REITS, InvITs Are Taking Precedence as Emerging Asset Classes In India

In April 2019, the Indian Real Estate Market Trust (REIT) was launched. Over the last few years, there have been significant developments in the organization. With more regulatory norms coming in, investors are finding it easier to access the trust. Besides, Brookfield issued the third REIT in the last few months.

As an alternative financial platform, REIT has come a long way all these years in the real estate sector. In fact, REITs have been changing how commercial real estate functions in the industry. In 2019, the first REIT got listed. After that, two more such trusts have been listed in India when it was difficult for businesses to sustain themselves. Currently, several entities are going for these options.

As the REITs in India have been successful, they have been attracting foreign funds as well. Developers benefit from InvITs, particularly when they develop infrastructure assets. In the process, they can monetize the same, using a single entity to pool up several assets. These assets come with contracts on long-term basis, ensuring a steady flow of cash up to two decades.

SEBI, in June 2021, cut down the minimum amount to be invested in REITs to INR 10K - 15K. Previously, this was around INR 50K, which used to make it difficult for investors to explore the avenues. Thanks to higher trading, there would be more liquidity in the REITs, leading to the discovery of the market price.

 Given that the government has allowed foreign portfolio investors to channelize their funds in debt securities that REITs issue, this is a great opportunity for Indian REITs. There would be a significant source of funding, resulting in a larger base. Indian REITs, in the process, will turn out to be more attractive to foreign investors as they would be more confident in the commercial segment. Over the last couple of years, REITs have yielded stable income even when the times were uncertain. As an investor, one can earn through interests, dividends, or capital redemption and gains. All these indicate the rising popularity of REITs as an asset class in India.