The Securities and Exchange Board of India’s (Sebi) proposed relaxation in investment norms for Real Estate Investment Trusts (REITs) is likely to boost retail investors’ returns even as it increases their risk too, experts said.
In a bid to attract realty developers to list their portfolios and with a view to smoothen the REIT registration process, Sebi has now proposed allowing REITs invest up to 20% in under-construction projects. Earlier, investments into under-construction projects were capped at 10%. It has also proposed change in the number of sponsors and removing the restriction on the special purpose vehicles (SPVs), when the REIT’s holding company is to invest in other SPVs holding the assets. “Allowing REITs to invest more in under-construction projects would help in improving overall returns for investors. Today, analysis and estimates show that traditionally returns from REITs in mature markets range between 8-11%.