Union Budget 2015: Analysts see monetisable value of REITs at over $96 billion

MUMBAI: The tax sops proposed in the Budget for REITs (real estate investment trusts) can help realise a potential $ 96 billion by listing the occupied commercial real estate across offices, retail and warehousing segments over the next few years, according to analysts and industry leaders.

According to a report prepared by KPMG, Knight Frank and Hariani & Co, nearly $ 96 billion worth or 1.41 billion sq.ft of occupied commercial real estate across the country, with the top seven metros forming a major part of it, can be listed on the REITs platform.

However, the major hurdle in tapping the potential is certain regulations and tax-related issues which the government needs to tackle to make REIT successful, KPMG India partner Punit Shah said in a note.

"The REITs could have a large opportunity in the real estate market with a growing economy, existing portfolio of commercial real estate and conducive investment climate. However, to get REITs to be functional and successful, the regulators have to ensure that the REITs regime is continuously reviewed in accordance with the changing market requirements," he said.

According to the report, the critical issues that need to be addressed include tax efficiency, one-time waiver of stamp duty on transfer of assets to REITs by states, tweaking of the Irda investment regulations to allow insurers to invest in REITs, thereby widening the investor base.

"Given the functional model of some of the REITs established markets, it is evident that its success depends on the capability to customise the rules and regulations governing it in a way that they fit into their own markets.

"The support of governing authorities to ensure a less restrictive REITs regime and favourable tax transparency status can be a critical factor in the development of a vibrant REITs sector in a new market," said Knight Frank India chairman, Shishir Baijal.