This will be subscribed by investors with a minimum investment of Rs 2 lakh to own a piece of a high end real estate property.
While the concept of REITs been in existence in developed markets for several years now, it is a new concept in India
REIT are investment trusts that operate much like the mutual funds except for the fact that they invest in income generating real estate assets — commercial, residential etc and thereby look to generate return for the investors within the fund.
While mutual funds invest in equities, REITs invest in real estate and make it possible for even the smaller investors to invest in real estate.
For investors it is a good option to invest in real estate as you can own a piece of a prime property for a modest sum which otherwise is impossible for small investors. It is also a less risky real estate investment mode as the investors takes a position in a developed property that provides regular income.
REIT will be set up as a Trust and will have parties such as trustee (registered with SEBI), sponsor, manager and principal valuer with specific responsibilities.
After the registration, the REIT would raise funds through an initial offer from investors and get listed.
The minimum issue size of the initial offer has been specified at Rs 250 crore and the regulator has specified that the size of assets under the REITs should not be less than Rs 500 crore.
The regulator has said that till the market develops, the units of REITs may be offered only to HNIs/institutions and therefore, the minimum subscription size has been kept at Rs 2 lakh and the unit size is proposed at Rs 1 lakh.
In India the REIT will invest in commercial real estate assets, either directly or through SPVs.
In such SPVs a REIT shall hold or proposes to hold controlling interest and not less than 50 per cent of the equity share capital or interest.
As per the final guidelines REITs shall invest in at least two projects with not more than 60 per cent of value of assets invested in one project.
It has also been proposed that at least 90 per cent of the distributable post tax income of the REIT should be distributed among the investors on a half yearly basis so that there is regular income for them.
Also not less than 80 per cent of the value of the REIT assets shall be in completed and revenue generating properties and not more than 20 per cent of the value of REIT assets shall be invested in developmental properties and mortgage backed securities, equities, government securities and money market instruments.
Let us see how it is taking off in India
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