REITs, InvITs collect Rs 18,658 cr in Apr-Sep on robust infra demand, attractive returns – EQ

In Short : Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs) in India have collected a total of Rs 18,658 crore (approximately $2.5 billion) in the first half of the fiscal year (April to September). The strong fundraising is attributed to robust demand for infrastructure projects and the attractive returns offered by these investment vehicles.

In Detail : Strong demand for infrastructure investment, attractive returns, and favourable government policies have pushed fund mobilization through listed REITs and InvITs to Rs 18,658 crore in the April-September period of the current fiscal. This came following a fund collection of Rs 2,596 crore through listed Infrastructure Investment Trusts (InvITs) in the entire 2022-23, although the amount mopped up through listed Real Estate Investment Trusts (REITs) was nil, data with the Securities and Exchange Board of India (Sebi) showed.

Going forward, experts believe that trends seen in REITs and InvITs will continue in the second half of the year too.

“The fresh savings will continue similarly as has happened in the last six months, and the investments will continue to be towards InvITs as both the central government and the state governments continue to focus more on infrastructure development,” Himanshu Kohli, Co-founder of Client Associates, said.

Hence, the trends you have seen in REITs and InvITs will continue in the second half of the year, he said.

According to Sebi data, Rs 18,658 crore was collected through these emerging investment vehicles in the April-September period of 2023-24.

This comprises Rs 12,753 crore through InvITs and the remaining Rs 5,905 crore via REITs.

Karan Shetty, Co-Founder of Claravest, a fractional ownership real estate investment platform, attributed several factors for the massive jump in fundraising through the route to favourable government policies, huge demand for investment in real estate, and the government’s focus on urbanisation and infrastructure development.

Additionally, other reasons for the surge in fund collection could be regular income provided by REITs and InvITs as these trusts are required to distribute 90 per cent of their income to investors regularly, gives diversification benefit, provides liquidity benefits as the units trade on stock exchanges and increased awareness and investor interest about the instruments, Feroze Azeez, Deputy CEO, Anand Rathi Wealth, said.

Moreover, the government and the capital markets regulator Sebi have played an active role in popularising and promoting REITs and InvITs in India.

Of the Rs 18,658 crore investment, Rs 12,753 crore was invested through InvITs, and the remaining Rs 5,905 crore via REITs.

InvITs have been more popular than REITs in terms of fundraising, due to several factors as InvITs can invest in a wider range of assets than REITs, including roads, highways, bridges, railways, power transmission lines, renewable energy projects, and gas pipelines.

Besides, InvITs are exempt from paying income tax at the trust level, which makes them more attractive to investors, Azeez said.

“Further, the infrastructure sector in India is expected to grow significantly in the coming years, which is likely to drive the growth of InvITs,” he added.

REITs and InvITs are relatively new investment instruments in the Indian context but are extremely popular in global markets for passive income investors due to attractive yields and capital appreciation.

While a REIT comprises a portfolio of commercial real assets, a major portion of which is already leased out, InvITs consist of a portfolio of infrastructure assets such as highways, and power transmission assets.

InvITs and REITs help infrastructure developers monetise their assets and redeploy the capital into upcoming projects.

However, these instruments are comparatively new to Indian investors with only four registered REITs and 22 registered InvITs, as of August 8, 2023, Sebi data showed.

The value of mutual fund exposure to REITs and InvITs stood at Rs 8,416 crore as of September 30, 2023.