There has been talks of Real Estate investment Trust (REIT) as a financial product in India for quite some time in the past. The concept has seen lot of roadblock like data availability and transparency, availability of REITable assets, monitoring process, taxation structure, regulation complexity, etc. However, after all these issues, in April 2019, the first REIT was launched in India by a joint venture of Embassy Office Parks Private Limited and Blackstone Group L.P. as 'Embassy Office Park REIT'.
The debut has been a success with approx. 35% increase in value and distribution of INR 463 cr as divided to its unit holders in Sept. 2019. This shows a marking of Indian economy interest and movement towards a structured and matured business conduct in the real estate sector. With this success many global funds like NikkoAM-Straits Trading Asia, Eastspring Investments, North Carolina Fund, and Sentry Global, etc are eyeing to take a pie of rent yielding real estate assets in India. It is been estimated that India has a potential of approx. USD 25 billion to be raised in next three to four years.
This instrument has also raised bar for valuation standard and practices been followed in India. As mutual funds, REIT cover a large spectrum of investors and a huge quantum of investment. It is imperative for the valuation agency to ensure the valuation undertaken should be done with utmost diligence keeping into account latest updates on standards and practices. It becomes the responsibility of the valuer to pronounce every possible detail in his report about the assets, valuation process, market conditions. Though the valuer should ensure minimization of assumptions and limitations while undertaking the valuation and should base his calculation on maximum real time data points, however should clearly bring out the assumptions and limitations if any been observed. This will help the REIT to inform the stakeholders about its asset performance in a very transparent manner.
Overall, there are interesting times ahead, with lot more excitement from all the stakeholders and at the same time leading to more transparent and responsible business practices.
