DNA Money Edit: Will Reits race ahead of InvITs?

In the last three years, Infrastructure Investment Trust (InvIT) and Real Estate Investment Trust (Reit) are the two new products made available to all classes of investors. Debut of both these categories of Trusts on the bourses wasn't a celebrated affair as everyone wanted to 'wait and watch' performance of the first movers. It is close to two years since IRB Infrastructure Developers and Sterlite Power sponsored their respective InvITs – IRB InvIT Fund and India Grid Trust, respectively.

On the listing day, IRB InvIT Fund was traded at a nominal premium, thereafter, it has been trading below the listed price. Likewise, the unit price of India Grid Trust too has been below the listing price since the first day. On the other hand, Embassy Office Parks Reit, which got listed on April 1 at Rs 300 per unit is being traded at a premium. On Thursday, it closed at Rs 328.53 on BSE, an increase of Rs 6.18 during intra-day trade.

Though InvITs and Reits cannot be compared as they aren't a mirror image, but the broader contours aren't very different. Under InvITs, the concession period of a road asset is fixed, and thereafter there is zero asset value as the asset is handed back to the government. Whereas yields as well as valuation of assets under Reits continue to appreciate and can be sold at a premium after a few decades.

On the Reit front, commercial real estate players are cheering with the prospects and opportunities that is getting unlocked for the industry especially when there's liquidity crunch. Going forward, India will witness more Reits as already close to half-a-dozen of them are in the works.