Barua was speaking at an RICS organized real estate conference
conference, What’s new: Predictions for the future brought together industry leaders and the government
representatives to discuss the current trends and its dynamic impact on the
Ø The conference also witnessed the release of a joint RICS-Jones Lang LaSalle report, Office markets in India: Exploring the unexplored
Ø The report ranks Delhi and Mumbai among the top 31 cities out of a universe of 300 global cities in terms of commercial attraction index based on the economic and real estate market size
Mumbai: Market Regulator Securities and Exchange Board of India (SEBI) is of the view that real estate investment trusts (REITs) will usher in a great deal of transparency in real estate and thus attract global pension behemoths and financial institutions of repute. It is understood the Board is in talks with the finance ministry to introduce tax incentives for real estate investment trusts (REITs) to make these instruments stage a successful take-off.
“Tax incentives are key to the success of real estate investment trusts (REITs) and infrastructure investment trusts (InvITs) as that would help attract more funds in a transparent manner into realty and infrastructure sectors. Additionally, compulsory listing of REITs will also usher in transparency in Indian markets. Also, given Net Asset Valuation (NAV) would need to be done periodically, the role and requirement of valuers would become paramount,” SEBI Executive Director Mr. Ananta Barua said at a real estate conference based on the theme, ‘What’s new: Predictions for the future’. World’s leading body for standards and professionalism in the real estate and construction sectors, RICS organised the conference.
Taxation is involved at four stages--first while structuring and transferring assets to REITs or InvITs, second when they distribute income to its investors, third when they are traded and fourth time when there is an exit. These are heavy
stages so tax issues have to be addressed. For both trusts, the minimum initial offer size should be Rs. 250 crore with a public float of at least 25 per cent. The minimum asset base for these trusts to get listed is Rs. 500 crore.
Retail investors too are going to benefit from the pass-through status to REITs. Commenting on the significance of REITs and the possible impact of the ruling Mr. Sachin Sandhir, Global Managing Director- Emerging Business for RICS said, “With the twin objective of spurring growth back and infuse more liquidity in to the real estate market, the government’s move to set up the REITs is laudable. While REITs will provide investors an investment avenue, which is comparatively less risky than investing in under-construction properties, implementation will also give them easier exit routes along with regular income in terms of returns. “
In October 2013, SEBI had issued draft norms for the introduction of REITs. Since then they had remained stuck due to the lack of pass-through status. In this Budget, the finance minister has assured that REITs will not be doubly taxed. REITs allow investors with only a small amount of money to invest in real estate.
“However, there are some concerns. The current guidelines state the ‘Valuer’ for the purpose of valuation is a person, who is a registered valuer under Section 247 of the Companies Act, 2013 and assigned as such and who has been appointed by the manager to undertake valuation of the real estate assets. We urge the government to increase the ambit of qualifications required to define the ‘valuer’ and should include qualified valuation professionals and include professional bodies such as the RICS along with ICAI, ICS, ICWA, IE and IOA as specified in the definition,” he added.
Also, the introduction of valuers in the assessment
of assets to be leased by way of REITs, will require the adoption of
international valuation standards for evaluating the asset value for the
computation of the returns,” Mr. Sandhir added.
the occasion, RICS and international property consultancy firm, Jones Lang
LaSalle also released a joint report, Office
markets in India: Exploring the unexplored.
As per the report, Delhi and Mumbai figure among the top 31 cities out of a universe of 300 global cities in terms of commercial attraction index based on the economic and real estate market size. However, both are near the 100th rank and lower, in terms of real estate investment, which points towards the growth potential these cities behold.
With new construction offering smarter and socially responsible office space at attractive valuations, corridors within the Indian top cities are primed for an increased level of engagement with European companies. The report said, in terms of values, Bangalore and Chennai have reached close to their historic peaks while other regions are still heavily discounted.
The report further said it is expected that the change in average capital values across the residential markets in the top seven cities will remain below 10 per cent in 2014. However, top seven cities have shown signs of recovery and subsequent growth from second half of year 2009.
RICS is a global professional body. The organization promotes and enforces the highest professional qualification and standards in the development and management of land, real estate, construction and infrastructure. Our name promises the consistent delivery of standards – bringing confidence to the markets we serve. The work of our professionals creates a safer world: we are proud of our profession’s reputation and we guard it fiercely. See www.rics.org