The Russell 2000 Value Index measures the performance of small-cap value segment of the U.S. equity universe. It includes those Russell 2000 companies with lower price-to-book ratios and lower forecasted growth values. The Russell 2000 Value Index is constructed to provide a comprehensive and unbiased barometer for the small-cap value segment. The Index is completely reconstituted annually to ensure larger stocks do not distort the performance and characteristics of the true small-cap opportunity set and that the represented companies continue to reflect value characteristics.
Real estate industry is currently estimated to be US$ 48 billion, with a CAGR of 30 percent Accounting for 4-5 % of the GDP Growth driven primarily by IT/ITeS, growing presence of foreign businesses in India, the globalization of Indian corporates and, the rapidly increasing consumer class providing a huge market potential The real estate sector is in an early growth stage, can be segmented into residential, commercial, retail and hospitality asset classes Demand-supply gap across all segments for quality real estate REIT as a trust registered under the Indian Trusts Act, 1882 and registered with the SEBI, whose object is to organize, operate and manage real estate collective investments. &quot;real estate investment management company&quot; means a company incorporated under the Companies Act, 1956 (1 of 1956) and registered with the Board under these regulations, whose object is to organise, operate and manage a real estate investmentscheme; REIT and Real Estate Investment Manager Co. (REIMC) are required to have a minimum net worth of INR 5 crores. REITs and REIMC would be regulated by SEBI and will have to comply with the prescribed code of conduct. At least 50% of the trustees of REIT and directors of REIMC are required to be persons who are independent and not associated with persons having control over REIT or REIMC. The management of REIT and REIMC is required to be independent of each other. Each Scheme to be rated at the time of launch by a credit rating agency Each Scheme to be appraised at the time of launch and at the end of each financial year. Schemes not to provide guaranteed or assured returns. Provision only for close-ended schemes with no repurchase before the expiry of the maturity period. An independent principal valuer is required to be appointed for valuation of the real estate properties. Advertisements for each scheme to disclose the investment objectives, the method and periodicity of the valuation of scheme property Principal valuer to be a reputed firm or company independent of the scheme, REIT or REIMC and having adequate financial resources, qualified key personnel and robust internal controls. Principal valuer to value all the real estate held under the scheme at least once a year and in any event, for the purpose of issuance of new units. Principal valuer to submit valuation report which shall include all material details regarding the property, nature of interest in property, valuation methodology, overall condition of market and supply demand situation, material information regarding title, etc. Where a legal opinion is required, the same is to be made available to the Principal valuer for inclusion in the valuation report. Principal valuer to compulsorily retire after it has conducted valuations of the real estate of the scheme for 3 consecutive years.
Schemes to invest only in real estate. Real estate should generally be income-generating. No REIT under all its schemes to have exposure in excess of 15% in any single real estate project. No REIT under all its schemes to have exposure in excess of 25% in real estate projects developed, marketed, owned or financed by a group of companies. Schemes are prohibited from investing in vacant land or engaging or participating in property development activities. Schemes not allowed to lend, guarantee, endorse, assume or otherwise become directly or contingently liable for or in connection with any obligation or indebtedness of any person or to secure the indebtedness of any person without prior approval of REIT and the unit holders
Could benefit to Indian Consumer to build Home...... Mention this point......
REIT - Concept & Reality Check in India
REIT (Real Estate Investment Trust) : Concept and Reality check in India <ul><li>Chintan Patel </li></ul><ul><ul><li>PGDM Finance </li></ul></ul><ul><ul><li>WE School (2008-2010) </li></ul></ul>
Agenda <ul><li>What is REIT? </li></ul><ul><li>REIT - USA </li></ul><ul><li>REIT - Indian scenario </li></ul><ul><ul><li>Draft SEBI REIT(2008) guidelines </li></ul></ul><ul><ul><li>Benefits </li></ul></ul><ul><ul><li>Potential market </li></ul></ul><ul><ul><li>Challenges and Suggestions </li></ul></ul>
Structure of REIT Investment Dividend Management service Management fees Act on behalf of Unit holders Trustee fees Own assets Rental income REIT Unit holders Asset Management Co. Trustee Properties
REIT - USA <ul><li>Launched in 1960 as investment vehicle for small investors </li></ul><ul><li>No. of REITs – 136 </li></ul><ul><li>REIT market capitalization = 193 Billion USD </li></ul>Source : REITWatch Report Aug09 - NAREIT USD – USA Dollar
Transition toward REIT structure Existing public REITS markets REIT structures under consideration Canada-1994 Australia-1971 New Zealand Belgium-1985 Japan-2000 Singapore-2002 Thailand -2005 Malaysia -2004 Hong Kong-2003 Taiwan -2003 Philippines Finland Italy Source: UBS and Deutsche Bank, as of January 2009 U.S.-1960 France-2003 Netherlands-1969 South Korea-2001 Greece -1999 Turkey -1998 India UK - 2006 Germany - 2007
REIT – Indian scenario Draft SEBI guidelines INR – Indian Rupees
Benefits to Investor Buy real estate stock Own a Property Buy REIT units Returns Dividend from profit Rental income Dividend from rental income Expectancy Company & real estate sector will perform Property prices will rise & Increase in rental income Property prices will rise & increase in rental income Investment Low High Low Liquidity Yes No Yes Diversification Can diversify by buying different companies stock No REIT diversifies by buying various properties Issues Getting clear title property, Ownership hassle No ownership issues
Appetite for real estate investments <ul><li>Real estate fund is a tool to invest in Indian Realty Sector </li></ul><ul><li>Available only to high net worth individual and institutional through private placement </li></ul><ul><li>Min. ticket size : INR 5 lakh </li></ul><ul><li>Close-ended funds have lock-in period of 7 - 8 years </li></ul><ul><li>Indians are keen to invest in real estate sector </li></ul><ul><li>Retail participation can increase liquidity </li></ul>INR – Indian Rupees; CR- Crores
Potential REIT market in India <ul><li>Assumptions </li></ul><ul><li>Considered 5 Cities </li></ul><ul><ul><li>Mumbai </li></ul></ul><ul><ul><li>NCR </li></ul></ul><ul><ul><li>Bangalore </li></ul></ul><ul><ul><li>Chennai </li></ul></ul><ul><ul><li>Pune </li></ul></ul><ul><li>Capitalization rate – 10% </li></ul><ul><li>CAGR for commercial - 22% </li></ul><ul><li>CAGR for mall – 10% </li></ul>Source :Data about Commercial Supply, Mall Supply , Rents and Vacancy rates taken from Report : Cushman & Wakefield – India Real Estate Outlook 2009 CAGR – Compounded Annual Growth Rate; INR – Indian Rupees; CR- Crores
Challenges <ul><li>Launch of Real estate mutual fund </li></ul><ul><li>Real estate funds getting listed </li></ul><ul><li>Shortage of quality assets </li></ul><ul><li>No clear title ownership of assets </li></ul><ul><li>High cost of transaction due to high stamp duty </li></ul><ul><li>FDI restriction in areas less than 25 acres </li></ul><ul><li>No standard valuation policies </li></ul>Suggestions Reduction in stamp duty Removal of FDI restriction on less than 25 acres Introduction of standard valuation
Sources <ul><li>Websites </li></ul><ul><li>http:// www.reit.com </li></ul><ul><li>http://www.sebi.gov.in </li></ul><ul><li>http://www.ibef.org </li></ul><ul><li>Website of Singapore Stock Exchange(SGX) </li></ul><ul><li>Websites of Indian Real Estate Funds </li></ul><ul><li>Reports </li></ul><ul><li>REITWatch - August 2009 </li></ul><ul><li>Ernst & Young - Global Real Estate Investment Trust Report 2008 </li></ul><ul><li>Cushman & Wakefield - India Real Estate Outlook 2009 </li></ul><ul><li>Presentation </li></ul><ul><li>Asia-Pacific Real Estate Securities - Danny Elkins </li></ul>