In the wake of the budget proposal last week, several real estate companies and private equity funds are planning to list their commercial property portfolio through the real estate investment trusts (REITs) in the near future. These include Embassy group, DLF, RMZ Corp, Xander, Red Fort Capital among others, all of which have accumulated income generating commercial assets.
"There are over 10 companies that are in different stages of preparing a portfolio that can be 'reited'," said Anckur Srivasttava, chair man of GenReal Property Advisers.
Finance minister Ar un Jaitley had proposed incentives for real estate investment trusts or REITS, which are listed entities that primarily invest in leased office and retail assets, allowing developers to raise funds by selling completed buildings to investors and listing them as a trust.
REITs seek to reduce the pressure on the banking system and make available a new avenue of equity to cash-strapped developers. The budget seeks to provide a pass-though status to REITS for the purpose of taxation, which means a REITS holder will pay tax on the income, not the fund.
"We will certainly look forward to launching REITS in the near future," said a DLF spokesperson. The company has 28 million square feet of leased assets.
"For future commercial properties, we will look at REIT when Initially, minimum subscription size would be Rs 2L and unit size shall be Rs 1L For an initial public offering (IPO), the size of the assets under the REIT shall not be less than Rs 1,000 crore Finance minister Arun Jaitley has proposed incentives for real estate investment trusts. Some clauses include: Minimum initial offer size of Rs 250 crore and minimum public float of 25%, to ensure adequate public participation The REIT may raise funds from any investors, resident or foreign Till the market develops, it is proposed that the units of the REITs may be offered only to HNIs and institutions the need arises," said Brotin Banerjee, MD and CEO, Tata Housing.
The Blackstone Group and its local partner Embassy Group are also planning to list REITs on the domestic exchange. "We will certainly list our properties through REITs after the fine details on the taxation and regulatory aspects are ironed out," said Mike Holland, chief executive officer, Embassy Office Parks.