Indian REITs In Talks With Regulators To Be Classified As Equities
The Indian REITs Association is also working with the Reserve Bank of India to allow direct lending from banks.
The newly formed Indian REITs Association has pitched to the market regulator for real estate investment trusts to be classified as equities.
"...The idea for classifying it as equities is to simplify it for investors," Aravind Maiya, chief executive officer of Embassy REIT, told NDTV Profit on Wednesday. "We believe it's similar to equities based on the returns profile, as it has regular distribution along with capital appreciation."
Some Indian REITs are part of global indices, such as FTSE and MSCI, but aren't part of BSE and NSE indices currently. "There is also a need to be part of index inclusion, which enables passive flows, and increases liquidity," he said.
The current three REITs listed on stock exchanges—Embassy Office Parks REIT, Mindspace Business Parks REIT, and Brookfield India Real Estate Trust—are backed by office assets, whereas Nexus Select Trust is the first REIT retail asset offering listed in India.
"REITs, at present, are classified as a hybrid (mix of equity and debt) instrument, which creates confusion in the minds of investors," said Alok Aggarwal, CEO, Brookfield India Real Estate Trust.
Direct Bank Lending
The association is also working with the Reserve Bank of India to allow direct lending from banks.
“Banks are allowed to lend to special-purpose vehicles—one level below the REITs. They're allowed to lend to InvITs, but not directly to REITs," said Maiya.
REITs are currently raising money from capital markets through bonds, where mutual funds, insurance, and non-banking financial corporations, or NBFCs, participate, he said. "As a structure, REITs prefer raising money on the trust level and then putting it down to SPVs, which helps in the free flow of money."