The Indian Real Estate Investment Trust (REIT) industry is lobbying for access to direct bank lending and classification as equities, aiming to broaden its financial options and investor appeal.

Seeking Access to Direct Bank Lending

The Indian REITs Association (IRA), a newly formed umbrella body representing the sector, consisting of four listed entities, advocates for REITs to be permitted to borrow directly from banks. Currently, REITs can issue bonds or borrow from non-bank lenders or mutual funds but are restricted from accessing bank loans.

Arvind Maiya, Chairman of IRA and Chief Executive of Embassy REIT, highlights the necessity for direct bank lending, emphasizing that the real estate industry’s asset-heavy nature requires regular access to funds for asset acquisition.

Classification as Equities

REITs, currently classified as “hybrid” instruments, aspire to be recognized as equities to eliminate investor confusion and attract passive investments. Alok Aggarwal, Managing Director and Chief Executive of Brookfield India Real Estate Trust, stresses the importance of aligning REITs with equity instruments, akin to global practices in countries like Singapore and the US.

Tax Implications and Growth Prospects

Despite concerns about potential changes in tax advantages and implications for Long Term Capital Gains (LTCG), the industry remains optimistic about growth prospects. The IRA underscores significant growth opportunities in India’s real estate sector, driven by both increasing demand for real estate assets and investor interest in diversified asset classes.

Ramesh Nair, Chief Executive of Mindspace REIT, identifies Global Capability Centres (GCCs) of multinational corporations as a lucrative segment for REITs in India.

Diversification and Partnership Opportunities

Industry executives foresee the emergence of specialized REITs focusing on specific real estate segments like warehousing and residential properties, inspired by global precedents. Despite challenges in the residential sector, efforts are underway to engage with mutual funds and increase investor awareness and participation in REITs.

In conclusion, the Indian REIT industry’s push for direct bank lending and equity classification reflects its ambition to diversify funding sources, enhance investor confidence, and capitalize on growth opportunities in the evolving real estate landscape.