By Accommodation Times News Service
The government might nod on a proposal to allow real estate investment trusts (REITs) to participate in the country’s rental housing market. The Housing and Urban Alleviation minister Ajay Maken will be shortly framing the policy paper on REITs and then later will be taken up with the finance ministry.
Ajay Maken said, lot of foreign money can come through these REITs to invest in rental housing which will create space in the country. Adding further he said official estimates see the shortage of homes in urban areas at over 18.78 million. To meet this vast requirement the governments have to spend a handsome amount.
REITs operate on the principal of mutual funds which collect money from investors deploy it into income producing real estate assets manage the assets and pay the rent collected to shareholders as dividend. SEBI had already issued guidelines in 2008 but a final notification has yet to come. Maken said, almost 11% of the housing stock is lying vacant because investment are done on speculative purposes. REITs can also buy these vacant homes across India and put them on rent. This will help use more properties for tenancy purposes. REITs invest in both commercial and residential properties.
The experts have different opinion on the issue; some says it is an attractive policy global pension as they produce stable incomes even when the market is slow. It will definitely bring liquidity in the market and increase housing stock. Some believe this policy has to make business sense for the investors as return on investment is very low.