Final guidelines on REITs to be issued shortly: Mayaram
Mumbai: The final guidelines on the proposed real estate investment trusts (REITS), which help the fund- starved realty sector with long-term funds, will be issued soon, Economic Affairs Secretary Arvind Mayaram said Thursday.
"We are very actively looking at announcing the final guidelines for REITs...There is now a concerted effort on the part of the government and the regulators on this and we believe that in this rapidly changing environment, credit rating agencies will have to play an important role," Mayaram told an corporate bond market summit organised by Crisil here.
Mayaram, however, did not say whether the government is inclined to offer tax incentives to retail investors to invest in REITs, though he noted that Sebi had asked for it. Sebi Chairman U K Sinha was also present at the function.
About five years after issuing the first draft regulations for REITs, the capital markets regulator Sebi on October 10 this year had issued the draft guidelines to allow REITs.
REITs are a novel investment mechanism contemplated by the Sebi, which are expected to pep up the cash-strapped realty sector with capital infusion.
But soon after the draft guidelines were announced, Sinha had demanded tax sops to woo investors.
"For REITs to be successful, they have to be tax efficient. We will ask tax authorities to consider some incentives for REITs. We'll talk to the I-T department to make it happen," Sinha had said on October 28.
In its draft regulations relating to REITs, Sebi has broadly applied a framework similar to that of an initial public offers, requiring listing of units issued by REITs. Sebi has also prescribed various norms, including those related to minimum offer size, public float, and size of assets.
These trusts are proposed to be allowed to list on exchanges through IPOs and through follow-on offers and raise funds. Sebi has also said REIT would invest primarily in completed revenue generating properties.
"A REIT shall be set up as a trust under the provisions of the Indian Trusts Act of 1882," Sebi said, adding, however, they are not allowed to launch any schemes. According to the draft rules, only such entities would be allowed that have at least 90 percent investment in completed revenue generating projects.
The move is aimed at providing investment avenues for investors by way of trading units of REITs, similar to mutual fund and other exchange-traded funds for stocks, bonds and other securities.
REITs can raise funds from any investors, resident or foreign though initially, till the market develops, it is proposed that the units of REITs may be offered only to HNIs/institutions.
The draft norms comes as the real state sector witnessed rapid growth in recent years underlined by robust economic growth in the country. Globally, framework for REITs exist in several countries, including the US, the UK, Australia, Singapore, Japan and France among others.