Blackstone may list India’s first REIT

Mindspace IT parks in Hyderabad and Mumbai, could be included in the first REIT in India

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Global private equity firm Blackstone Group is in talks with K Raheja Group to set up a Real Estate Investment Trust  (REIT). Plans are to work with over 2.25 billion square feet of commercial space. This includes Raheja’s Mindspace IT parks in Hyderabad and in Mumbai.

Blackstone and its other Partnerships

Blackstone is also set to list REIT in collaboration withEmbassy Group,Bangalore. 2 billion square feet would be part of this REIT. It would span Manyata Business Park, Embassy Golf Links, and Vrindavan Tech park.

New York-based Blackstone has invested about $2.7 billion in real estate projects across India. In 2014, it made news when it acquired the iconic Express Towers in Nariman Point from the Indian Express Group for close to Rs 900 crore.

Recent changes in Regulatory Policy

Earlier this month, Reserve Bank of India allowed banks to invest into REITs in its first monetary policy announcement of the year. stocks of real estate companies are on the rise following this news. REIT is a fractional ownership in a property that is already leased.  Income is assured and 90% of the returns are distributed to shareholders. Returns from REITs are expected to be in the range of 12-13%.

Blackstone with its joint ventures is expected to be the first mover.  Well-known private equity funds like Brookfield, Singapore’s GIC and the Canada Pension Plan Investment Board (CPPIB), are expected to follow.

The dividend distribution tax was a major obstacle that was putting off potential investors from the REITs. In the 2016 Budget, the Dividend Distribution Tax (DDT) was exempted on special purpose vehicles (SPVs).

In July 2016, the Securities and Exchange Board of India (SEBI) relaxed the rules for REITs and foreign fund managers, to relocate to India. Further, it allowed REITs to invest larger corpus in under construction assets, raising the limit from 10% to 20%. Sebi also proposed to raise the number of REIT sponsors and relaxed norms on clearing third-party transactions

 

In the past we had covered SEBI’s stance on REITs and what we thought of this. You can read about  a historical regulatory perspective here.