Page 40 - Construction & Architecture Update JAN-FEB 2018
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REAL ESTATE
Simplification of REITs regulation will
benefit the growth of CRE
lad tidings emerged for the commercial real estate sector in the
country with the Securities and Exchange Board of India (SEBI)
GBoard further easing as well as simplifying regulations for REITs.
Under the new announcements, REITs can now invest at least a 50%
stake in the Holding Company (Hold Co)/SPVs with a holding of 50% stake
similarly allowed for the Hold Co in the SPVs. This, however, is subject to
some safeguards and previous rules applicable to the REIT structure.
To enable efficient capital raising and capacity building for promoters,
SEBI has enabled measures to achieve the minimum public shareholding
threshold of 25% by allowing for QIP (Qualified Institutional Placement)
which will facilitate the listed entity to choose its financial partners more
prudently. By also enabling promoters to sell up to 2% of their shares in the
open market, short-term working capital requirements can be adequately
addressed while meeting the regulatory norms for the public float.
Additionally, SEBI has enabled REITs to invest in unlisted shares under
RAMESH NAIR the 20% investment category. This should allow access to funds for smaller
CEO & Country Head, JLL India development players who have the potential for future growth and
may go ahead and list their shares in near future. This should benefit
such smaller, unlisted firms while REITs can undertake investments at
attractive valuations.
Earlier in the year, REITs were allowed to issue debt securities and even
single-asset REITs were allowed, thus paving the way for further easing
Earlier in the year, REITs of accessing public capital markets. The regulator and the government
were allowed to issue debt have heeded the call of the sector participants and eased the norms
considerably and created an enabling environment over the past year or so
securities and even single- after multiple rounds of consultations. Considering the capital requirement
asset REITs were allowed, of CRE developers and the investment avenue that REITs provide, these
thus paving the way for further simplifications of rules are likely to further boost investments in the sector.
In India, SEBI notified the REIT Regulations on 26 September 2014 that
easing of accessing public provided a regulatory framework for registration and regulation of REITs in
capital markets. The regulator India. We are yet to see any REIT listings, but the progress seems to be on
and the government have track for a listing in the near future.
As per JLL Research, close to 306 million sq ft of office space in India
heeded the call of the sector is REITable. With Bengaluru, NCR and Mumbai leading among the major
participants and eased the cities, the top seven cities collectively have more than 900 REIT-worthy
norms considerably and created properties. Real estate investments trusts are listed entities that primarily
an enabling environment over invest in income-generating properties and distributing most of the
the past year or so after multiple income proceeds to the unit holders. They are a very acceptable manner
of capital raising from public markets while enabling suitable exits to
rounds of consultations. institutional investors.
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