REIT is a hybrid product between Equity and Fixed Income which generates regular & growing cash yields and also gives capital appreciation due to an increase in value of Commercial properties (Offices, hotels, retail, industrial, healthcare).

History :

REITs were first introduced in the US in the early 1960s and have since then been adopted as a preferred investment mode across the world in at least 30 countries.

In India, SEBI introduced its draft REIT regulations in 2007. REIT regulations were finally enacted in India on 26 September 2014.

Eligibility of REITs in India:

• Sponsor to have at least 5 yrs experience in RE
• At least 80% of the value of a REIT to be in completed and rent-generating RE, with a lock-in period of three years from the purchase date
• The minimum value of REIT assets: 500cr.
• 51% of the REIT’s revenues should be from renting RE.
• Are allowed to take leverage only up to 49% of their total assets.

Structure of REIT

• Sponsor – sets up REIT and appoints a trustee
• Trustees - holds assets on behalf of and for the benefit of investors
• Manager – undertakes operational responsibility of REIT
• SPVs - Holds assets or projects

"A Co.", a developer of Grade A, Commercial Office Spaces, to lease to majorly MNCs of the world for a tenure of 9-15 years with an annual escalation of 4-5% per year.

Benefits to Developer / Sponsor

• Increased liquidity
• Lesser cost of capital