India Real Estate Investment Trusts

The Government of India, in collaboration with the Associated Chambers of Commerce and Industry (ASSOCHAM), is working on feasibility of introducing India Real Estate Investment Trusts which would be similar in structure, operation, and regulation to the Indian Mutual Fund industry.

These trusts would park the general and corporate investors' funds and help them own real estate properties for both, domestic and business purposes. Further, India Real Estate Investment Trusts would invest the accumulated corpus in different capital market instruments such as shares, debentures, and other securities. The income earned through these investments and the realized capital appreciation are shared by its unit holders in proportion to the number of units owned by them. Thus, such an investment structure or instrument is most suitable for the common investors as it offers an opportunity to invest in a diversified and professionally managed basket of securities at a much lower cost.

"We are considering the option of a Real Estate Investment Trust or REITs as an investment tool", said Mr. Anil Baijal, Secretary, Ministry of Urban Development, at the FICCI international seminar on real estate.

A Real Estate Investment Trust was first conceptualized and rationalized in the US. This trust was created to offer a helping hand to that section of the American public whose buying capacity was lower in comparison to the prevalent real estate prices. The main advantage of investing in such a fund is that it offers income tax exemptions, both for corporate entities and the general investors. An important feature of such investment is equity real estate investment, where the trust invests in or owns the real estate and collects rents for the investors.

These trusts have to utilize at least 90% of this tax saving corpus. The corpus accumulated is invested in different kinds of real estate properties like -

• Business premises
• Shopping malls
• Entertainment facilities
• Health care facilities
• Hotels