BSE forms advisory group on REITs

Bombay Stock Exchange (BSE) has formed an 11-member advisory group to develop the market for real estate investment trust (REITs) in India. The developmentĀ follows grantĀ of tax pass-through status for REITs in the Union Budget after SEBI allowed the development of such trusts as an alternative fundraising channel for real estate sector.

The group comprises experts from real estate, securities market participants like merchant bankers, legal professionals and consultants in real estate.

It includes Apurva Shah, managing director for investment banking and advisory at Deutsch Equity; Deepak Chhabria, managing director (finance) at RMZ Corp; Gesu Kaushal, executive director of Kotak Mahindra Capital; Gautam Bhalla, managing director of Vatika Group; Jesal Sanghvi, principal at Capacity Real Estate; Sanjay Chandel, principal at Azure Capital Advisors; Shobhit Agarwal, managing director (capital markets) of JLL India; Siddharth Shah, partner at Khaitan & Co; Saurabh Chawla, executive director (finance) at DLF; Vinod Rohira, director of K Raheja Corp and DB Group's CEO Vipul Bansal.

Last October market regulator SEBI had floated draft norms for allowing REITs.

SEBI has said REITs would be allowed only for large assets, to begin with. It has said that for coming out with an initial offer, the size of the assets under the REIT shall not be less than Rs 1,000 crore ($160 million) which is expected to ensure that initially only large assets and established players enter the market.

It had also specified the minimum initial offer size would be Rs 250 crore and minimum public float of 25 per cent to ensure adequate public participation and float in the units.

The REIT may raise funds from any investors, resident or foreign. However, initially, till the market develops, it is proposed that the units of the REITs may be offered only to HNIs/institutions and therefore, it is proposed that the minimum subscription size shall be Rs 2 lakh and the unit size shall be Rs 1 lakh.

The market regulator had previously released a first draft of guidelines for REITs in 2008 after which the entire REIT framework was withdrawn to make way for real estate mutual fund (REMF), which eventually did not see the light of the day.

SEBI was also seeking tax incentives to boost REITs which has come through in the maiden Budget of the new government.

(Edited by Joby Puthuparampil Johnson)

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