REITs – The Investment of Choice for Indian Retail Investors: Real Estate Sector Experts

New Delhi: Federation of Indian Chambers of Commerce & Industry (FICCI) and Savills India, a leading international property consultant, today jointly organized a virtual conference India REIT: A potential investment window to bring together industry leaders and educate potential retail investors about Real Estate Investment Trusts as a prospective investment instrument.

FICCI & Savills India also released a research report that provided an overview of REITs with specific attention to retail investors’ interests. Through a comparative study with established markets such as the US and Singapore, and other instruments such as G-Sec, PPF and FD. Additionally, the report outlines the growth potential of REITs in India.

According to the report, India’s sole REIT launched in early 2019, has outperformed the market, not merely in normal circumstances but even during the ongoing pandemic. It also pointed out that REITs are relatively secure as 80% of the underlying assets in REITs are required to be operational and income-generating. Moreover, the diminishing returns in other investment avenues such as PPFs, FDs, RDs and government bonds when compared to the superior pre-tax yields of REITs, makes it a lucrative option.

Additionally, as per the report, commercial leasing activity will form the backbone of REITs in the Indian market. The office market holds significant promise and is expected to bounce back in the near future. The release of the report was followed by a panel discussion. The panellists spoke about the potential this investment platform promises and what makes it a good investment alternative even during the pandemic.

Mr Sanjay Dutt, Joint Chairman, FICCI Real Estate Committee and Managing Director and CEO, Tata Realty and Infrastructure Limited said, “Due to the COVID-19 pandemic, REITs and commercial real estate market, in general, may feel some pressure on rental cash flows in the short term. However, given that India continues to be a top IT outsourcing destination globally due to the availability of talent pool, cost arbitrage and high-quality infrastructure, commercial real estate will continue to be a resilient, low risk and high return asset class.”

Mr Mike Holland, Chief Executive Officer, Embassy Office Parks (Embassy Office Parks is India’s first publicly-listed Real Estate Investment Trust (REIT) said, “REITs is a tax-efficient tool and if the product continues to perform, the way it has been, then it will be very successful in attracting investors domestically as well as internationally.”

Mr Gaurav Karnik, Partner and National Leader Real Estate EY India, said, “There is strong corporate governance framework which allows related parties to be valued properly. So from corporate governance and tax efficiency perspective, and also potential fixed income and upside on the unit growth, REITs are a good place to put your money in.”

Mr Balaji Rao, Managing Partner – Real Estate, Axis AMC Limited, said, “Once we emerge out of COVID-19, the office market is likely to be as lucrative as ever. REITs should be given as much preference as equities or Mutual Funds as it is a much safer investment tool.”

Mr Arvind Nandan, Managing Director, Research & Consulting, Savills India said, “REITs are an attractive investment offering, especially in the current environment when interest rates are benign. Apart from capital growth, the returns from REITs include dividend returns which are currently 7%+. Overall, REITs promise to offer healthy returns over a 3-5-year period. Investors have had a positive experience from India’s first REIT in the last year.”

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