail finance industry due to a better flow of liquidity in the market. Moreover, government intervention would also reduce the corrupt practices in the sector, which would prove to be beneficial for future of the entire industry. This, in the end, will truly benefit the homebuyer.

From the perspective of the homebuyers, the tax benefit on housing loan interestfor self occupied property has remained constant at 1.5 lakh since 2001. However, the real estate prices have increased rapidly leading to a quantum rise in the loan requirement for each home purchase; in this scenario, the limit of Rs. 1.5 lacs needs to be reanalyzed. A significant increase in the exemption limit for self-occupied property, ideally to Rs. 3 lacs, will result in additional tax savings for the home buyer and will also help reenergize the realty sector.

 The country has started off in the right direction by electing a stable government. Now, we are waiting for action. With all eyes and ears on the Finance Minister, there is an expectation from the budget of showing a positive, growth-oriented road map. The real estate industry is keenly anticipating a forward-thinking budget, and at the end, the homebuyer is sure to benefit!

Source: MoneyControl.com

Read More

Affordable Housing Policy in Real Estate is Need of the Hour

The recent rail fare hike announced by the government has shaken up the struggling real estate industry, as this will result in an increase in cost of raw material.

The BJP manifesto talks of home for all by 2022. It is $6 trillion requirement to service the housing deficit of 18.8 million housing shortage in India. Beauty is that real estate sector can easily generate interest of domestic as well as foreign funding agencies in various forms.

Globally the housing growth is barometer of health of economy. But in India discouraging housing is the theme of banking regulator. The attitude of ministers and senior officials is such that they don’t even call the housing industry association for regular consultation on budget or discussing health of economy. Affordable housing policy in real estate is the need of the hour for the Indian real estate and the new government has a pivotal role in its hand to uplift the sector.

Presently, interest rates charged by the banks to developers and home buyers are at an all-time peak and need to be brought down below 7 per cent.

There is a dire need for an industry status for the realty sector. Once industry status is granted, funding for the real estate projects will become easier and at lower interest rate.

Another long pending issue in the sector is Single Window Clearance. Now the approval process is very lengthy and takes around 1.5 years to 2 years for approval. Approval processes (single window clearance) to be simplified as the cost of delay in approval, adds further to customers spending by 25% to 40%.

The Floor Space Index (FSI) or FAR rules were made decades ago. Changes need to be made in the Development Control Rules and higher FSI needs to be allotted to stabilise real estate rates.

The budget document should support a proper REIT structure. If the long overdue in having a REIT structure is made it can generate almost one lakh crore worth equity replacing debt.

We suggest a special focus on rental housing to serve the needs of a huge section of the population that may not be in a position to immediately buy houses. For the economic growth of the country and the real estate sector government should encourage setting up of SEZs across country. SEZs, once touted as tax/duty free enclaves have lost their sheen due to withdrawal of Minimum Alternative Tax (MAT) and Dividend Distribution Tax exemption.

Investors in SEZs with a long term development vision are exploring avenues for exit or de-notification. Restoring DDT and MAT benefits could help in salvaging SEZs.

Currently there are multiple taxes being levied on home buyers. We request the government to remove service tax as it further puts burden on the home buyer. We suggest for reducing FDI eligibility limit to 20,000 sq meter and capitalisation limit to $1 million. Broader base of FDI investment will enhance foreign investment and will be able to retain the funds with larger per cent of success.

In all, the need is the due attention and respect for business of Real Estate Development which will bring the desired growth in economy and job market.

Source: The New Indian Express

Read More