Realty stocks today gained as much as 5.6 per cent after market regulator Sebi cleared final guidelines for creation and listing of business trusts for real estate and infrastructure sectors. Shares of Oberoi Realty surged 1.3% while that of Indiabulls Real Estate soared 0.7% on the BSE. Similarly, DLF rose by 2.5%% and Unitech gained 1%.
The Securities and Exchange Board of India approved the norms that can now set up trusts that can list themselves in the stock markets. The Real Estate Investment Trust (REIT) is expected to own real estate properties that yield rents, for example, commercial office space, shopping malls etc. The idea is similar to mutual funds, where people can invest in the real estate market and cash in on the returns. This has two positives. One the cash strapped sector will get investors and money. According to media reports, around 150 million office spaces in major cities could be listed. The minimum asset size has also been reduced from Rs 1000 crore to Rs 500 crore. Smaller players can also join the party, as a maximum of three asset holders could come together to float a combined REIT as well.
The taxation issue has also been cleared with the REITs taxed when projects are sold or investment is monetized.
The second benefit is for investors who do not have very high investment capacities to physically invest in real estate. The minimum investment limit is floored at Rs 2 lakh with which one can invest in the market.
Also, the investors will get easy returns as the trust has to redistribute at least 90% of their cash flows, and at least once in six months.
Sebi Chairman U K Sinha had said along with foreign investors, domestic institutions like insurers, pension funds and provident funds would also be allowed to invest in these trusts.