MUMBAI: While the tax break announced for the Real Estate Investment Trusts (REIT) has been largely welcomed by the industry, experts said that the stringent provisions contained in the draft SEBI (REIT) Regulations 2013 could act as a major dampener for the growth of REITs in India.
The Securities and Exchange Board of India (SEBI) is yet to come out with the final regulations on REITs. However, the draft regulations put out for public comments last year states that the minimum size of the assets under the REIT shall not be less than Rs 1,000 crore.
According to real estate experts, the value of commercial real estate projects developed in tier II and III cities typically varies in the range of `300-`500 crore, and hence most of the developers from such places would not be able to participate in Real Estate Investment Trusts.
“The tax pass through status granted by the finance budget is a major enabler for the growth of REITs in India. But there are also other few provisions in the draft Securities and Exchange Board of India regulations that need to be re-looked at for us to develop a vibrant REITs segment in India. The current provision requiring minimum asset size of `1,000 crore should be brought down so that small and medium players from smaller cities could also participate in it,” said Sanjay Chandel, promoter, Azure Capital.
According to Ramesh Nair, chief operating officer (COO), JLL India, the requirement of minimum asset size of `1,000 crore should be revised downwards to `500 crore. “This would help in attracting more number of participants,” Mr Nair said.