REIT ASIAPAC
E D U C AT I O N
There have been some Infrastructure
investment Trusts (InvITs) listed in India and
now the first REIT. How have the InvITs
performed and how do you see the REIT
and InvIT markets developing over time?
Education
INVESTOR EDUCATION IS
CRITICAL FOR INDIA’S REITS
AND INVITS TO THRIVE,
SAYS APREA
The Embassy REIT has had great start, and it has opened up an
avenue for the investors to gain a share of the real estate sector.
By selling stabilised assets to REITs, developers can unlock capital
that can be more effectively deployed in new development
projects. Embassy’s portfolio is on a strong foundation with more
than 95% occupancy and about half the rentals accruing from
Fortune 500 firms. REITs are expected to provide a low double-
digit return over a period of time, which will include a dividend
yield of 6-8% that is trending up besides capital appreciation,
thereby leading to a 12-13% return. With the possible retail
participation, Indian REITs present a golden opportunity for
investors as an alternate investment option and a share of real
estate without owning it, thereby allowing them to get regular
income and capital appreciation over a medium to long-term
investment period. India still has to ride the wave of teaching
people what REITs are, in contrast to the U.S. where investor
education has gone straight into what REITs can do for investors’
investment portfolio.
InvITs have been underperforming since their listing. However,
distributions have so far been on track. The first InvIT was listed
earlier in 2017: IRB InvIT Fund, which owns toll roads, debuted
and then India Grid Trust
InvIT, which owns power
transmission projects.
“In India, since real estate assets are generally held in SPVs (Special
India’s first Infrastructure Investment Trust (InViT)
was listed in 2017. The country’s first Real Estate
Investment Trust, Embassy REIT, made its debut
in April this year. While India’s REIT market has
growth potential, it “still has to ride the wave
of teaching people what REITs are,” says Sigrid
Zialcita, APREA’s newly appointed CEO.
Sigrid Zialcita,
CEO, APREA
In this interview, she also elaborates on the tax
implications for investors and the relative pros and
cons of an India-focused REIT listing in India versus
offshore.
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InviTs have not been
Purpose Vehicles), the REIT structure would be the trust holding the
doing well due to a lack of
SPV shares. Interest distributed by the SPVs to the REITs and the REITs
understanding. Generally,
to investors is subject to 5% withholding tax in the hands of foreign
InvITs suffer from a
investors. Dividend is exempt from DDT (dividend distribution tax).”
perception problem. Since
the fund was listed as
equity and benchmarked
For one, both asset classes will have to broaden its appeal and
to equity indices, investors
access to retail investors, which means generating a good enough
expected a higher return but the final return should be judged
spread on the risk-free rate in India. Both asset classes can be
in the form of dividends, interest and buybacks rather than on
seen to be highly regulated, low risk products that have their
current price. Extensive investor education is important so that
place in any investment portfolio. The central premise of these
they attract the right investors.
asset classes, beside boosting infrastructure financing and real
estate liquidity, is that they remain products every economy
InvITs have requested for approval to do buybacks as they are
needs to foster growth of deeper and healthier capital markets.
trading at deep discounts to their intrinsic values and are waiting
The government and the regulators must do their utmost to
for approval from SEBI (Stock Exchange and Exchange Board of
ensure the success of InvITs and REITs, given the long-term
India).
potential of these instruments as alternative sources of funding.
We, at APREA, remain committed to work with all stakeholders in
It is definitely for now anyone’s guess to say how India’s REIT
India to promote the growth of REITs.
market might develop although the potential remains immense.
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