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The Real Estate Investment Trust (REIT) as an investment vehicle has the potential to transform the Indian real estate sector

Mumbai, March 4, 2015: KPMG, Knight Frank India, Hariani & Co and NAREDCO today launched a comprehensive analysis on Real Estate Investment Trust (REIT) by outlining the importance of a REIT in the Indian context; guidelines applicable to REIT, tax implications and an overview of REIT model in other countries.

Key Highlights

  • Tax efficiency is critical to the success of REIT in India
  • Foreign investment is crucial to create liquidity post the listing of REIT
  • State governments could consider a one-time waiver of stamp duty on transfer of assets to REIT
  • Tweaking of IRDA investment regulations to allow insurance companies to invest in REIT, thereby widening the investor base

Speaking about the report Punit Shah – Partner and Head, West India, KPMG in India said “REIT could have a large opportunity in the Indian real estate market with a growing economy, existing portfolio of commercial real estate and conducive investment climate. REIT offers an exit opportunity to developers thereby enabling them to monetize their real estate. While on the other hand, mandatory listing of the REITs on recognized stock exchanges will offer an easy entry and exit mechanism for investors. However, in order to get REIT functional and successful in India, REIT regulators have to ensure that the REIT regime is continuously reviewed in accordance with the changing requirement of the real estate market.”

Added Shishir Baijal, Chairman & Managing Director, Knight Frank India “Given the functional model of some of the REIT established markets , it is evident that the success of REIT in any country depends on the capability to customise the rules and regulations governing REIT in such a way that they fit into their own markets. The support of governing authorities to help ensure a less restrictive REIT regime and favourable tax transparency status can be a critical factor in the development of a vibrant REIT sector in a new market. While there is huge potential, how much and how soon this is harnessed will depend on the overall economic momentum and the acceptance of REIT as an investment vehicle”.

Ameet Hariani, Managing Partner, M/s. Hariani & Co., Advocates and Solicitors adds, “REIT’s present an interesting opportunity to securitize the critical real estate sector in India and effectively make real estate a tradable commodity. While some more clarifications are still needed we should see launches by mid-2016.”

Mr. Sunil Mantri, President, NAREDCO said, “We are hopeful that soon REIT will become a reality which is the need of the hour for India and especially for the real estate sector. REIT as an investment instrument is considered one of the safest and most trusted. Going forward, REIT is going to be a successful model for attracting huge investments in commercial real estate sector.”

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