1. SEBI expected to Amend REIT Rules to attract FIIs & HNIs
The Securities & Exchange Board of India may amend the latent guidelines governing real
estate investment trusts (REIT) to lure international investors into investing in them as various
arms of the government scramble to defend the sliding rupee.
A new set of rules may soon be announced by the regulator which would make it easy for
wealthy Indians and international investors to buy into these trusts that provide regular income
like bonds or bank deposits, said two people familiar with the development.
The new format for the so called REIT will keep away retail investors as such investments with
liberal guidelines may not be appropriate for those with less risk appetite.
“We are working on a new set of guidelines that will be attractive to FIIs,” said a person at the
market regulator who did not want to be identified. But it will be out of bounds for retail investors
since the relaxed guidelines will be a risky proposition for them, he said.
Indian regulators are looking to re-draft the Real Estate Investment Trust, or REIT, guidelines to
draw foreign investment to shore up the rupee. The initial guidelines announced in 2006 were
so onerous that not a single trust was founded. One of the conditions was that the trusts have to
declare the net asset value on a daily basis, a requirement quite impossible in the real estate
market where similar properties do not trade on a daily basis. REITs are a pool of funds raised
by issuing a tradable security like a share or a debenture. The value of a REIT is dependent on
the rental income from the properties that are owned by the REIT as a whole. This is one way of
real estate investment for higher yields for small investors who cannot spend crores of rupees
buying property. The Indian currency is among the worst performers among emerging markets
as foreign investors pulled out more than $6 billion amid fears that the Federal Reserve
chairman Ben Bernanke will end the $85 billion monthly bond purchases that helped global
stocks rally.
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