How lack of clarity can put blemish on REITs Success


How lack of clarity can put blemish on REITs Success :

There is no doubt about the fact that the proposed Real Estate Investment Trusts (REITs) could become a big agent of change for the realty sector.

However, as there is little clarity on taxation and regulatory issues related with the subject, it might act as a dampener in terms of not attracting enough foreign investments in the commercial space, this has been revealed in a recent report.

As per the plan by the government, REITs are expected to easy up the process to funnel funds from moderate investment agencies such as insurance and pension funds, but on the other hand, there are a number of taxation and regulatory issues that could act as roadblocks in its adoption. This was revealed in a report titled ‘Destination India – Are we ready for REITs?’ unveiled by global accounting firm KPMG in association with Indian Private Equity and Venture Capital Association.

This report has estimated that India has a capacity for about 350 million square feet of ‘Grade A’ office space today, the valuation of which is about $65 billion to $70 billion or Rs. 4.2 lakh crore.

Out of this, about 100 million square feet is estimated to be eligible for REITs in the next three years, valued at about $20 billion (Rs. 1.2 lakh crore). This will translate into major development and growth of this sector in India.

As a matter of fact, most of India’s ‘Category A’ property is hovering around in seven big metro cities, namely Delhi-NCR, which includes Gurgaon and Noida, in addition to Mumbai, Bengaluru, Chennai, Pune, Kolkata and Hyderabad. This is where there is most of the real estate growth today.

However, India’s real estate has to prepare for a better tomorrow in terms of creating that process driven foundation on which future growth can be held upon