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<keyword id="24068881" type="General" weightage="100" keywordseo="Equity-investments-in-Indian-real-estate" source="keywords">Equity investments in Indian real estate</keyword> may rise 49% to $11 billion this calendar year amid strong demand for properties, according to CII and CBRE. In the 2023 calendar year, the equity investments in real estate stood at $7.4 billion. Industry body CII and real estate consultant CBRE on Wednesday released a joint report titled 'Leading the Charge: Crafting the Skylines of Tomorrow' at the annual CII Realty 2024 conclave. Equity capital inflows touched $8.9 billion between January and September, registering a 46% year-on-year growth. "Overall equity investments in 2024 in the real estate sector are set to hit a new record surpassing $10 billion for the first time," the report said. With a resurgence in investment inflows in built-up office assets and a strong acquisition pipeline for land in the residential sector, the overall equity investments in 2024 would be in the $10-11 billion range. During January-September, institutional and collective vehicle investors accounted for nearly 40% of the overall investments. Developer companies led the total capital inflows with more than 41% share in this period. Domestic investors (predominantly developers) invested nearly USD 6 billion during the first nine months of the calendar year, dominating the overall capital inflows with an almost 65% share. In comparison, foreign investors contributed about $3.1 billion during the same timeframe. Notably, North American and Singaporean investors were the significant contributors, representing about 85% of all foreign capital inflows. Anshuman Magazine, Chairman &amp; CEO, India, South-East Asia, Middle East &amp; Africa, CBRE, said, "Projection for 2024 equity investments between $10-11 billion, highest-ever, underscores continued investor interest in the growing <keyword id="23870227" type="General" weightage="20" keywordseo="real-estate-market-in-India" source="keywords">real estate market in India</keyword>." With SEBI's SM-REIT framework, he said, smaller but high-quality assets in Tier-II markets would also present new avenues for strategic capital deployment. "We believe this regulatory support will add much-needed transparency, enabling a more diversified investment base and encouraging institutional participation across these markets," Magazine said. Going ahead, he said this growing diversification will not only solidify India's real estate sector but also pave the way for future growth across emerging asset classes.

Equity investments in Indian real estate may rise 49% to record $11 billion this year, says CII-CBRE report

New Delhi: Markets regulator <keyword id="19901201" type="General" weightage="100" keywordseo="Sebi" source="keywords">Sebi</keyword> has proposed allowing Real Estate Investment Trusts (<keyword id="20186402" type="General" weightage="20" keywordseo="REITs" source="keywords">REITs</keyword>), Small and Medium REITs (SM REITs) and Infrastructure Investment Trusts (<keyword id="20186403" type="General" weightage="20" keywordseo="InvITs" source="keywords">InvITs</keyword>) to use <keyword id="21737868" type="General" weightage="20" keywordseo="interest-rate-derivatives" source="keywords">interest rate derivatives</keyword> for <keyword id="23778373" type="General" weightage="20" keywordseo="hedging-risk" source="keywords">hedging risk</keyword>. Also, the regulator has suggested approving locked-in units for REITs and InvITs to be transferred among sponsors and their groups, similar to rules for promoters in listed companies, to help sponsors manage their holdings without compromising "skin in the game". Additionally, Sebi has suggested permitting fixed deposits to be considered as cash equivalents when calculating leverage for REITs and InvITs, clarifying credit rating requirements for REIT and InvIT borrowings, and setting a timeline for filling vacancies on their boards and expanding the asset base for REITs and SM REITs. The regulator has also proposed to permit REITs to invest in liquid mutual funds. It has suggested measures to facilitate ease of doing business for REITs and InvITs, along with investors' protection. According to its consultation paper, Sebi is considering allowing REITs and InvITs to hedge against interest rate fluctuations by using derivatives like interest rate swaps. This could help stabilise cash flows, reduce risks, and protect unitholder interests, especially for long-term infrastructure projects. It is also proposed to define "Common Infrastructure" for REIT regulations. To enhance business flexibility for REITs, it has been proposed to clarify that facilities like power plants, heating/cooling systems, water treatment, and waste treatment plants -- serving one or more REIT assets -- will qualify as "common infrastructure" under REIT rules. This applies even if these facilities are not located within a single project due to their technical requirements. These facilities should supply and be used exclusively by REIT assets. For power plants, however, any excess power can be sold to the state utility/grid as per regulations, with any credits or payments going towards the benefit of REIT assets. To improve transparency, it has been proposed to amend the governance norms for quarterly reporting of InvITs. Currently, quarterly results for the investment manager and its business segments are presented to the investment manager's board, but there is no direct requirement for InvITs to report their performance. The proposed amendment would clarify that quarterly results should specifically reflect the performance of the InvITs themselves, not just the investment managers. This change aligns InvIT regulations with REIT regulations, where the focus is on the quarterly results of the REIT itself. Also, it has been suggested to align the composition of NRCs in REIT and InvIT managers with listed companies under the LODR regulations. Currently, all NRC members for REITs and InvITs must be independent directors. The proposal allows a mix of independent and non-executive directors, similar to listed companies. To enhance investors' protection, Sebi has suggested reviewing conditions for InvITs to borrow beyond the 49 per cent limit, assessing REIT investments in unlisted equity shares and outlining the roles and responsibilities of trustees for REITs, InvITs, and SM REITs. In a separate consultation paper, the regulator has proposed a regulatory framework for "restricted return InvITs" to provide infrastructure investors with predictable returns by setting limits on both upside gains and downside protection. The proposed framework for restricted return InvITs is designed to provide investors with structured returns, capped at both minimum and maximum levels to offer stability. Restricted return InvITs would include downside protection -- a minimum assured return -- and/or an upside restriction, a cap on returns -- depending on the arrangement. These investments would be limited to sophisticated investors who meet high minimum investment thresholds, with each unit priced at a minimum of Rs 500 crore and total InvIT assets of at least Rs 50,000 crore. Investors would be required to sign a waiver and undertaking form, acknowledging their understanding of the structured returns and risks involved, including the transfer of any excess returns to the sponsors. This waiver should be submitted before purchase in both primary and secondary markets, with compliance overseen by merchant bankers or brokers. The Securities and Exchange Board of India (Sebi) has sought public comments on both consultation papers by November 13.

Sebi proposes to allow InvITs, REITs, SM REITs to use interest rate derivatives for hedging risk

Capital markets regulator <keyword id="20378396" type="General" weightage="20" keywordseo="Sebi-Chief" source="keywords">SEBI Chief</keyword> <keyword id="19922107" type="General" weightage="20" keywordseo="madhabi-puri-buch" source="keywords">Madhabi Puri Buch</keyword> on Monday refrained from commenting on the investment vehicle, <keyword id="20024284" type="General" weightage="20" keywordseo="real-estate-investment-trusts" source="keywords">Real Estate Investment Trusts</keyword> (REITs), saying if she comments on the subject, she will be accused of <keyword id="20339010" type="General" weightage="20" keywordseo="conflict-of-interest" source="keywords">conflict of interest</keyword>. The remarks came as US short-seller <keyword id="20016892" type="General" weightage="20" keywordseo="Hindenburg-Research" source="keywords" meta.keywordsubtype="org" meta.entityname="Hindenburg Research" meta.hostid="261" meta.entityid="Hindenburg Research">Hindenburg Research</keyword> raised questions about a potential conflict of interest involving Buch and private equity major <keyword id="20144468" type="General" weightage="20" keywordseo="Blackstone" source="keywords" meta.keywordsubtype="org" meta.entityname="Blackstone" meta.hostid="261" meta.entityid="Blackstone">Blackstone</keyword>. Her husband Dhaval Buch is a senior advisor with Blackstone, a major player in the <keyword id="20009947" type="General" weightage="100" keywordseo="REIT" source="keywords">REIT</keyword> space. However, the couple refuted the allegations. Also, Hindenburg alleged that SEBI's recent amendments to REIT regulations 2014 favoured a specific financial conglomerate, which the markets regulator denied. Speaking at an event organised by industry body CII, Buch said," If I utter the word REITs, I am accused of conflict of interest". REITs are a new concept in the Indian market but have been a popular choice globally for their lucrative returns and capital appreciation. A REIT is made up of a portfolio of commercial real estate assets, the majority of which are already leased out. Meanwhile, the <keyword id="19895371" type="General" weightage="20" keywordseo="Congress" source="keywords" meta.keywordsubtype="org" meta.entityname="Congress" meta.hostid="261" meta.entityid="Congress">Congress</keyword> on Monday levelled fresh conflict of interest allegations against Buch and asked Prime Minister <keyword id="19895781" type="General" weightage="20" keywordseo="narendra-modi" source="keywords">Narendra Modi</keyword> to come clean as the head of the appointments committee of the cabinet on her appointment. At a press conference, the Congress alleged that since the current SEBI chairperson took office in 2017, she has not only been drawing a salary from SEBI but has also been holding an office of profit at the ICICI Bank, continuing to receive income from them to this very day. SEBI didn't make any comment on the allegations made by the Congress. Last week, the SEBI Chief stated that there has been a positive response to small and medium REITS (real estate investment trusts) and industry players came forward for regulations on such entities. Recently, the Securities and Exchange Board of India (SEBI) implemented regulations for small and medium real estate investment trusts (SM REITS) aimed at significantly increasing investor interest in fractional ownership of real estate assets.

If I say anything on REITs, will get accused of conflict of interest, says SEBI Chief

<ul><li><keyword id="35210" type="General" weightage="20" keywordseo="sebi" source="Orion">SEBI</keyword> has introduced new investment criteria to mitigate risks associated with <keyword id="509133" type="General" weightage="20" keywordseo="fractional-ownership" source="Orion">fractional ownership</keyword> of <keyword id="6354553" type="General" weightage="20" keywordseo="real-estate" source="Orion">real estate</keyword>. </li><li>You should research the <keyword id="6354516" type="General" weightage="20" keywordseo="property" source="Orion">property</keyword>, its location, market trends, and potential risks before investing. </li><li>Fractional ownership platforms operate by purchasing pre-leased commercial properties and dividing the ownership among investors. </li></ul>Owning real estate is not just a financial decision, in many cases, it’s a deep-rooted emotional one for many households. Buying commercial real estate, on the other hand, has always been touted as a wise economic decision. But how can one own such an asset if you can’t afford it given that the price of commercial properties is often too high for most individuals? You can still invest to avail a slice of real estate through fractional ownership! Minimum investment required Previously, the minimum investment required for fractional ownership of real estate varied, typically ranging from ₹10 to ₹25 lakhs. However, most platforms standardised the minimum investment at ₹25 lakhs. With the introduction of new regulations from SEBI, this threshold has been lowered to ₹10 lakhs making it more accessible to a broader range of investors. Fractional ownership options in India are still limited. However, while the concept is relatively new, it has quickly garnered <keyword id="6368449" type="General" weightage="20" keywordseo="investor" source="Orion">investor</keyword> interest. The fractional ownership industry is currently estimated to have ₹4,000 crores AUM and is expected to experience substantial growth, with projections suggesting it could reach a size of $5 Bn+ AUM by 2030, as per a JLL report. The number of platforms offering these investment opportunities is still limited, reflecting the industry's early stage of development. However, there were no defined rules on fractional ownership until SEBI stepped in recently. What SEBI says regarding fractional ownership To safeguard investor interests and foster growth in the Real Estate Investment Trusts (REIT) and fractional ownership market, SEBI has implemented a distinct framework tailored for small and medium (SM) (REITs). “SM REITs are structures that pool funds ranging from at least ₹50 crore to less than ₹500 crore, with the aim of issuing units to a minimum of 200 investors. These funds are utilised to acquire real estate assets, ensuring investors receive income generated from such assets. Going forward, any firm offering product (FOP) intending to establish an SM REIT must seek SM REIT registration from SEBI,” says Sudeep Chandran, Founder and COO of YOURS, a platform for Fractional Ownership of Luxury Second Homes. SEBI has also introduced new investment criteria to mitigate risks associated with fractional ownership. “It mandates that at least 95% of a scheme's assets must be invested in completed and income-generating properties, while the remaining 5% can be allocated to liquid assets. Furthermore, SEBI has issued additional rules and guidelines aimed at enhancing the sector's performance and safeguarding investors' interests," says Aryaman Vir, CEO of WiseX, a real estate investment platform that facilitates fractional ownership. Fractional ownership platforms Fractional ownership platforms operate by purchasing pre-leased commercial properties and then dividing the ownership among investors using a special purpose vehicle (SPV) structure. An SPV is a distinct legal entity set up for the sole purpose of acquiring a specific real estate asset, allowing for a clear separation of this investment from other financial engagements. Investors participate by acquiring securities issued by the SPV, effectively gaining a fractional share in the property. “The costs associated with the acquisition and maintenance of the property are distributed among the investors in the SPV, and these investors then share in the profits and returns from the asset. This sharing takes into account the management and maintenance fees that are levied by the FOP or by appointed third parties. Such a structure provides investors with an accessible route to earn from real estate, offering benefits like rental yields and potential asset appreciation,” says Vir. This model of investment significantly reduces the financial burden on individual investors, allowing them to attain steady income streams and long-term financial returns. Furthermore, it enables investors to diversify their investment portfolios by engaging in various real estate projects located in different areas, with each project having its own SPV. What you should keep in mind Before you enter into an agreement, review the agreement thoroughly to understand your rights, responsibilities, and any potential limitations or restrictions associated with the fractional ownership arrangement. “Like traditional property investment, due diligence is a must. You should research the property, its location, market trends, and potential risks before investing. Consider factors such as property valuation, maintenance costs, and resale prospects,” says Chandran. Also, when you co-own a property through a platform, credibility, reputation, and track record of the fractional ownership platform facilitating the investment also become important. Look for platforms that have a reliable track record of adhering to regulatory guidelines, providing transparent information, and offering robust investor protection mechanisms.

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Equity investments in Indian real estate may rise 49% to record $11 billion this year, says CII-CBRE report

PTI

Sebi proposes to allow InvITs, REITs, SM REITs to use interest rate derivatives for hedging risk

PTI

If I say anything on REITs, will get accused of conflict of interest, says SEBI Chief

PTI

You can own a fraction of a real estate property, but it pays to keep the following in mind

Anagh Pal

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