India real estate - The long wait for REITs may get over, a big positive for the sector - Standard Chartered Securities

- SEBI is working towards introducing Real Estate Investment Trusts (REITs) in India. If implemented, IER believes it will be very positive for the real estate sector, attracting long-term and low-cost capital to India. REITs will provide four key benefits: reduce cost of capital, improve liquidity, improve transparency and increase business efficiency.

- Globally, REITs have been a successful model. In the US, REITs have USD 1tn under management (USD 630bn equity REITs). They have delivered 12.6% CAGR over past 40 years (outperforming US equity indices) with low volatility or correlation to other asset classes. In the last decade, REITs were introduced in the UK, Germany, Singapore and HK.

- Once implemented, REITS will be a welcome relief for developers, investors and end-users of real estate. Within IER's coverage universe, all companies will benefit from such a development. However, companies with large annuity portfolios such as DLF, Phoenix Mills, Prestige Estates and Indiabulls Real Estate will see more near-term benefits.

Source : Equity Bulls

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