Market regulator SEBI is exploring a proposal to allow Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs) to invest in third-party projects subject to certain conditions, to address supply constraints and expand investment opportunities in the sector.
Addressing the third edition of FICCI’s Real Estate Investment Summit in Mumbai on Thursday, Maninder Cheema, Executive Director, Securities and Exchange Board of India (SEBI), said developer-sponsors typically have a limited pipeline of projects available for transfer to these investment trusts.
“Normally, assets come into REITs from a sponsor who is usually a developer, and the pipeline of projects may be limited,” Cheema said. “They are open to allowing REITs and InvITs to invest into third-party projects subject to certain conditions.”
Cheema said the challenge facing India’s real estate investment sector was not a lack of demand but the need to explore new investment structures that could unlock opportunities and generate yields.
“The challenge for the industry here is not that the demand doesn’t exist. The demand is there,” he said. “What we lack probably is the imagination that we can have these kinds of real estate investments where there is a demand, where there can be yield.”
Highlighting the growth of the sector, Cheema said REITs currently hold assets worth more than Rs 3 lakh crore across over 214 million square feet of Grade A office space. These trusts distributed Rs 3,000 crore to investors in the first quarter of the year.
InvITs have also expanded their investor base, distributing Rs 5,900 crore in the previous quarter and reaching a unit-holder base of 6.5 lakh, he said.
Foreign investors have played a significant role in the growth of these instruments. Foreign capital accounts for 30 per cent to 40 per cent of the combined assets under management (AUM) of Rs 10.5 lakh crore across REITs and InvITs, according to Cheema.
Looking ahead, Cheema said a key priority for the sector would be to encourage greater participation from domestic insurance companies and pension funds, which could provide an additional source of long-term capital for real estate and infrastructure investments.
