India’s real-estate investment trust (Reit) market is poised for take off, with at least seven IPOs at various stages of readiness.
Peter Verwer, chief executive of the Asia Pacific Real Estate Association (Aprea), said the Reit or Reit-like structures were being prepared for initial public offerings, with the Securities and Exchange Board of India (Sebi) expected to approve the first deals in the first quarter of 2017.
India has installed a legislative framework for Reits and responded to industry suggestions around tax neutrality, noted Singapore-based Verwer.
Moreover, Sebi has agreed to allow private (unlisted) Reits for infrastructure assets, in what is a world first, he said. “This allows for versatility in the marketplace, which will drive greater liquidity and depth."
Aprea, which lobbies governments on behalf of the Reit industry, estimates that up to $60 billion worth of Indian real estate – the size of the Singaporean Reit market – can be put into a listed format.
Verwer (pictured left) hopes India’s example will spur developments in other markets, especially China. The US Reit market now exceeds $1 trillion in capital value, while Japan’s stands at $115 billion and Australia’s $112 billion.
Chinese officials have been considering allowing Reits for 15 years, with the Asset Management Association of China and US lobby group Nareit engaged in talks. But Verwer said Reits or similar securitisation tools could help Chinese officials achieve policy objectives regarding public-private projects, housing supply and reducing debt burdens involving property assets.
But whereas India’s government has proved willing to address tax-neutrality status for Reits, that is not yet the case in China.
Reits are seeing strong demand this year off the back of robust, stable returns, with Asian investors the main driver of these flows, said Collin Bell, a managing director on the fundamental equity team at Goldman Sachs Asset Management.
Asian Reits in particular have been on a roll, with Singapore vehicles, for instance, returning an average of 12.7% this year.