REIT is a Real Estate Investment Trust which offers units to public. They are the ones responsible to gather reserves from the investors; they are also equally responsible to acquire rentals relating to the real estate and also dispense the income among the investors. These bodies majorly own govern and manage the income generating properties which are required to allot around 90% of the profits gathered as dividend among the unit holders.
The REIT’s were firstly introduced in India by the Securities and Exchange Board known as the SEBI. The REIT regulation was drafted in the year 2007. These set of regulations in the draft were never finalized and executed as the structure inherited a major limitation. Further in 2013 September, the SEBI has unconfined a draft and a sketch of the REIT regulations and rules for public comments. These regulations are hoped to fulfill the purpose when they come into force these set of rules thus are in accordance with the global regulations. The SEBI and the REIT has received many relevant comments and these regulations are to be expected to come into force soon.
The REIT has an immense ability to attract and effectively manage the investments within the real estate industry. Below a few reasons are discussed which could incentivize these investments in the real estate.
The most importantly the REIT’s prevent the creation of any kind of black money. The creation of such black money could take place through any normal banking channel.
It is equally essential to make this investment striking and feasible as well as there is a requirement to lighten the burden on Indian Banking functionality and also promote channelization of these savings into real estate as a valuable asset.
In the recent times a fixed income instrument is lacking which is an active tool to supply for the inflation hedged capital or return appreciation. This as an outcome has diverted savings into investments in gold whereas the savings in housing has remained unproductive for a longer period of time. The effectiveness of the REIT coming in force will change these unproductive savings into an asset which is productive in a manner reducing the shortage in monetary terms.
It is also important to craft the REIT as a smart tool both for the corporate as well as the individuals. This essentially requires a very tax efficient model to be added to the REIT regulations. Thus it is the need of an hour to modify and make certain essential changes in the tax law and the foreign exchange policies to make sure the REIT’s practicalities are kept unchanged and the regulation have a smooth take off in a planned manner.
It has been a known fact that the real estate contributes mainly to the GDP of the Indian economy on one hand and on the other hand it is mainly unorganized. Thus, the taster of the REIT regime will definitely render the needed support and help to make the real estate a much smoother an operative sector also helping it to overcome the tag of an unorganized sector.
The REIT will nevertheless facilitate the investments and but also provide a productive assets to the real estate industry. Thus, to conclude, the REIT enforcement is that it is essential to promote such investments in the realty sector for the betterment of the real estate industry.