- The document discusses the potential for REITs (Real Estate Investment Trusts) to be a game-changer for the Indian real estate industry. It notes that REITs could provide more financing options for developers and open up the sector to greater investment. - It outlines some of the key challenges currently facing real estate developers, including high interest rates on loans and lenders demanding more collateral. This suggests REITs could help address financing shortfalls in the industry. - Several speakers with experience in real estate, law, and private equity are profiled, indicating they will provide perspectives on how REITs may impact the industry.

1. Creating Real Wealth
Aurum-DealCurry CXO Dialogues
__________________________________________________________
Webinar on the 25th of March 2015: 3pm – 4pm

2. Creating Real Wealth
Will REITS be a game-changer for the Indian
real-estate industry as it is expected to be?
25th March 2015
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3. Creating Real Wealth
Sanjay has over 20 years of experience ,with a deep and on the ground understanding and
exposure of handling more than a 100 mid and large sized transactions, across a range of sectors.
Work Experience:
• Ambit Corporate Finance , Co Founder and Managing Director
• Arthur Andersen Global Corporate Finance
• KPMG Corporate Finance
• AF Ferguson and Co.
Qualifications and Memberships
• Chartered Accountant (The Institute of Chartered Accountants of India)
• Advance Management Program (Kellogg Business School)
• Bachelor of Commerce (Honors) - Shri Ram College of Commerce at University of Delhi
• Member of RICS (A global real estate body)
• Investor member - Indian Angel Network
Sanjay Bansal
Founder and Managing Partner - Aurum Equity Partners
Speaker Profiles
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4. Creating Real Wealth
Sunil Agarwal
Founder and CEO – Black Olive Ventures
Sunil has over 20 years of experience. He has all round exposure in Real Estate including Strategy,
Development, Funds Management, Advisory, Corporate Real Estate, Education and Brokerage with
MNCs and Local Firms. He is a team Leader for some large investment banking transactions. He has
expertise in Residential, Commercial, Retail, Hospitality and allied sectors of real estate.
Work Experience:
• Co-founder and CEO, South Asian Real Estate
• VP, ICICI Ventures
• Project manager, HSBC
• DS Group, Colliers International, Chesterton Meghraj
Qualifications
• MBA in Finance & Marketing (IMT, Ghaziabad)
• M.Plan (Housing) (CEPT, Ahmedabad)
• Civil Engineer (KNIT, Sultanpur)
Speaker Profiles
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5. Creating Real Wealth
Sita has over 20 years of in the areas of corporate, contract and commercial laws. She
has been involved in providing advice on a wide range of issues from company
formation, corporate governance and regulatory compliance to mergers and
acquisitions, corporate restructurings, foreign investments, exchange control
regulations and securities laws. She has been involved in advising on entry strategies
and structuring in a variety of business sectors including aviation, telecom, real estate
and IT. Her specific experience includes advise to global private equity funds as well
as strategic investors on multiple investments in India, especially, in the area of
aviation, telecom, ITES, real estate, oil & gas and publishing; advise to lenders/
investors on numerous real estate transactions; and advise to private equity arm of a
leading investment bank on investment related transactions and its commercial arm
on debt restructuring and acquisition of debt portfolios.
Speaker Profiles
Sita Khosla
Partner – Dua Associates
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6. Creating Real Wealth 6
The need for REITS in India
Investors have become wary of the real estate sector
PE Deals in RE FDI in RE
Interest rates on real estate loans have gone up significantly to over
15% compared to a starting rate of ~10% for clients in other sectors
Banks have started demanding the developer to bring in the equity first
before they disburse the loans
Demand for security /collateral has risen up to 300% up from 150-200%
In FY13, bank credit to the commercial real estate sector grew by only
11.5 %, compared to overall credit growth of 14.3 %
Lenders have also become cautious
Source: KPMG, DIPP, FDI Statistics, Financial Express
Developers are struggling to control debt amid strained cash flows, increased input costs and low sales. REITs will
open up more financing options for developers
Source: CEIC, RBI, Deutsche Bank
With 2 rate cuts since January 2015, and more expected
going forward, REITs will become more attractive
Source: KPMG , DIPP, FDI Statistics
46
139
112
31
71
68
44
46
17
65
55
4
14
24
11
10
0
50
100
150
2006 2007 2008 2009 2010 2011 2012 2013
Number of PE deals Foreign PE deals
Source: KPMG , DIPP, FDI Statistics Source: KPMG , PE in RE Database, Venture Intelligence
PE inflow in Commercial RE
0.30
1.90
1.38
0.22
0.77
1.15
0.60
0.85
0.00
0.50
1.00
1.50
2.00
2006 2007 2008 2009 2010 2011 2012 2013
PE inflow in Commercial RE
0.04
0.47
2.18
2.8
2.94
1.23
0.73
0.13
0
1
2
3
4
05-06 06-07 07-08 08-09 09-10 10-11 11-12 12-13
FDI in Real Estate Sector (USD bn)
Units - USD Billion

7. Creating Real Wealth 7
Real Estate Financing in India
Developers have been forced to rely on high cost options of financing in recent times Source: FICCI, E&Y
ECB 0 3 1 1 1
PE Funds 0 3 3 2 1
Offshore listing 1 3 1 1 1
Capital Markets 1 3 2 1 1
NBFC lending 1 1 3 3 3
Bank lending 3 2 3 1 1
Private lending 3 2 3 3 3
REITS 0 0 0 0 3
Pre 2005 2005-2007 2008-2009 2010 - 2015 2015 onwards
Major Channels of Financing Real Estate in India
LRD (Lease Rental Discounting) REITs
• LRD is a form of loan offered against rental receipts
derived from lease contracts with corporate tenants
• The borrower pledges the future rental earnings from
the leased property to the bank for loan repayment
• Max Loan tenure – 12 years (market driven)
• Max Loan amount – Low (typically 60% LTV)
• High interest rate and fixed amortization schedule
• REITs a corporation or trust that uses the pooled
capital of many investors to purchase and manage
income property (equity REIT) and/or mortgage loans
(mortgage REIT).
• REIT invests in future income stream generated from a
leased property in form of debt or equity or both.
• Tenure is flexible
• Equity investment can be 100% of the asset value
• Typically lower coupon and flexibility in repayment of
debt.

8. Creating Real Wealth 8
REITs Potential - Grade A assets in India
India has 376 million square feet of ‘Grade A’ office space valued at about USD 65-70 billion.
Cities with Grade A office space in India
Delhi NCR Mumbai Bengaluru Chennai Pune Kolkata Hyderabad
100 - 110 million square feet is estimated to be eligible for REITs
in the next 2-3 years valued at about USD 20 billion.
52.6 million square feet - likely to be developed in 2015
57.1 million square feet - likely to be developed in 2016
REITs Standards - Grade A office space
Incremental growth of Grade A office space from 2001 to 2013. It
clearly brings out the difference in the pace and size of
construction across the seven cities.4
8
8
57
79
107
140
183
225
265
309
340
376
0
50
100
150
200
250
300
350
400
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Indian Office Stock ( million sq ft)
Indian Office Stock ( million sq ft)
Source: JLL, Report Destination India- A RE journey of Corporate Occupiers.
32.2
32.7
21.6
30.9
37
26.8
26.8
33
42.5
42
40.5
44.4
30.4
36.3
0
5
10
15
20
25
30
35
40
45
50
2007 2008 2009 2010 2011 2012 2013
India Office Space Absorption and Supply
Absorption (million sq ft) Supply (million sq ft)
Source: JLL, Report Destination India- A RE journey of Corporate Occupiers.
2007 and 2008 - High absorption of office space reflect the pace of
space take up by corporates i.e. business growth of a country.
2010 - Demand for office space had increased by the end of 2010.
2013 - Net absorption remained stable at 2012 level while New
completions have increased i.e. high vacancy
SourceKPMG, Report Destination India, Are we ready for REITs?

9. Creating Real Wealth 9
REITIssuesunits
The REIT Structure
Developer/
Sponsor
Unit Holders
Special Purpose Vehicle (SPV)
Physical
Asset
Physical
Asset
Physical
Asset
Tenants Tenants Tenants
Trustee
REIT Manager
Sponsor sells SPV / Assets
REITreceivesCash
Sponsor receives Cash
/ REIT Units
REIT

10. Creating Real Wealth 10
Key Features
Structure
 The REIT shall be set up as a Trust under the provisions of the Indian Trusts Act, 1882
 The REIT shall have parties such as trustee (registered with SEBI), sponsor, manager and principal valuer
Sponsor’ Role and
Obligations
 A REIT can have up to 3 sponsors with a consolidated minimum Net Worth of INR 1 billion/ INR 100
crores, where each sponsor should have a minimum Net Worth of INR 200 million/ INR 20 crores
 The sponsor’s primary responsibility pertains to setting up of the REIT
 The sponsor is required to hold at least 25% of total listed units of the REIT post-listing of the REIT for a
period of 3 years from the date of listing
 A holding of 15% of total listed units is to be maintained by the sponsors after 3 years from the date of
listing
Offer of Units
 After registration, the REIT shall raise funds initially through an initial offer and once listed, may
subsequently raise funds through follow-on offers.
 For making an initial offer, the size of the underlying assets should be at least INR 5 billion/ INR 500
crores
 Minimum initial offer size of INR 2.5 billion/ INR 250 crores and minimum public float of 25%
 Minimum unit size of INR 100,000 with a minimum subscription on 2 units
Investment Guidelines
 REITs can invest in the properties directly or through special purpose vehicles (SPV)
 80% of the value of the assets of the REIT is to be invested in 'completed' and ‘rent generates properties'
Income and Distribution
 At least 75% of the REIT revenues, other than gains arising from disposal of properties, is to be from
rental, leasing and letting real estate assets
 A REIT shall distribute not less than 90% of the net distributable cash flows, to its investors, at least on a
half yearly basis

11. Creating Real Wealth 11
‘REITable Assets’
Investment Guideline Eligibility
 Minimum 80% of value of the REIT assets shall be invested
completed and rent generating properties
 Not more than 10% of the value of REIT shall be invested in
o under-construction properties (even if they are part of
already complete properties)
o Complete but not rent producing properties
 Not more than 20% of the value of REIT shall be invested in
o listed or unlisted debt of companies or body corporate
in real estate sector excluding any investment made in
debt of the SPV;
o Mortgage backed securities;
o Equity shares of companies which derive not less than
75% of their operating income from real estate activity
o government securities;
o unutilized FSI (existing project)
o TDR (existing project)
o money market instruments or cash equivalents.
• 100% constructed properties**
• Rent Yielding properties**
• For listing purposes: (a) Minimum combined
value INR 5 billion/ INR 500 Cr.; and (b)
Minimum offer size of INR 2.5 billion/ INR
250 Cr. and 25% of the outstanding units
** -- property or real estate has been defined to
mean land and any permanently attached
improvements to it, whether leasehold or
freehold and includes buildings, sheds, garages,
fences, fittings, fixtures, warehouses, car parks,
etc. and any other assets incidental to the
ownership of real estate but does not include
mortgage; further any asset qualifying the
definition of the term infrastructure shall not be
considered as real estate hereunder

12. Creating Real Wealth 12
Flow of Rental Income
SPV holding Rental Assets
Real Estate investment Trust (REIT)
REIT Debt Holders REIT Unit Holders
Operating Expenses
Corporate Taxes
Dividend Distribution Tax
Withholding Tax
Marginal Tax
Rental Income
Dividend Available to REIT
Interest income to
REIT debt holders
Less
Less
Less
Less
Minimum 90% of dividend
distributed to Unit Holders
Pays
Physical
Asset
Physical
Asset

13. Creating Real Wealth 13
The REITs Ecosystem
Sponsor
Principal
Advisor
REIT Manager
REIT
Auditor
Principal
Valuer
Lawyers
Merchant
Banker
Tax
Consultant
Trustee

14. Creating Real Wealth
The Stakeholders
Stakeholder Key Role and Responsibility
Sponsor
 Minimum post-IPO holding of Sponsor
a) 25% of the total listed units to be held by the Sponsors for 3 years from the date of listing
b) Any excess of units held by Sponsors over 25% to be held for 1-year lock-infrom the date of listing
c) 15% of the total listed units to be held by the Sponsors beyond 3 years from the date of listing
Trustee
 Ensuring proper legal and marketable titles
 Execution of Investment Management Agreement
 Overseeing Manager’s activities and operations
 Review of related party transactions
 Appointing a new Manager within 3 months in the case of vacancy
Manager
 Identifying and recommending investment opportunities
 Complying with the investment conditions and strategy
 Constituting a minimum 5 member Investment Committee
 Appointing other service providers
 Undertaking lease management (directly or through agents)
 Overseeing development activities and ensuring leasing the assets after completion
 Distributing dividends
 Ensuring half-yearly audit, valuation and reporting to its Board
 Reporting to the Trustee on prescribed matters
Principal
Valuer
 A “Registered Valuer” under Section 247 of the Companies Act 2013
 The valuer shall not invest in the units of REIT
 A REIT, through a valuer, shall undertake full valuation/updation on a yearly basis
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15. Creating Real Wealth
Q&A
Aurum-DealCurry CXO Dialogues
__________________________________________________________
Webinar on the 16th of January 2015: 3pm – 4pm
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16. Creating Real Wealth
Contact Aurum Equity Partners LLP
Corporate Office
301 & 312 A, Suncity Business Tower
Sector 54, Gurgaon – 122002
India.
Fax: +91 124 4424485
Tel: +91 124 4424488
Website : www.aurumequity.com
Email: info@aurumequity.com
Facebook: https://www.facebook.com/aurumequity
LinkedIn: http://www.linkedin.com/pub/aurum-equity-partners-llp/86/91b/12
Contact me at -
sanjaybansal@aurumequity.com
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