In a note submitted to market regulator Securities and Exchange Board of India (SEBI), ASSOCHAM has stated that an early introduction of real estate investment trusts (REIT) is required to bring the much-needed class of institutional investors to support transparency and discipline in domestic commercial real estate market.
The chamber has also said that REITs can help develop the commercial mortgage backed securities (CMBS) market and create a source of cheaper debt for commercial real estate.
REITs typically own a variety of real estate properties across geographies and offer a pool of well-diversified properties of CMBS. This results in a better spread of risks as compared to a regional developer.
ASSOCHAM President Venugopal N Dhoot has said that since purchase and sale of real estate assets would form part of the activity of REITs, the presence of a large number of REITs can enhance liquidity in the secondary market for commercial real estate.
ASSOCHAM has said that the diversification element inherent in the REIT model will rescue the investors’ overall market. This will, therefore, improve the investment characteristics of CMBS and provide REITs with easier access to lower-cost debt funds.