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Industry Implication of SEBI Allowing Banks to Invest in REITs and InvITs: An analysis

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Industry Implication of SEBI Allowing Banks to Invest in REITs and InvITs: An analysis

The Reserve Bank of India has announced that banks will be permitted to invest in REITs and InvITs. We examine the benefits that this move will bring to these sectors and whether it will be enough to finally kick-start these investment classes in India

Ever since the introduction of the SEBI (Real Estate Investment Trusts) Regulations and SEBI (Infrastructure Investment Trusts) Regulations in 2014, the market regulator and the government of India have initiated a number of reforms to kick-start the establishment of REITs and InvITs in India.

While these reforms have attempted to remove the regulatory and tax impediments that currently beleaguer these structures in India, investors’ confidence in their feasibility and profitability has not increased substantially, with most proposals for REITs and/or InvITs languishing at the set-up stage.

To tackle this issue, the Reserve Bank of India (RBI), upon being requested by the Securities and Exchange Board of India (SEBI), in its first bi-monthly monetary policy of FY 2017-18, announced that banks will be permitted to invest in REITs and InvITs. Investment by banks in REITs and InvITs will be subject to the limit of 20% of their net owned funds. This is an umbrella limit and hence, acts as an overall cap for investment by banks in asset classes such as equity-linked mutual funds, venture capital funds and equities and now, REITs and InvITs. The RBI has stated that detailed guidelines will be unveiled in May 2017.

The benefit for banks to invest in REITs and InvITs

The RBI’s move is a welcome one, due to the benefits it brings to both, banks and the real estate and infrastructure sectors. For banks, the investment scope has been widened to include safe and stable assets which provide steady returns, as REITs and InvITs predominantly function as income-generating structures that derive their value from the underlying capital-intensive, locked-in assets. Banks represent one of the largest investor types globally and are increasingly seeking to reduce equity exposure, in order to increase investment in alternate asset classes. In such a scenario, banks are following a low-risk investment approach, in order to maintain necessary levels of liquidity required by them at all times, due to the variable nature of their liability payments. This makes banks a perfect fit as investors in REITS and InvITs, since banks have a long-term view of such investment classes, which offer both, yield and liquidity.

The benefit for the real estate and infrastructure sectors from banks’ participation in REITs

On the other hand, the cash-starved real estate and infrastructure sectors will also benefit from the permission provided to banks to invest in REITs and InvITs, as they now have access to continuous capital that only banks, having large reserves, can provide. Further, the move will also provide an impetus to other institutional and retail investors, who were previously hesitant to invest in these investment classes. The influx of liquidity, due to investments by banks, will provide stability and risk-averse investors will have the assurance to invest in them, akin to investments in mutual funds.

Across the world, banks have successfully invested in REITs and InvITs, earning steady returns and also boosting infrastructure development in countries like Singapore and Hong Kong.

Potential for REITs and InvITs in India

Hence, even though the devil might be in the detailed guidelines being released in May 2017, the proposed relaxation is a godsend to the fledging REIT and InvIT investment class in India. However, given the potential size of the REIT and InvIT markets in India, wherein over USD 1.5 trillion of estimated investment in the infrastructure sector is required in the next 10 years and an estimated 67% of realty in India’s top 8 metropolises are REITs-eligible, the flexibility provided to banks to invest in REITs and InvITs requires to be backed with the opening up of other investor classes, to bridge the demand-supply gap.

Globally, the other large investor types for REITs and InvITs, are typically insurers and pension funds. While the Insurance Regulatory and Development Authority of India (IRDAI) has already permitted insurers to invest in REITs and InvITs pursuant to a notification in March 2017, Indian pension funds have not been granted such a relaxation yet. However, SEBI officials have publicly stated that they are in talks with the Pension Fund Regulatory and Development Authority of India (PFRDA) on the same and thus, it appears that 2017 may finally be the year when REITs and InvITs become viable investment structures for both, institutional and retail investors in India.

Source: Housing.com

Commercial

Square Capital Becomes The Largest Organized Distributor Of Secured Mortgages In India

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Square Capital Becomes The Largest Organized Distributor Of Secured Mortgages In India

Square Capital, the digital lending arm of India’s largest real estate transaction platform Square Yards has underlined its market dominance by becoming the largest organized distributor of secured mortgages in the country. It is currently facilitating USD 30- 40Mn (INR 200cr – INR 260cr) of loan disbursals every month, contributed majorly by secured mortgages spread across 50+ banking partners for their different products in home loan, home against property and business loan. Its impressive growth is attributed to the rise in availability of affordable housing in India as well as the increasing consumer propensity to rely on fintech platforms for a full spectrum of financial needs.

Speaking on the recent numbers, Amit Prakash Singh, Principal Partner, Square Capital said Real estate and fintech aggregation are a synergistic match to a vast degree and Square Capital, was able to build on the established best practices of Square Yards to become one of the largest mortgage distributors in India today. We are betting big on affordable housing to drive future growth, particularly with the Pradhan Mantri Awas Yojana offering interest subsidies and of course, the huge number of untapped first-time home buyers that can be catered to in the home loan segment up to Rs. 30 lakh.

Government schemes such as the Pradhan Mantri Awas Yojna which offers interest subsidy between 3-6.5% for loans between Rs.6-12 lakh for EWS and LIG categories and subsidy of 4% and 3% for loans of Rs.9 lakh (for those with income up to Rs.12 lakh annually) and Rs.12 lakh (for those with income up to Rs.18 lakh annually) respectively, are driving consumers to opt for home loans that they can repay easily and fulfill their dream of real estate ownership. In fact, several studies have shown that loans have gone up by more than 20% over the last few years for affordable housing purchases. Square Capital is optimizing this opportunity to the hilt by enabling easier access to credit for potential home owners.

In the absence of any national-level mortgage distributor that has managed to scale up over the last decade, Square Capital has not only been able to generate massive digital leads but is also enabling fulfilment, either digitally or through its hybrid online to offline (O2O) approach.

About Square Capital

Square Capital is a marketplace lending platform that aggregates offers from financial institutions on a single platform and provides end to end fulfilment support in the lending process that includes assessing the credit worthiness/risk of clients, helping them choose the right product from the appropriate lending organization, managing their documentation, advising on professional issues pertaining to taxation & insurance and assisting the client till the entire lifecycle of loan disbursement.

Also Read: Under The First MahaRERA Verdict, Builder To Return Rs.26 Lakhs To Buyer

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ASK Group and TVS Emerald Join Hands To Setup Rs 400 Crore Real Estate Investment Platform

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ASK Group and TVS Emerald Join Hands To Setup Rs 400 Crore Real Estate Investment Platform

ASK Group’s Property Investment Advisors, the real estate equity arm, and TVS Motor Company’s real estate wing Emerald Haven Realty Limited (TVS Emerald) have decided to set up Rs 400 crore real estate investment platform.

The raised capital will be spent on several affordable mid-segment projects.

“We strongly believe that affordable and mid- segment market offers huge growth potential and this is in sync with the TVS Emerald’s core purpose of providing better living space to the urban middle class,” said Amit Bhagat, MD & CEO ASK PIA.

“Our endeavour is always to delight customer by fulfilling the aspiration of the urban middle class in their quest for a better living space,” said R. Chandramouli, President, and CEO, TVS Emerald.

The first investment under their partnership will be of developing a 10-acre land parcel having 5,48,000 sq ft of saleable area. It will have an equity investment of Rs 83 crore in Porur, Chennai.

Sunil Rohokale, MD & CEO, ASK Group said, “This platform is poised to get benefited in the heightened regulatory regime of RERA through focus execution and satisfying customer needs.”

Also Read: Chandigarh Brokers Yet To Register Under RERA

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ANAROCK Property Consultants Acquires LJ Hooker’s Indian Operations – Redwoods

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ANAROCK Property Consultants Acquires LJ Hooker’s Indian Operations – Redwoods

Strategic acquisition to boost ANAROCK’s capability in integrated real estate solutions, dedicated design center in Bangalore

Bangalore, August 30, 2017 – Consistent with its focus on becoming India’s leading residential real estate solutions company, ANAROCK Property Consultants Pvt. Ltd. has announced the acquisition of Redwoods, the Indian arm of LJ Hooker, based out of Bangalore. The acquisition was closed today, with ANAROCK absorbing all Redwoods employees.

Anuj Puri, Chairman – ANAROCK Property Consultants says, “The acquisition of LJ Hooker’s Redwoods is in line to our overall business strategy and will help us augment our operations across key southern markets. It will give us unparalleled competitive advantage in offering customized real estate solutions. With its strong presence and unique multi-pronged approach, ANAROCK is decoding unmatched value for both B2B and B2C clients.”

ANAROCK Property Consultants is already redefining the residential real estate services sector in India by offering integrated solutions through a hybrid model of online and offline convergence. The company launched its operations under its flagship brand name of ANAROCK in June 2017 and is well on its way to cross INR 100 crores of revenues for 2017 calendar year. The firm has aggressive plans to achieve INR 250 crores of revenues in 2018.

With a growing team of over 750 professionals, ANAROCK aims to cross 1000 in employee strength by the end of 2017. The company currently operates in all key property markets across India – Mumbai, Chennai, Bangalore, Gurgaon, Noida, Hyderabad, Kolkata AND Pune, with an international presence in Dubai.

About ANAROCK Property Consultants Pvt. Ltd.:

ANAROCK Property Consultants Pvt. Ltd. is one of India’s leading real estate services company having diversified interest across real estate value chain. Anuj Puri, ANAROCK Group Chairman, is an acknowledged thought leader in the Indian real estate industry and numbers among the most established expert on India’s real estate opportunities, both in India and across the globe. With a career spanning over 27 years, Anuj Puri was the former Chairman & Country Head of international property consultancy JLL India.

The ANAROCK Group’s key strategic business units comprise of residential broking and advisory services to clients, investment services, debt, equity and mezzanine funding, and research and consulting. ANAROCK’s residential team consists of the industry’s finest residential real estate professionals who understand the ever-changing consumer needs and market trends.

With its vast experience and expertise in serving the most reputed developers, corporate houses, portfolio investors and individual investors makes ANAROCK India’s pre-eminent residential real estate services firm. The company’s investment arm has built a revolutionary business model of bulk-purchasing residential apartment inventory through a proprietary investment fund. For further information, please visit www.anarock.com

About LJ Hooker:

Established in 1928 by Sir Leslie Joseph Hooker, LJ Hooker has grown to become Australasia’s best-known real estate brand (Galaxy BrandTrack 2015). It is one of the largest residential and commercial sales and property management organizations in the industry with more than 8,000 sales professionals, property managers and support team members in 730 franchised offices.

LJ Hooker has an exciting and impressive heritage of innovation, perseverance and bold decision-making. The company’s strong people-focused culture was established and defined by its founding visionary: Leslie Joseph ‘LJ’ Hooker in 1928. A constant innovator, entrepreneur and devotee of best practices, he changed the way real estate business was conducted in Australia. Today, LJ Hooker is Australia’s best known real estate brand.

About Redwoods Projects Pvt. Ltd.

Established in 2006 with the philosophy of providing customized real estate solutions to clients, Redwoods has expertise in fund management, deal structuring, fund syndication, joint developments and unique transactions. With over 25 million sq.ft. of leasing experience across all major markets, Redwoods have nurtured long-standing relationships with all major developers across India.

Redwoods partnered with BNP Paribas Real Estate in 2008 to jointly provide real estate services in India. The company successfully exited the Joint Venture in 2010 after establishing a successful realty arm in BNP Paribas.

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