Mumbai: Welcoming the RBIs decision to allow banks to invest in Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs), realty sector experts said this move will give the much-needed boost to the industry by brining in liquidity.
Banks are allowed to invest in equity-linked mutual funds, venture capital funds (VCFs) and equities to the extent of 20 per cent of their Net Owned Fund (NOF).
“This is a landmark decision. It will allow greater institutional participation in the real estate sector. Banks will now have route to investment into real estate, in turn helping the liquidity within the sector,” Cushman & Wakefield Managing Director India Anshul Jain said.
The Securities and Exchange Board of India (SEBI) has put in place regulations for REITs and InvITs and requested the RBI to allow banks to participate in these schemes.
“This move has shown the faith RBI and SEBI has in real estate investment foreseeing positive and secured return in mid to long term on account of steady economic growth. So it can be viewed as a sign of maturity and a step towards institutionalisation of real estate in India,” he added.
Naredco Chairman and DLF CEO Rajeev Talwar said, “this step now has the potential to usher-in large number of REITs listing in India by offering a safe asset class to invest in and also provide competition to foreign institutions. For banks it offers an additional important asset class for investing.”
He noted that for commercial real estate companies, once REITs pick up, it will bring liquidity, and free up capital that will help lower overall costs.
“We now look forward to detailed norms and guidelines for banks investment in REITs by May end,” Talwar added.
FICCI President Pankaj Patel said the decision is encouraging and should offer a good source of liquidity for the real estate companies.
“We look forward to the detailed guidelines on this subject by the RBI as well as further instructions and final guidelines with regard to merchant discount rate for debit card transactions,” Patel added.
Assocham President Sandeep Jajodia said this would give a boost to the sector which has been witnessing tough times in the last few years.
Realty developer Surendra Hiranandani, Chairman and MD of House of Hiranandani said with the banks investing in the trusts, there will be higher liquidity in the system, which will help the cost of capital for developers in the commercial segment to come down in the future.
He said the decision to hike reverse repo rate by 25 bps to 6 per cent will control the liquidity surplus in the system.
Angel Brokings Senior Equity Research Analyst-Banking Siddharth Purohit said, “though further clarity is sought on the mechanism in which this shall be adopted, it can still be sentimentally positive for listed realty and infrastructure players.”