An analysis of real estate investment trusts in India

Abstract

Real Estate Investment Trust (REIT) is a financial instrument that helps developers to raise capital for investment in real estate properties. It was first introduced in the US in 1960 and has since tasted considerable success in the West in countries such as the US, the UK, and France. Over the last decade, several Asian countries such as Singapore, Japan, Taiwan and Hongkong too have adopted REITs. In early August last year, Securities and Exchange Board of India (Sebi) gave its approval to introduce real estate investment trusts (REITs) in India. This gave a reason for real estate builders and property developers to be upbeat since REITs would give them another avenue to raise capital easily especially at a time when the Indian real estate sector is cash-strapped. Yet, in well over eleven months, not a single REIT has taken off mainly owing to reasons such as taxation uncertainty, regulatory requirements and structural hurdles. This paper examines these issues and provides recommendations for widespread adoption of REITs by real estate developers in India.