Real estate is a business that requires regular funding, be it at the acquisition or execution stage. To raise funds, developers in India opt for modes like joint venture, pre-sale and construction finance. Construction finance can work out cheaper but is difficult to obtain because of the strict guidelines laid down by the Reserve Bank of India. Other routes are relatively easier but cut into a developer’s profits, since they involve sharing approval as well as execution and marketing risk for the project.
Where should I invest my money – in a bank or in property, business, gold, stocks or REITs? Many of us have asked that question of both experts and ourselves. These kinds of questions do not seem to have an all-time correct answer, nor do they have a universally correct answer.
REITs and the associated changes in the legislature need to find a place on a priority list that aims for larger developments and subsequent employment creation.
The tax structures that will need to be placed if REITs are to be successfully launched in India are still awaiting necessary approvals. As such, their launch in this year’s budget is somewhat unlikely, given that it just might be an interim one.
The eligibility criteria for REITs that have been spelled out suggest that initially, only large and established asset management firms can participate. The minimum asset size of REITs should be INR 1000 crore.