1. Govt Plans to Attract Sovereign Wealth Funds (SWFs),
Revives REITs
Real estate investment trusts (REITs) and tailor-made investment options from
infrastructure companies to sovereign wealth funds could get a go-ahead soon as part
of the government’s efforts to attract investments and make capital markets more
vibrant.
Finance Minister P Chidambaram had last week held discussions with investment
bankers and economists on measures to create interest in Indian capital markets and
attract overseas investments. Based on the feedback, the finance ministry has started
discussions on a number of initiatives.
“A number of options are being examined...REITs and specific instruments to attract
sovereign wealth funds are some of them,” said a senior government official, who did
not wish to be named.
REITs pool capital from investors to purchase and manage real estate assets and/ or
mortgage loans and are traded on major stock exchanges like normal stocks. These
could help raise stable funds for the real estate sector and also help wean away
investors from gold by giving them an electronic mechanism to invest in real estate. At
present, investment in real estate is possible only through direct purchase of property or
indirectly through shares of real estate companies, both risky investment options.
REITs, like gold ETFs, can create a new set of investors who may not have the
resources or may not want to directly buy property. Market regulator SEBI had issued
draft guidelines for REITs in 2008 but the final norms were never issued, prompting
some of the domestic real estate firms to launch a similar product on an overseas stock
exchange.

2. “REITs have become a preferred public property investment vehicle around the world.
REITs boost and help stabilise capital access, and reduce capital costs. REITs help in
real estate business efficiently by creating conditions for building integrated property
businesses,” SEBI had said in its covering note to the draft guidelines. The then SEBI
chairman CB Bhave had cited non-transparent valuation norms, differential stamp duty
across states and the lack of uniformity in land and property pricing as the major
hindrance in the way of REITs.
Real estate players have time and again demanded establishment of REITs, which are
very popular instruments in the developed markets. In the US, REITs have raised over
$160 billion in fresh money since 2011.
“It is a very good idea,” said Anshuman Magazine, chairman and managing director of
CBRE South Asia, adding that it has the potential to make the industry more transparent
and professional apart from helping attract more investments.
The ministry could also allow some select stateowned infrastructure firms to raise long-
term foreign capital from sovereign wealth funds and investors in select markets as it
seeks to shore up long-term capital flows in the country.
Some long-term investors such as pension funds and sovereign wealth funds have
shown keenness to invest in the India story and the government is keen to capitalise on
the sentiment, the official said. The options being discussed include allowing some
public sector entities involved in infrastructure development to raise funds from select
markets where there would be interest and appetite for India. For example, allowing
DMIC to raise funds from Japanese investors who could be keen on high returns from
an infrastructure project in India or Indian Railways Finance Corporation from investors
in the Middle East.

3. The country needs stable foreign capital flows to finance its high current account deficit
that stood at 4.8% in 2012-13.
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