Indian realty industry, which has been reeling under a slump due to demonetization, GST and the liquidity crisis at non-banking financial institutions, has finally got a ray of hope with a ₹4,750-crore IPO of Embassy Office Parks REIT.
The collaboration of Embassy Group with US-based private equity fund Blackstone Group for the REIT is likely to bring in a wave of investments in the country’s realty sector.
As per the sources, the REIT is likely to include Embassy Group properties and offer 158.6 million units at close to ₹300 a unit.
REIT allows a retail investor to invest in the market without even buying a property and consequently help the developers to get liquidity for projects, especially during the times of cash crunch.
According to Manju Yagnik, Vice-Chairperson, Nahar Group, and Vice-President, Naredco (Maharashtra), this liquidity will greatly help developers complete their projects. “REITs will bring the much-needed respite to the commercial real estate sector and enable developers sitting on underdeveloped or unsold assets to unlock value and create liquidity,” Yagnik said.
“2018 saw large foreign institutional investors such as Japan’s NikkoAm-Straits Trading Asia and US’ North Carolina Fund, among others, receive SEBI approval to invest in India under REITs. Several FIIs have already ‘conquered’ India’s equity markets in the past, and now it is the turn of the real estate market via REITs,” Shobhit Agarwal, MD & CEO, Anarock Capital, said.
“Low returns coupled with the overall negative hype that has followed the Indian residential sector in recent years have clearly negated its candidature for Indian REITs — at least in the foreseeable future,” Agarwal added.
Realtors expect REITs to bring in the much-awaited equity into the sector. “REITs will thrive and create trust in developers as people are willing to convert a long leap annuity business with the asset holding capacity by the developers,” Parth Mehta, Managing Director at Paradigm Realty, said.